aim* for self-employed income with loan prioduct advisor ......aim for self-employed income this...

AIM* for self-Employed Income with Loan PRioduct Advisor

March 2020 Freddie Mac Learning

AIM* for Self-Employed Income with Loan Product

Advisor®

AIM – Asset and *AIM = Asset & Income Modeler

This reference document is updated to coincide with changes to requirements to AIM for Self-Employed. Recent

changes include:

Effective Date: Loan Product Advisor submissions and resubmissions on or after March 29, 2020

Bulletin 2019-25 Update to eligibility for income representation and warranty relief

March Release Note All AIM Feedback Message Updates

Versions

4.07 and

higher

Message

Category-

Code

Version

5.0.6

Message

Code

Existing Message Text

(if applicable) New/Revised Message

LPN - 22 FE10028

We cannot assess your loan for income

validation at this time. Please resubmit and if you

continue to receive this message, contact

Customer Support at (800-FREDDIE) for

assistance.

Unable to process your loan for income

assessment at this time. Please resubmit and if

you continue to receive this message, contact

Customer Support at (800-FREDDIE for

assistance.

LPN - 24 FE10030

Based on Loan Product Advisor’s overall

assessment, the loan is eligible for Income

Representation and Warranty Relief. The loan

does not have to be resubmitted with the Freddie

Mac derived income to maintain income

representation and warranty relief.

Based on Loan Product Advisor’s overall

assessment, the loan is eligible for income

representation and warranty relief.

LPN - UL FE10223 Not applicable

~BorrowerName~’s submitted

~SubmittedIncomeType~ income is not required.

Either remove this income and resubmit or

document this income in accordance with

Freddie Mac Single-Family Seller/Servicer Guide

Topic 5300.

LPN - VC FE10225 Not applicable

~BorrowerName~’s submitted self-employed

income was assessed using the ~Vendor~ report.

The Income Calculation Report “ReportID” dated

“ReportDateTime”, tax returns, and all other

documentation uploaded to ~VendorName~

must be retained in the loan file. No further

documentation is required for this income.

LPN - UB FE10213 Not applicable

"Self-employment income for ~BorrowerName~

from ~Business Type~ named ~NameofBusiness"

could not be derived because of income

fluctuation."

Revision History

https://sf.freddiemac.com/tools-learning/freddie-mac-learning/overview

https://guide.freddiemac.com/app/guide/content/a_id/1003516


AIM for Self-Employed Income

Versions

4.07 and

higher

Message

Category

- Code

Version

5.0.6

Message

Code

Existing Message Text

(if applicable) New/Revised Message

LPN - UF FE10217 Not applicable


from ~BusinessType~ named ~NameofBusiness"

could not be derived because IRS Schedule K-1

was marked as final."

LPN - UG FE10218 Not applicable



could not be derived because Loan Product

Advisor’s assessment does not support the

business having sufficient liquidity and/or being

financially capable of producing stable monthly

income for the Borrower.

LPN - 4L FE10219 Not applicable



could not be derived because of insufficient

documentation. Submit complete signed

individual and business returns for most recent 2

years if business in existence less than 5 years;

most recent year return if in existence for at least

5 years."

LPN - 4Y FE10220 Not applicable



could not be derived because history of receipt

of income reflected on the tax return(s) is less

than two years."

LPN - 5F FE10221 Not applicable



could not be derived because income was

excluded in the Income Calculation Report by the

lender."

LPN - ZF FE10222 Not applicable



could not be derived because tax returns are

filed on a fiscal year basis."

Retired Messages

LPN - MW

Self-employed income/loss for

~BorrowerName~ from ~BusinessType~ named

~NameofBusiness~ not included in income

calculation assessment because

~ReasonForIneligibility~.

Not applicable

LPN - TJ

Unable to assess income for ~BorrowerName~

from ~BusinessType~ named

~NameofBusiness~ because

~ReasonForIneligibility~

Not applicable








This reference is intended to assist you with using our automated income assessment with Loan

Product Advisor using tax return data (referred to as “AIM for Self-Employed”), a part of asset and

income modeler (AIM) – our solution for automating the manual processes of assessing borrower

assets and income, and provides the following information:

Table of Contents Pages

Introduction to AIM for Self-Employed PG 4

How it Works (high-level overview) PG 5

Eligibility Requirements PG 6

Seller’s In-House Quality Control Program Impacts PG 8

Income Representation and Warranty Relief Results Returned PG 9

Loan Product Advisor Feedback Certificate Results Returned, including Documentation

Requirements PG 10

What You Need to Know to Get Started (Initial Set-Up) PG 14

Steps for Originating Loans Using AIM for Self-Employed PG 15

Reminders PG 18

Where to Get Help PG 19

Loan Product Advisor Feedback Certificate Examples PG 20

Note: Vertical revision bars " | " are used in the margin of this quick reference to highlight new requirements and

significant changes

COVID-19 Response Notice:

Visit our COVID-19 Resources web page for temporary guidance related to credit underwriting

and property valuations effective immediately for all mortgages in process.






https://sf.freddiemac.com/about/covid19



Introduction to AIM for Self-Employed

AIM for self-employed is a capability within Loan Product Advisor that leverages access to optical character

recognition (OCR) technology from third-party service providers to help enable the automation of certain income

calculations for self-employed borrowers; this allows Loan Product Advisor to determine if you are eligible for

relief from enforcement of certain representations and warranties (referred to as “rep and warranty”) related to

the borrower’s income based on tax return data.

How does this happen? After uploading your borrower’s federal income tax returns to a designated service

provider, (e.g. LoanBeam), a report (“Income Calculation Report) is returned for your review and verification in

accordance with the requirements of Section 5903.3(a). If edits are made to the report, the updated Income

Calculation Report must be uploaded to the service provider before proceeding. Once the report is reviewed and

verified, you submit the mortgage to Loan Product Advisor using the unique reference number assigned by the

service provider. From there, Loan Product Advisor applies calculation and eligibility rules to assess for income

representation and warranty relief eligibility and returns the result of the assessment on the last Feedback

Certificate.

AIM for self-employed makes it easier to:

▪ Grow your business: Simpler underwriting helps you take on self-employed loans you might

have had to commit greater time and resources to previously.

▪ Close loans faster: Automation speeds up income assessment and creates efficiency.

▪ Get immediate representation and warranty relief: Related to the eligible self-employed income

sources.








Process Flow-How it Works

The following process flow provides a high-level overview of how AIM for self-employed works.








Eligibility Requirements

Loans must be submitted to Loan Product Advisor Version S4.8.01 or higher and Loan Product Advisor v5.0.06

meet the following requirements outlined in Guide Chapter 5903:

Topic Requirements

Eligible Mortgages Conventional Mortgages (conforming and super conforming) delivered through

Loan Selling Advisor® as a Loan Product Advisor Mortgage

Loan Product Advisor Risk

Class

Risk Class of “Accept”

Loan Purpose ▪ Purchase

▪ Refinance

Defined term: Income

Calculation Report

The document provided by the service provider (e.g. LoanBeam Workbook) that

you are responsible for reviewing to determine if any adjustments to the

income must be made based on information in the mortgage file.

Eligible Income Sources

The following income sources are eligible for AIM for self-employed:

▪ Sole Proprietorships reported on Internal Revenue Service (IRS) Schedule C

▪ S Corporations reported on IRS Form 1120S (including compensation of

officers reported on IRS Form W-2), IRS Form 8825 and IRS Schedule K-1

(Form 1120S)

▪ Partnerships reported on IRS Form 1065, IRS Form 8825 and IRS Schedule

K-1 (Form 1065)

Note: Tax returns must not be:

▪ Filed on a fiscal year basis

▪ Handwritten

▪ An amended return

▪ From a U.S. Territory








Topic Requirements

Federal Tax

Returns-

Documentation

Requirements

Business Structure Business in existence

> 5 years

Business in existence

< 5 years

Sole

Proprietorship

Complete signed federal

individual (form 1040)

income tax return for the

most recent year


individual (form 1040)

income tax return for the

most recent two years

Partnership Complete signed federal

individual and partnership

(Form 1065) income tax

returns, including the

Schedule K-1(s) for the

most recent year


individual and partnership

(Form 1065) income tax

returns, including the

Schedule K-1(s) for the


S-Corporation Complete signed federal

individual and S-

Corporation (Form 1120S)

income tax returns,

including the Schedule K-

1(s), Form 1125-E and W-

2(s) if applicable, for the

most recent year


individual and S-

Corporation (Form 1120S)

income tax returns,

including the Schedule K-

1(s), Form 1125-E and W-

2(s) if applicable, for the


Check the tax returns uploaded to the service provider for the following to confirm:

IRS Filing: Are they the borrower’s most recent return(s) filed with the IRS.

Note: For mortgages with Loan Product Advisor initial submission dates

on or after May 1, the tax returns must be from the most recent tax year

(e.g., if the Loan Product Advisor submission date is after April 30, 2020

and before May 1, 2021, the most recent tax return must be from 2019).

History of receipt: If the borrower’s business has been in existence, or the

borrower has owned the business for less than five years, does the

borrower’s federal income tax returns reflect at least two years of receipt

of income and/or losses from the business?

Same business type: Is the income and/or loss reflected in the tax returns

reported for the same business on the same tax form structure for the

most recent two years? For example, the business cannot be reported as a

sole proprietorship and then converted to a partnership.

Business tax returns: Income reported on the business tax returns but not

on the personal tax returns must not be considered as stable monthly

income.








Topic Requirements

Loan Product

Advisor Data Entry

Loan must be submitted to Loan Product Advisor with:

▪ Self-employment indicated if borrower has an ownership interest of 25% or more in

the business. Otherwise, the feedback messages will be incomplete.

▪ Report reference number issued in the report by the service provider.

Loan Product

Advisor: Required

Resubmission

If, for any reason, the Income Calculation Report is updated, or additional income

documentation is provided, you must upload the updated report and/or income

documentation to the service provider and resubmit the loan with the same reference

number to Loan Product Advisor.

Business Assets ▪ If applicable, Assess Business Assets: If business assets are used for closing, you

must meet the requirements (Section 5903.3(b)).

Delivery Loan must be delivered through Loan Selling Advisor as a Loan Product Advisor loan

with an LP AUS Key Number.

Seller’s In-House Quality Control Program

For mortgages selected for Seller’s in-house pre-closing and/or post-closing quality control review that receive

an income rep and warranty result on the Last Feedback Certificate of either “Eligible” or “Not eligible” with a

feedback message indicating that no further documentation is required for the income reflected on the Income

Calculation Report, you are not required to do the following for eligible self-employed income sources that are

on the Income Calculation Report:

▪ Recalculate income for eligible income sources described in Section 5903.2(b) that are on the Income

Calculation Report, and

▪ Perform the business and income analysis described in Section 5304.1(d) for eligible income sources

that are on the Income Calculation Report.








Income Representation and Warranty Relief Results

Loan Product Advisor assesses the calculation of income and/or losses on an individual borrower-level and

individual business-level basis from the income sources based on the tax returns and the Income Calculation

Report you upload to the service provider. Loan Product Advisor will return income representation and warranty

result eligibility messages in the Feedback Certificate specifying whether the mortgage is eligible for relief from

enforcement of certain reps and warranties.

For mortgages that receive a Loan Product Advisor Risk Class of “Accept”, and an income representation

and warranty result on the Last Feedback Certificate of:

And,

A message is returned to indicate

that the Income Calculation

Report, tax returns and all other

documents uploaded to the

vendor is sufficient and valid

documentation for that eligible

self-employed income source(s),

Then,

all the eligible income sources

assessed by Loan Product Advisor

are eligible for relief from

enforcement of representations

and warranties regarding:

▪ the accuracy of the income

calculation related to the eligible

self-employed income sources

on the Income Calculation

Report, and

▪ the business and income

analysis, including the analysis

of the eligible income source

that the business has sufficient

liquidity and is financially

capable of producing stable

monthly income for the

borrower.

Note: Message Code UL will be

returned when there is out of scope

income that is not required to retain

income rep and warranty relief. In this

instance you must either, document

this non-assessed income, or remove

and resubmit.

And,

A message is returned to indicate

that the Income Calculation Report,

tax returns, and all other documents

uploaded to the vendor is sufficient

and valid documentation for that

eligible self-employed income

source(s),

Then,

all the eligible income sources

assessed by Loan Product Advisor

are eligible for relief from

enforcement of representations and

warranties regarding:

▪ the accuracy of the income

calculation related to the eligible

self-employed income sources on

the Income Calculation Report, and

▪ the business and income analysis,

including that the analysis of the

eligible income source that the

business has liquidity and is

financially capable of producing

stable monthly income for the

borrower.

However,

Additional feedback message(s) will

be displayed to instruct you to verify

the out of scope income, as per the

Guide, to retain the income rep and

warranty relief on the eligible self-

employed income source. Note: The

out of scope income is not eligible

for income rep and warranty relief.

And,

A feedback message

indicating that the eligible

self-employed income source

verified by the Income

Calculation Report is sufficient

income documentation was

not returned,

Then,

the loan is not eligible for

income representation and

warranty relief,

However,

it may still be eligible for relief

offered through Freddie Mac’s

selling representation and

warranty framework as

described in Guide Section

1301.11.

Note: Derived income

messages will only be

returned when the loan

receives “Not eligible” for

income rep and warranty

relief and Message Code VC

was not returned.

Eligible Not Eligible Not Eligible








Loan Product Advisor Feedback Certificate Results Returned, including Documentation

Requirements:

The following chart provides a summary of income assessment results and the messages returned to confirm

income representation and warranty relief eligibility and documentation requirements.

Income Rep

and Warranty

Result/Risk

Class

Loan Product Advisor Feedback Messages Income Documentation

Income

representation and

warranty relief

Borrower Income

Eligible Self-employed

Income Sources

Reported on the

Income Calculation

Report

Other Income

Sources

Eligible/Accept

Risk Class

Relieved from:

▪ Accuracy of the

income calculation

related to eligible self-

employed income

sources that are on the

Income Calculation

Report, and

▪ The business and

income analysis,

including the analysis

of the eligible income

source to support that

the business has

sufficient liquidity and

is financially capable

of producing stable

monthly income for

the borrower.

“Based on Loan Product

Advisor’s overall

assessment, the loan is

eligible for income

representation and

warranty relief.”

(Message 24)

Borrower’s income

source is an eligible

self-employed income

source reported on

the Income

Calculation Report,

and assessed by Loan

Product Advisor,

which is sufficient to

support the loan.

Document the eligible


source with the following:

▪ The Income Calculation

Report received from

the service provider, all

tax returns and all

documentation

submitted to the service

provider and maintain

in the mortgage file.

(Message VC)

▪ Verification of current

existence of each

business.

(Message 5C)

▪ IRS Form 4506-T (or an

acceptable alternative

form)1 if applicable.

(Message 1K)

▪ If applicable, for a sole

proprietorship

document on the loan

application the number

of years business has

been in existence.

(Message RV)

▪ Self-employment must

be documented on the

loan application.

For income other than

income from eligible


sources (e.g. alimony

social security) you

must either:

▪ Verify and

document the

income per the

Guide for the

applicable income

type

(various messages)

or

▪ Remove the income

and resubmit the

loan to Loan Product

Advisor.

(Message UL)

Note: You do not

receive income

representation and

warranty relief for

these other income

sources.








Income Rep

and Warranty

Result/Risk

Class


Income representation

and warranty relief Borrower Income

Eligible Self-Employed

Income Sources

Reported on the

Income Calculation

Report

Other Income

Sources

Not Eligible

with Message

Code VC

Returned

Accept Risk

Class

The loan is not eligible

for income rep and

warranty relief.

(Message 23)

However, the eligible


source that was assessed

may be eligible if:

Loan Product Advisor

returns Message VC, then

the eligible self-employed

income source supported

by the Income Calculation

Report is sufficient

income documentation,

And,

You are relieved from:

• Accuracy of the income

calculation related to

eligible self-employed

income sources that

are on the Income

Calculation Report, and

• The business and

income analysis,

including the analysis of

the eligible income

source to support that

the business has

sufficient liquidity and is

financially capable of

producing stable monthly

income for the borrower

Borrower’s income

source:

▪ Eligible self-

employed income

source reported on

the Income

Calculation Report,

and

▪ Income source not

eligible for

assessment but

used to underwrite

the loan.

Document the eligible


source with the

following:

▪ The Income

Calculation Report

received from the

service provider.

(Message VC)

▪ Verification of current

existence of each

business.

(Message 5C)

▪ IRS Form 4506-T (or

an acceptable

alternative form)1, if

applicable.

(Message 1K)

▪ If applicable, for a sole

proprietorship

document on the loan

application the

number of years

business has been in

existence.

(Message RV)

▪ Self-employment must

be documented on the

loan application

Income other than

income from eligible

self-employed

sources (e.g.,

alimony, social

security) must be

verified and

documented as

required by the Guide

in order to retain

representation and

warranty relief for

eligible income

sources.

(Various messages)

Note: You do not

receive income

representation and

warranty relief for

these other income

sources.








Income Rep

and Warranty

Result/Risk

Class


Income

representation and

warranty relief

Borrower Income

Eligible Self-employed

Income Sources

Reported on the

Income Verification

Report

Other Income

Sources

Not Eligible

Accept or

Caution Risk

Class

The loan is not eligible

for income

representation and

warranty relief related to

the borrower’s income.

“Based on Loan Product

Advisor’s overall

assessment, the loan is

not eligible for income

representation and

warranty relief; however,

it may be eligible for

relief offered through

Freddie Mac's selling

representation and

warranty framework.”

(Message 23)

Note: Message VC was

not returned.


returns:

▪ The total derived

self-employed

income amount per

borrower.

(Message TG)

▪ The self-employed

derived income

amount derived by

business type and

business name.

(Message TH)

Verify and document the income per the Guide

for the applicable income type.

(Various messages)








Income Rep

and Warranty

Result/Risk

Class


Income

representation and

warranty relief

Borrower Income

Eligible Self-Employed

Income Sources

Reported on the

Income Verification

Report

Income Not

Reported on the

Income Verification

Report and/or

Other Income

Sources

Unavailable

Accept or

Caution Risk

Class


was unable to assess the

borrower’s income. This

could be due to missing

or incomplete

information from the

service provider or a

system being down.

Refer to messages

returned.

You are not eligible for

relief from enforcement

of representation and

warranties related to the

borrower’s income.

The income must be verified and documented as required by the Guide.

NOTES:

1This includes, Commonwealth of Puerto Rico Form 2907 or Form 4506-T, as applicable, signed by the borrower for income

that is derived from sources in Puerto Rico, Guam, or the U.S. Virgin Islands and is exempt from federal income taxation

under the Internal Revenue Code.

Refer to the Loan Product Advisor Feedback Certificate Examples section for a summary of Loan Product Advisor

income assessment results and applicable messages.








Getting Started

The next several sub-sections cover details including the initial setup process and steps for originating loans with

AIM for self-employed.

Initial Setup

To participate, you must first have an agreement with a designated service provider, (e.g. LoanBeam). In your

agreement, the service provider must agree to:

▪ Utilize its proprietary technology to extract data from borrower tax returns you submit to enable

calculation of certain self-employment income/loss, including the Income Sources.

▪ Generate an Income Calculation Report with a unique reference number and submit it to you in the form

of an Excel workbook.

▪ Forward the Income Calculation Report and all income documentation you uploaded to the service

provider to Freddie Mac through Loan Product Advisor.

Note: By requesting an income report from the service provider, (e.g. LoanBeam) and entering the applicable

reference number in Loan Product Advisor, you are requesting the capability to be initiated in Loan Product

Advisor. Use of this capability is not required.

Steps for Originating Loans

Operational, Loan Origination System (LOS), and LoanBeam system impacts must be taken into consideration

before implementing this capability. Once you are ready to begin using this service, follow and complete the

steps outlined below. Based on your organization’s business processes, the order in which you complete the

steps may vary.

Deliver

loan to

Freddie

Mac

6

Review

Results

5

Submit to

Loan

Product

Advisor

4

Complete

data

entry

3

Reconcile

the

report

2 Order

the

workbook

from the

service

provider

1








Step 1: Order the Workbook Report from the Service Provider

As part of your process for gathering loan application data and authorizations, also obtain the borrower’s

authorization to share their tax returns and other relevant income information with the service provider and

Freddie Mac. After you have obtained the borrower’s authorization, order the service provider’s workbook.

Step 2: Reconcile the Report

The service provider completes the report request and returns the Income Calculation Report (Excel

workbook) to you. After you receive the report, capture the reference number. The reference number issued

by the service provider will apply to a maximum of one IRS Form 1040 for each applicable calendar year, for

up to two years, with no more than two borrowers on the same 1040 when filed jointly.

Importance of the Reference Number

The service provider assigns a unique reference number to the Income Calculation Report (workbook). This

number is associated with an application ID at the service provider. Identifying and using the correctly formatted

reference number is critical for Loan Product Advisor to access the Income Calculation Report. The following are

items to keep in mind with regards to the reference number:

1. The reference number is located in a field in the workbook provided by the service provider.

2. If there are multiple versions of the workbook, there is still only one reference number. The reference

number plus the applicable date and time makes each workbook version unique.

3. Based on the reference number provided to Loan Product Advisor, Loan Product Advisor will receive the

latest version of the workbook that you send back to the service provider.

4. If you did not make any changes to the workbook and upload back to the service provider, Loan Product

Advisor will receive the original version generated by the service provider.

5. If you don’t want Loan Product Advisor to use the workbook provided by the service provider, omit the

reference number from your Loan Product Advisor request.

6. Ensure you are requesting the correct workbook when ordering and uploading to the service provider (e.g.

LoanBeam) and submitting the loan to Loan Product Advisor.

7. The original reference number must be used with all subsequent submissions to the service provider to

update information (if applicable) and with all loan data submissions to Loan Product Advisor.








Next, review the Income Calculation Report to determine if any adjustment to the income must be made based on

the information in the mortgage file and, if so, update the Income Calculation Report accordingly.

For example:

1. Are the income calculations acceptable or do manual changes need to be made to the report?

2. Is there non-continuing income, or income that should be excluded, such as when a business is no longer

in operation.

3. Are there technical issues that may require help from the service provider (e.g. LoanBeam) support team

to resolve?

The following are examples of workbook sheets from the service provider’s (e.g. LoanBeam) workbook:

LoanBeam Income Calculation Report Example – Cover Page

Cover Page displays the Reference number that must

be provided to Loan Product Advisor.

If you need to upload additional income

documentation to the service provider, edit

your previous request so you are uploading

documentation to the service provider’s

existing application ID. Request an updated

Income Calculation Report from the service

provider. The service provider will return an

updated Income Calculation Report to you

with the same reference number.

If you need to make manual updates to

the Income Calculation Report, save the

changes in the workbook and upload

the report to the service provider under

the same reference number so Loan

Product Advisor can access the updated

Income Calculation Report.

Uploading Additional Income Documentation Updates to the Income Calculation Report Tips!








LoanBeam Income Calculation Report Example – Schedule C, Partnership, S Corporation

Step 3: Complete Loan Product Advisor Loan Data Entry

Once you have reviewed the Income Calculation Report and made any applicable adjustments, complete loan

data entry in your loan origination system. Keep the following requirements in mind when entering data:

▪ Include the reference number assigned by the service provider in the Report ID field with the submission

for Loan Product Advisor to access the report.

▪ “Yes” must be selected for the Self-Employed indicator field in the Borrower Employment Details if the

borrower has an ownership interest of 25% or more in the business, and the amount of self-employed

income you used to underwrite the loan entered in the Base Employment Income field.

▪ You may enter income types for a borrower in Loan Product Advisor even if the income is from an income

source which is not currently assessed under the AIM for self-employed capability (for example, employed

income).

Step 4: Submit the Loan to Loan Product Advisor

From your system, submit the loan to Loan Product Advisor. Loan Product Advisor sends a request with the

Report ID (reference number) to the service provider. The service provider must match the information

provided in the request to release the workbook data to Loan Product Advisor.

If a match is not made, (for example, an invalid reference number or invalid workbook) messages are returned

indicating Loan Product Advisor was unable to process the report for an individual borrower.

Tips when reviewing the Schedule C, Partnership and

S Corporation sheets:

1. White cells can be adjusted. For example, non-

recurring income should be excluded.

2. A box can be checked to exclude all the income

from the form if, for example, the business no

longer exists, the box must be checked.

Note: If you need to make manual updates to the

report, save the changes in the workbook and upload

the report to the service provider under the same

reference number so Loan Product Advisor can access

the updated Income Calculation Report.








Step 5: Review the Loan Product Advisor Feedback Certificate

Loan Product Advisor Messages are returned in the Employment & Income section of the Feedback Certificate

regarding eligibility for income rep and warranty relief.

Review the messages and reconcile them against the information in the Income Calculation Report. Also,

verify that the report date and time on the Income Calculation Report matches the report date and time in the

Loan Product Advisor message(s). Keep in mind, after you review the messages and determine what, if any

action is needed, you may choose to resubmit the loan.

Note: On resubmissions, maintain the same reference number in the Report ID field.

Step 6: Deliver the Loan to Freddie Mac

When you are ready to deliver the loan to Freddie Mac, you must deliver it through Loan Selling Advisor as a

Loan Product Advisor loan. Loan Selling Advisor confirms that the data from the Last Feedback Certificate is

consistent with the data delivered in Loan Selling Advisor, and when applicable, provides relief from

enforcement of certain selling rep and warranties related to the accuracy of income calculations and the

business and income analysis.

Important Reminders

Ensure the self-

employed indicator

is selected in Loan

Product Advisor, if

the borrower has an

ownership interest

of 25% or more in a

business, to receive

all the applicable

self-employed

feedback messages.

Self-employed

Indicator

If, for any reason, you

update the Income

Calculation Report, or

provide additional

income

documentation, you

must upload the

updated report and/or

income

documentation to the

service provider and

resubmit the loan with

the same reference

number to Loan

Product Advisor.

Updated Income

Information

You are responsible for

investigating and

resolving any inconsistent

or contradictory

information contained in

the Income Calculation

Report, tax returns and/or

the loan file and, if

necessary, updating the

information in Loan

Product Advisor and/or

the Income Calculation

Report for resubmission

of the data. For example,

if you determine that a

business for which

income was calculated is

no longer in operation,

you must exclude it from

the qualifying income.

Inconsistent or Contradictory Information

You must have no

knowledge,

information or

documentation that

contradicts a

reasonable

expectation of

continuance of

income or

probability of

consistent receipt of

income for at least

the next three years.

Income Continuance








Note:

Ineligible Income Sources – All income must meet the requirements of the Guide. Income not included under

this capability may be used to qualify the borrower, provided the income meets Guide requirements. For

instance, the following income sources may be shown on the tax returns but are not included under this

capability; however, these income sources may still be used to qualify:

▪ Wages, Salaries, Tips, etc. ▪ Taxable and non-taxable interest

▪ Dividends ▪ Alimony

▪ Capital Gains ▪ Other gains/losses

▪ IRA distributions ▪ Pensions/annuities

▪ Rental/Royalties ▪ Unemployment Compensation

▪ Social Security ▪ Other income

▪ Corporation income ▪ Farm income

Where to Get Help

For questions related to AIM for self-employed, please contact your Freddie Mac

representative or Freddie Mac’s Customer Support Center at 800-FREDDIE. Also, visit

the AIM for Self-Employed webpage. For questions related to LoanBeam’s workbook,

contact the LoanBeam support team.






https://sf.freddiemac.com/tools-learning/loan-advisor/content/aim-for-self-employed



Loan Product Advisor Feedback Certificate Examples – AIM for Income

The following Feedback Certificate Employment & Income section examples display messages you may see in

your results.

The following examples received a Risk Class of “Accept”.

Example 1 – Loan is Eligible for Loan-Level Relief

In this example, the loan was submitted to Loan Product Advisor with the following self-employed income

sources:

Eligible Self-Employed Income Sources on

the Income Calculation Report

Other Income Sources

• John Freddie: Sole proprietorship • N/A

• Mary Freddie: Partnership

Employment & Income

Code Messages

24 Based on Loan Product Advisor’s overall assessment, the loan is eligible for income representation and warranty relief.

RV The loan application must reflect that the Borrower’s sole proprietorship(s) has been in existence for at least 5 years to retain income representation and warranty relief.

VC JOHN FREDDIE’s submitted self-employed income was assessed using the LoanBeam report. The Income Calculation Report 102398 dated 3/24/2019 07:00 PM, tax returns, and all other documentation uploaded to LoanBeam must be retained in the loan file. No further documentation is required for this income.

VC MARY FREDDIE’s submitted self-employed income was assessed using the LoanBeam report. The Income Calculation Report 102398 dated 3/24/2019 07:00 PM, tax returns, and all other documentation uploaded to LoanBeam must be retained in the loan file. No further documentation is required for this income.

5C File must contain verification of current existence of each business through a third-party source for JOHN FREDDIE dated no more than 120 days prior to the Note Date or after the Note Date but prior to the Delivery Date.

5C File must contain verification of current existence of each business through a third-party source for MARY FREDDIE dated no more than 120 days prior to the Note Date or after the Note Date but prior to the Delivery Date.

1K Signed IRS Form 4506-T: any borrower, whose income is used to qualify, is required to sign IRS Form 4506-T no later than the Note Date.

Reminder Effective March 29, 2020: Derived income messages are no longer returned when Message

Code VC is returned.








The Results from Example 1 indicate:

Income Rep and Warranty Results

Topic

Income Source

Feedback Messages Eligible self-

employed

income source

Other

Loan Level

Eligible?

Message Code 24: Based on the assessment, the loan is eligible

for income rep and warranty relief. The borrower’s eligible self-

employed income source is sufficient to support the loan. Source level

Eligible?

Documentation Requirements

Topic

Income Source


employed

income source

Other

Income

Calculation

Report

Message Code VC: The Income Calculation Report is

acceptable documentation as an alternative to Form 91,

Income Calculations, to support the eligible self-employed

income sources for both borrowers. Confirm the report date

and time on the Income Calculation Report matches the report

date and time in this message. Maintain in the mortgage file.

Federal Income

Tax Returns

Message Code VC: Maintain the tax returns and all other

documentation uploaded to LoanBeam in the mortgage file.

Verify

existence of

the business

Message Code 5C: Traditional documentation for obtaining the

verification of the existence of the business for each business

for John Freddie and Mary Freddie.

4506-T

Message Code 1K: Obtain signed IRS Form 4506-T.

Other

documentation

Message Code RV: For sole proprietorships. This message is

returned to ensure the loan application reflects this business has

been in existence for at least 5 years to retain income rep and

warranty relief since only 1 year tax return was received.

Reminder: The tax returns uploaded to the service provider must meet the requirements outlined in the Federal

Tax Returns- Documentation Requirements section.








Example 2 – Loan is Eligible for Loan-Level Relief for Eligible Self-Employed Income on the Income Calculation

Report

In this example, the loan was submitted to Loan Product Advisor with the following income sources:




• John Freddie: Sole proprietorship • John Freddie: Rental income

• Mary Freddie: Partnership

Employment & Income

Code Messages




VC MARY FREDDIE’s submitted self-employed income was assessed using the LoanBeam report. The Income Calculation Report 102398 dated 3/24/2019 07:00 PM, tax returns, and all other documentation uploaded to LoanBeam must be retained in the loan file. No further documentation is required for this income.

UL JOHN FREDDIE’s submitted NetRentalIncome income is not required. Either remove this income and resubmit or document this income in accordance with Freddie Mac Single-Family Seller/Servicer Guide Topic 5300.

1K Signed IRS Form 4506-T: Any borrower, whose income is used to qualify, is required to sign IRS Form 4506-T no later than the Note Date.


5C File must contain verification of current existence of each business through a third-party source for MARY FREDDIE dated no more than 120 days prior to the Note Date or after the Note Date but prior to the Delivery Date.

2V If rental income is being used to qualify document the loan file in accordance with Chapter 5306 of the Freddie Mac Single-Family Seller/Servicer Guide.











Income Rep and Warranty Relief Results

Topic

Income Source

Feedback Messages Eligible

income

source

Other

Loan Level

Eligible?

Message Code 24: Based on the assessment, the loan is eligible for income rep

and warranty relief. The borrower’s eligible self-employed income source is

sufficient to support the loan.

Note: Refer to Message Code UL below.

Source level

Eligible?


Topic

Income Source

Feedback Messages Eligible

income

source

Other

Income

Calculation

Report

Message Code VC: The Income Calculation Report is acceptable

documentation as an alternative to Form 91, Income Calculations, to support

the eligible self-employed income sources for both borrowers. Confirm the

report date and time on the Income Calculation Report matches the report

date and time in this message. Maintain in the mortgage file.

Note: Refer to Message Code UL for the rental income.

Federal Income

Tax Returns

Message Code VC: Maintain in the mortgage file the tax returns and any other

documents uploaded to the vendor.

*

Message Code UL and 2V: The eligible self-employed income sources reported

on the Income Calculation Report for both borrowers is sufficient to support the

loan. John Freddie’s renal income is not required, therefore, you have the

*option, for John Freddie’s rental income source, to:

• Verify and document the income, Message Code 2V, or

• Remove the income and resubmit the loan to Loan Product Advisor.

Verify

existence of

the business

Message Code 5C: Traditional documentation for obtaining the verification of

the existence of the business for each business for John Freddie and Mary

Freddie.

4506-T

Message Code 1K: Obtain a 4506-T.

Other

Documentation

Message Code RV: For sole proprietorships. This message is returned to ensure

the loan application reflects this business has been in existence for at least 5

years to retain income rep and warranty relief since only 1 year tax return was

received.










Example 3 – Loan is Not Eligible for Loan-Level Income Rep and Warranty Relief. Eligible for Rep and Warranty

Relief for the Eligible Self-Employed Income on the Income Calculation Report

In this example, the loan was submitted to Loan Product Advisor with the following income sources:




• John Freddie: Partnership

• John Freddie: Military income

Employment & Income

Code Messages

23 Based on Loan Product Advisor’s overall assessment, the loan is not eligible for income representation and warranty relief; however, it may be eligible for relief offered through Freddie Mac’s selling representation and warranty framework.




II Military income for JOHN FREDDIE must be supported by a YTD Leave and Earnings Statement, W2 for the most recent calendar year and a 10-day pre-closing verification (10-day PCV), OR a written VOE documenting all YTD earnings and the earnings for the most recent calendar year (including current monthly fixed entitlement amount(s), if applicable), and a 10-day PCV.












Topic

Income Source


employed

income source

Other

Loan Level

Eligible?

Message Code 23: Based on the assessment, the loan is not

eligible for income rep and warranty relief.

Source level

Eligible?

Mortgages that receive a Not Eligible with Message Code VC

all the eligible self-employed income source (John Freddie)

supported by the Income Calculation Report is eligible for

income rep and warranty relief, as long as, the military

income is documented and verified per the Guide. The

military income is not eligible for income rep and warranty

relief.


Topic

Income Source


employed

income source

Other

Income

Calculation

Report

Message Code VC: The Income Calculation Report is

acceptable documentation as an alternative to Form 91,

Income Calculations, to support the eligible self-employed

income source for John Freddie. Confirm the report date and

time on the Income Calculation Report matches the report date

and time in this message. Maintain in the mortgage file.

Federal Income

Tax Returns

Message Code VC: Maintain the tax returns and all other

documentation uploaded to LoanBeam in the mortgage file.

Verify

existence of

the business



for John Freddie.

4506-T


Other

documentation

Message Code II: Traditional documentation requirements

must be obtained for the military income to retain the income

rep and warranty relief for the eligible self-employed income.










Example 4 – Loan is Not Eligible for Income Rep and Warranty Relief.


sources:




• John Freddie: Sole proprietorship N/A

• John Freddie: S Corporation

• John Freddie: Partnership (Insufficient

documentation to derive income)

Employment & Income

Code Messages

23 Based on Loan Product Advisor’s overall assessment, the loan is not eligible for income representation and warranty relief; however, it may be eligible for relief offered through Freddie Mac’s selling representation and warranty framework.

4L Self-employment income for JOHN FREDDIE from Partnership named TNT PARTNERSHIP could not be derived because of insufficient documentation. Submit complete signed individual and business returns for most recent 2 years if business in existence less than 5 years; most recent year return if in existence for at least 5 years.

TG For JOHN FREDDIE, the total Loan Product Advisor derived self-employed income is $3,004.41 using tax return data provided by (Income Calculation Report #102398 dated 03/25/2019 07:00 PM).

TH For JOHN FREDDIE, self-employed income of $2,876.00 from SoleProprietorship named AAA INC was derived using tax return data provided by (Income Calculation Report #102398 dated 03/25/2019 07:00 PM).

TH For JOHN FREDDIE, self-employed income of $128.41 from SCorporation named ENBC CORPORATION was derived using tax return data provided by (Income Calculation Report #102398 dated 03/25/2019 07:00 PM).

TK Please retain in the loan file all documentation uploaded and the Income Calculation Report #102398 dated 03/25/2019 07:00 PM.

TR If the Borrower's sole proprietorship(s) has been in existence for less than five years, complete signed income tax returns reflecting at least two years of receipt of income from the business must be uploaded to LoanBeam.



CY Self-employed income for JOHN FREDDIE must be supported by signed complete federal individual and business tax returns as applicable. If business in existence five years or more, provide personal and business tax returns for the most recent year. If the business has been in existence for less than five years provide personal and business tax returns for the most recent two years. File must contain Form 91 or equivalent.










Topic

Income Source


employed

income source

Other

Loan Level

Eligible?

Message Code 23: Based on the assessment, the loan is not

eligible for income rep and warranty relief.

▪ The derived income is less than the submitted income.

When the loan is not eligible for income rep and warranty relief,

and Message Code VC was not returned, Loan Product Advisor

will return feedback messages related to the Loan Product

Advisor derived income.

▪ Message Code TG is returned for the total Loan Product

Advisor derived self-employed income for John Freddie.

▪ Message Code TH is returned to display at the borrower

level the business type, name of business and the Loan

Product Advisor derived income for John Freddie.

Source level

Eligible?


Topic

Income Source


employed

income source

Other

Income

Calculation

Report

Message Code TK: . Confirm the report date and time on the

Income Calculation Report matches the report date and time in

this message. Maintain in the mortgage file.

Federal Income

Tax Returns

Message Code TR and CY: Traditional documentation must be

obtained based on the existence of the business 5 years or more;

or less than 5 years.

Verify

existence of

the business



for John Freddie.

4506-T


Other

documentation

Message Code 4L: Loan Product Advisor derived income is less

than the submitted income. Obtain required documentation to

support the TNT Partnership and you may resubmit the loan to

assess eligibility for income rep and warranty relief.










Example 5 – Loan is Eligible for Loan-Level Relief for Eligible Self-Employed Income Reported on the Income

Calculation Report

This example is provided to illustrate instances of when the loan is eligible for loan-level income rep and warranty

relief and Message Code TK is returned, in lieu of Message Code VC.

Message Code TK is returned when one borrower has multiple eligible self-employed income sources reported on

the Income Calculation Report.


sources for the borrower, John Freddie:




• John Freddie: Sole proprietorship

N/A

• John Freddie: Partnership

Employment & Income

Code Messages



TK Please retain in the loan file all documentation uploaded to LoanBeam and the Income Calculation Report #124961 dated 10/31/2019 06:29 PM.

1K Signed IRS Form 4506-T: Any borrower, whose income is used to qualify, is required to sign IRS Form 4506-T no later than the Note Date.


Reminder Effective March 29, 2020: Derived income messages are no longer returned when, in this

instance, Message Code TK is returned.










Topic

Income Source


employed

income source

Other

Loan Level

Eligible?

Message Code 24: Based on the assessment, the loan is eligible

for income rep and warranty relief. The borrower’s eligible self-

employed income source is sufficient to support the loan. Source level

Eligible?


Topic

Income Source

Feedback Message Eligible self-

employed

income source

Other

Income

Calculation

Report

Message Code TK: John Freddie has multiple eligible self-

employed income sources reported on the Income Calculation

Report, therefore, this message is returned. The Income

Calculation Report is acceptable documentation as an

alternative to Form 91, Income Calculations, to support the

eligible self-employed income sources for John Freddie.

Confirm the report date and time on the Income Calculation

Report matches the report date and time in this message.

Maintain in the mortgage file.

Federal Income

Tax Returns

Message Code TK: Maintain the tax returns and all other

documents uploaded to LoanBeam in the mortgage file.

Verify

existence of

the business



for John Freddie.

4506-T


Other

documentation

Message Code RV: For sole proprietorships. This message is

returned to ensure the loan application reflects this business has

been in existence for at least 5 years to retain income rep and

warranty relief since only 1 year tax return was received.



This document is not a replacement or substitute for the information found in the Freddie Mac Single Family

Seller/Servicer Guide or terms of your Master Agreement or other Pricing Identifier Terms.

©2020 Freddie Mac.






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