months ended in Sep. 2020 was $0 Mil. 5. Here is how Dale Elenteny summarizes Asset Depletion Income Calculation: As mentioned earlier, Gustan Cho Associates at Loan Cabin has various asset depletion guidelines. Depreciation is a present expense that accounts for the past cost of an asset that is now providing benefits. View and export this data going back to 2010. 2020 ) + 0 (Sep. 2020 ) = $0 Mil. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. It is not an infallible process. The income may also be added to any additional monthly income currently being received. three Many home buyers, especially retirees, have limited or no traditional income. Fannie Mae and Freddie Mac also allow for asset depletion to be used as income streams, but of course the requirements are different. This is a reminder that depreciation involves estimates and choices. The calculation of depletion involves these steps: Compute a depletion base. Charge depletion based on units of usage. Warren Buffett even jokingly said We prefer earnings before everything when criticizing the abuse of EDITDA. c. Depletion (+)_____ (+)_____ d. Depreciation (+)_____ (+)_____ ... Business capital losses identified on Schedule D do not have to be considered when calculating income or liabilities, even if the losses are recurring. Let’s take an example of one of Dale Elenteny’s borrowers who qualified for a particular asset depletion loan program: This borrower has a loan approval and is scheduled to close in the coming days. Custodial Accounts for Taxes and Insurance ... Exhibit VII-5 DUS Final Settlement of Loss Calculation. Fundamental company data provided by Morningstar, updated daily. This single asset item may be marked Net. 360 for 30 years, 180 for 15 years. Apply Now; Credit Soft Pull; Document Checklist; Mortgage Calculator; Mortgage Programs. Individuals who change jobs frequently, but who are nevertheless able to earn consistent and predictable income, are also considered to have a reliable flow of income for qualifying purposes. Rather, the amount simply reflects an ongoing reduction in the amount of … Now, borrowers with substantial assets with no income can qualify for mortgages with asset depletion loans. IRS Form 1040 – Individual Income Tax Return . Gustan Cho is a senior mortgage expert and National Managing Director, providing direct-to-consumer advice at Loan Cabin. The interest calculation method is generally specified in the Loan Documents Loan Documents All documents evidencing, securing, or guaranteeing the debt obligation executed for a Mortgage Loan and approved by Fannie Mae. We are experts in FHA Loans, VA Loans, USDA Loans, Conventional Loans, FHA 203k Loans, Reverse Mortgages Jumbo Mortgages, Non-QM mortgages, Bank Statement Mortgage Loans for self employed borrowers, and alternative financing. This will create a “monthly income”, which certain lenders will allow you to use in lieu of actual income/employment. Float Percentage Of Total Shares Outstanding, Accounts Payable & Accrued Expense for Financial Companies, Accumulated other comprehensive income (loss), Cash, Cash Equivalents, Marketable Securities, Long-Term Debt & Capital Lease Obligation, Other Liabilities for Insurance Companies, Short-Term Debt & Capital Lease Obligation, Cash From Discontinued Investing Activities, Cash Payments for Deposits by Banks and Customers, Cash Receipts from Deposits by Banks and Customers, Cash Receipts from Securities Related Activities, Other Cash Payments from Operating Activities, Other Cash Receipts from Operating Activities, Payments to Suppliers for Goods and Services, Earn affiliate commissions by embedding GuruFocus Charts. So, for example a company might have: In this case, the only item likely to be shown on the balance sheet is Property, Plant, and Equipment - Net. No, Fannie Mae’s existing policies related to disasters do not apply to loans impacted by COVID-19. Quick Reference Guide: Fannie Mae Cash Flow Analysis . suggested guidance only and does not replace Fannie Mae® instructions or applicable guidelines. Sorry. It is possible for a company to have fully depreciated assets on its balance sheet. As long as you have assets, we will match you with a perfect asset depletion loan program for you. Most public companies choose not to show this contra asset account on the balance sheet they present to shareholders. The resulting net carrying amount of natural resources still on the books of a business do not necessarily reflect the market value of the underlying natural resources. IRS Form 1040 – Individual Income Tax Return Assets are generally qualified with 100% of cash accounts and 70% of retirement and investment accounts (100% of retirement funds may be … All numbers are in their local exchange's currency. suggested guidance only and does not replace Fannie Mae instructions or applicable guidelines. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. Fannie Mae then issues securities backed by pools of these mortgages that it sells to capital markets. Note: A lender may use Fannie Mae Rental Income Worksheets (Form 1037 or Form 1038) or a comparable form to calculate individual rental income (loss) reported on Schedule E. a. Fannie Mae FNMA Stock Message Board: [quote][i] So, in your calculations, converting JPS would raise Although depreciation is not a cash cost, it is a real business cost because the company has to pay for the fixed assets when it purchases them. Banks may sell loans to Fannie Mae individually or pooled with other loans, directly or through intermediaries. 1.Take sum of eligible assets 2. Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Business capital losses identified on Schedule D do not have to be considered when calculating income or liabilities, even if the losses are recurring. Fannie Mae  (OTCPK:FNMA) Depreciation, Depletion and Amortization Explanation. 2016 2017: NOTES: 1: W-2 Income from Self-Employment (Line 5) + * … The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. FNMA has been successfully added to your Stock Email Alerts list. Both Warren Buffett and Charlie Munger hate the idea of EDITDA because depreciation is not included as an expense. The matching principle states that companies should report associated costs and benefits at the same time. It means the company's assets cost $150 million, the company has reported $120 million in depreciation expense over the years, and the company is now reporting the assets have a book value of $30 million. GCA - Commercial And Residential Informational Center, This BLOG On Asset Depletion Guidelines For Borrowers Without Income Was PUBLISHED On November 10th, 2020, Non-traditional mortgages came to an abrupt halt after the 2008 mortgage meltdown. Loss. That's why we've developed several self-employed borrower calculators to help you calculate and analyze their assets properly. Borrowers who derive income from such sources must document that it is expected to continue for at least three years after the date of their mortgage application. Depreciation, Depletion and Amortization for the trailing twelve months (TTM) ended in Sep. 2020 was 0 (Dec. 2019 ) + 0 (Mar. We are a mortgage brokers licensed in multiple states. Dale Elenteny is our Asset Depletion Mortgage Expert and a Senior Vice President at Gustan Cho Associates at Loan Cabin Inc. Every lender has different Asset Depletion Guidelines. 2020 ) + 0 (Jun. Companies do not have cash layout for depreciation. Asset Depletion Qualification is simply an Underwriter’s tool to apply more qualifying income by calculating a return on the borrower’s “liquidable” assets. Once you’ve created an app, copy the key and start using the APIs you selected. How an asset depletion loan works is you take your total assets and divide that total by 360 months (the number of months in a 30 year mortgage). Please use the following quick reference guide to assist you in completing Fannie Mae Form 1084. Some jumbo lenders who cater to high net worth individuals have more liberal asset depreciation programs. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. However, public companies in the United States explain their depreciation choices to shareholders in a note to their financial statements. Fannie Mae considers distributions from 401(k)s, IRAs, or Keogh retirement accounts to have a defined expiration date because they involve depletion of an asset. Instead, they simply show a single item. The lender uses a formula called “asset depreciation” or “asset annuitization or depletion” to impute a monthly distribution from the investment portfolio. Servicers Servicers Primary Person responsible for servicing the Mortgage Loan (e.g., the originator, the selling Lender, or a third-party servicer). Fannie Mae DUS Guide Page 5. Please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. 2013 2012: NOTES : 1: Total Income (Line 22) *Tax–exempt interest income: is not self–employed income and should not be entered on this form. Generally the calculation is a borrowers total assets divided by a set number of months, such as 360 for the standard 30 year loan. Asset Depletion Guidelines For Borrowers Without Income. Total Expenses (Line 20) – c. Depletion (Line 18) + Subtotal Schedule E = 6 Schedule F – Profit or Loss from Farming a. Calculator and Quick Reference Guide: Fannie Mae Cash Flow Analysis. Asset Depletion Program Overview: Frequently, special attention is required beyond traditional underwriting guidelines for high net worth borrowers with varying streams of income. Popular loan programs such as stated income, no doc, bank statement loans, and asset depletion loans came to an abrupt halt. It provides . Page 4 Fannie Mae DUS Guide. Investors can find this note in the company's 10-K. Past depreciation expenses accumulate on the balance sheet. Royalties Received (Line 4) + b. Take the Remainder and Divide by length or loan. Form 1040 — Individual Income Tax Return. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. • Borrower has $1,000,000 in liquid assets. Social Security Income For Mortgage Lending Guidelines, Fannie Mae Collection Guidelines On Conventional Loans. * All numbers are in millions except for per share data and ratio. You can manage your stock email alerts here. 100% of the assets … They can instead rely on asset depletion calculations based on a combination of cash, retirement, and investment monies divided by 360 payments. Instead, lenders can follow the guidance in Lender Letter s . GuruFocus has detected 3 Severe Warning Signs with FNMA. Asset Depletion, which is also known as Asset Dissipation, is what you get when your liquid assets are calculated using a specific formula to provide you with monthly income for qualifying. Just use your Fannie Mae account to get started. Web Designer Chicago | Disclaimer | Disclosures & Licenses | Copyrights | Privacy Policy © 2021 - Gustan Cho Associates. Asset depletion is a calculation where a borrower’s liquid assets are entered into a calculation to bring up the amount of monthly income they have in order to make mortgage payments. All Rights Reserved. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. . Many retirees and business owners are ideal borrowers who can benefit from the asset depletion loan program. Freddie Mac Form 91 Calculator (2018-2019) Quick reference guide and income analysis for Freddie Mac Form 91 updated. The good news is that alternative financing is coming back. (-) 30% of the remaining value IF a Stock, Bond or Mutual Fund 3. Its depreciation, depletion and amortization for the trailing twelve months (TTM) ended in Sep. 2020 was $0 Mil. It guarantees that investors in these securities will receive prompt payment of the principal and interest due on the mortgages. ... Fannie Mae Form 1084 Calculator XLS (2018-2019) Calculate and analyze cash flow to help you complete Fannie Mae form 1084. updated. All Rights Reserved. Only PremiumPlus Member can access this feature. Calculator and Quick Reference Guide: Fannie Mae® Cash Flow Analysis. To create income statements that meet the matching principle, accountants use an expense called depreciation. So, instead of reporting a $300 million purchase expense in 1982, the company might: To calculate depreciation, a company must make estimates and choices such as: The range of different ways of spreading the cost under GAAP accounting is too long to list. © 2004-2021 GuruFocus.com, LLC. Do Fannie Mae’s existing disaster policies in the Selling Guide apply to the COVID- 19 pandemic? Your email address will not be published. Fannie Mae’s underwriting guidelines emphasize the continuity of a borrower’s stable income. Examples of Asset Depletion: Example 1: 43-year old borrower: • Borrower’s income is $5,000/month but DTI is too high to qualify. Or email us at gcho@gustancho.com. Schedule E – Supplemental Income and Loss . Borrowers who do not have a regular source of income but have assets can now qualify for an asset depletion mortgage. The term amortization is used when discussing intangible assets. The Asset Depletion Program allows the Underwriter to use a Borrower’s LIQUID ASSETS to provide more income to qualify! A contra asset account is an account that offsets an asset account. Fannie Mae's depreciation, depletion and amortization for the Our asset depletion mortgage loan programs are for primary owner-occupant homes, second homes, and investment properties. Loss Sharing formula) Equals: Net Asset Value m. Additional Collateral. Warning! It is actually the asset account netted against the contra asset account. The stable and reliable flow of income is a key consideration in mortgage loan underwriting. Borrowers who use an asset depletion program to qualify do not need to show any source of income or employment. LL-2020-03, Impact of COVID -19 on Originations and LL-2020-04, As a result, the asset - although it is still being used - is carried on the balance sheet at its salvage value. It is critical that investors read this note. Please use the following quick reference guide to assist you in completing Fannie Mae Form 1084. Qualifying assets tend to be only liquid assets such as cash, investment accounts and retirement accounts. As such, asset dissipation loans typically require a large down payment. i.e. Gustan Cho Associates has multiple asset depletion loan programs. Schedule E – Supplemental Income and . Note: Use Fannie Mae Rental Income Worksheets (Form 1037 or Form 1038) to evaluate individual rental income (loss) reported on Schedule E. Refer to One of the key tenets of Generally Accepted Accounting Principles (GAAP) is the matching principle. You can use 70% of the asset for income, then divide by 240 months: $500,000 * 70% = $350,000. 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'S depreciation, depletion and amortization Explanation Gustan Cho Associates mortgage Group at 262-716-8151 text. Investment properties 91 Calculator ( 2018-2019 ) Quick Reference Guide to assist you in completing Fannie Mae and Freddie require! For 15 years Managing Director, providing direct-to-consumer advice at loan Cabin and export this data going back 2010! 15 years | Privacy Policy © 2021 - Gustan Cho is a Senior mortgage Expert National! Apis to discover the latest Fannie Mae 's Earnings per Share ( Diluted ) the... Of Earnings per Share ( Diluted ) guaranteed for completeness, accuracy or in any other way Director! Program is ideal for wealthy borrowers who have substantial assets but do apply... Sign up for for the past cost of an asset depletion program allows the Underwriter use. Loan program for you qualify for an asset account subtracted from net income in the Selling Guide apply to COVID-... 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