For a Fannie Mae loan, a self-employed borrower has a $1,900 monthly equipment debt on the personal credit report. The account has no delinquency history, acceptable records show payments from business funds, and the lender has accounted for the obligation in business cash flow. How may the payment be treated in personal DTI?
Correct Answer
C) It may be excluded because the documented business-payment, payment-history and cash-flow conditions are satisfied
C. The payment may be excluded from personal DTI under the stated conditions. Personal credit reporting does not by itself require duplicating an obligation already appropriately handled in business cash flow. The rule accepts evidence of company payment, with twelve months of canceled company checks given as an example. Scope and exceptions: Insufficient payment evidence, missing cash-flow treatment or delinquency defeats this exclusion. Where included personally, the analysis must avoid counting the relevant business expense twice. Excluding a payment from DTI does not release legal liability. Source: Business Debt in Borrower’s Name — https://guide-selling.fanniemae.com/sel/b3-6-05/monthly-debt-obligations
Why This Is the Correct Answer
C. The payment may be excluded from personal DTI under the stated conditions. Personal credit reporting does not by itself require duplicating an obligation already appropriately handled in business cash flow. The rule accepts evidence of company payment, with twelve months of canceled company checks given as an example. Scope and exceptions: Insufficient payment evidence, missing cash-flow treatment or delinquency defeats this exclusion. Where included personally, the analysis must avoid counting the relevant business expense twice. Excluding a payment from DTI does not release legal liability.
Why the Other Options Are Wrong
Option A: It counts at half, reflecting the borrower share of the company
There is no automatic half-payment rule.
Option B: It counts in full, since it appears on the personal credit report
It ignores the documented business-debt exception.
Option D: It may be excluded where the business has 2 or more employees
Employee count is not an exclusion criterion.
Exam Tip
Verify payer, history and cash-flow treatment together.
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