Unreimbursed Business Expenses change from FNMA

When people ask me about my career in the mortgage business as an underwriter, the questions comes up “well what do you actually do?”.  The best way I can describe the job is “jack of many trades, but master of none”! While working as an underwriter you learn to become good at topics such as title work, condo HOA’s, multiple forms of assets, basic CPA skills, and tax returns just to name a few.

Today’s blog is how my “partial CPA knowledge” in the area of reading and understanding tax returns helps in underwriting. Full disclaimer, I am not a CPA, and only play one on TV, so consult a real CPA if you have questions from a tax standpoint on this topic!

One of the biggest changes people will notice this year on their tax returns is that the standard deduction has basically doubled for most categories.  Instead of my basic understanding here is a blog that better explains the standard deduction , credit to “The Balance” for this information  BLOG HERE

For years underwriters have been required to consider and deduct unreimbursed business expenses from the borrower’s income. Depending on which agency and year we are talking about this income reduction was applied to borrowers with qualifying income that was commission based of 25% or greater, or for any borrower claiming URBE’s which was the case on older guidelines for conventional and government-based loans.  Of course, lowering a borrowers income would either increase the risk of a DTI decline OR actually decline a borrower due to DTI issues.  I can personally tell you have I have seen deductions of $1,000- $3,000 per month of income due to the URBE’s, which resulted in declines.

One of the “trade offs” made by the government doubling the standard deduction was removing the ability for an employee to right off unreimbursed expenses (among other items).  Due to this discontinuation of this tax policy, Fannie Mae in SEL 2018-09 dated 12/04/2018 has removed the requirement to deduct URBE’s from the borrower income.

At this time we do not see any other agencies change their policy about URBE’s, but I would expect that to change since this tax concept is now “expired”.

That is all for this week, until next time.

By |2018-12-13T19:43:20-04:00December 13th, 2018|Uncategorized|2 Comments

About the Author:

Michael Whitbeck
Michael is a subject matter expert on the process of mortgage underwriting. With 25 years in the mortgage business holding different positions in his career such as loan officer, underwriting manager, auditing supervisor, and chief credit officer. Through those experiences, he continually built content and systems to teach a process to improve people's underwriting skill set. Michael is the co-creator of UberWriter. UberWriter is the only online mortgage calculator that can determine any of the 30+ types of income listed in the agency guidelines. UberWriter has been a huge success in the market and half of the top 10 companies on the Scotsman Guide use UberWriter and produce thousands of income reports per month. Outside of the mortgage world Michael is a recreational pilot, loves Jeep adventures with his wife Jennifer. As a military veteran himself, he helps out with veterans organizations.


  1. Lynn February 6, 2019 at 1:46 PM - Reply

    What about URE 2106 listed for a Schedule C borrower? I would think deduct from the income as these expenses should have been part of the schedule C. What whatever reason, the borrower prepared a 2106 with expenses along with Schedule C.

    • Michael Whitbeck
      Michael Whitbeck February 6, 2019 at 8:47 PM - Reply

      Hi Lynn

      No need to deduct those expenses with this change to Fannie Mae regardless of income type. As I mention in the article those are eliminated now from Fannie Mae and I expect them to be removed from other agencies as well!

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