On February 2, 2022, Fannie Mae announced the removal of temporary COVID-19 requirements for borrowers using self-employment income in Lender Letter 2021-03.

Self-Employed Income Qualification Update

Additional income and analysis qualifications for self-employed borrowers were introduced during the beginning of the COVID-19 pandemic. For loans and new applications dated after February 2, 2022 and using tax returns from 2020 or 2021, these additional requirements have been retired.  

The retired requirements are as follows:

• A year-to-date profit and loss statement with a minimum of three months reported
• Unaudited year-to-date profit and loss statements must be accompanied by three months of business depository account statements

It’s important to note that if the tax return being used to qualify is prior to 2020, the temporary COVID-19 policies will continue to apply.

Summary of Active Fannie Mae COVID-19 Selling Guidelines for Self-Employed Borrowers

Four temporary policies remain active for self-employed borrowers. The following policies must be fulfilled until further notice:

• Verification of self-employment, including confirmation of the self-employed borrower’s business within 120 days prior to the note date, and confirmation of the business’ operation within 20 business days of the note date.
• Suspension of bulk transactions
• Additional requirements and restrictions for the sale of loans aged six months or less
• Additional documentation to confirm the status of all outstanding mortgage tradelines for purchase and refinance transactions

 Closing Thoughts

The retirement of temporary COVID-19 guidelines is a welcome relief for self-employed borrowers. The update removes additional obstacles from the loan process, making purchase and refinance transactions easier for those looking to qualify with self-employment income.