A borrower co-signed a $415 car payment for a sibling who has paid it from their own account for 18 months. If the program permits excluding debt paid timely by another obligor over the required documented period, how may this co-signed payment be treated?
Correct Answer
A) It may be excluded on proof the sibling has made the payments
A. The payment may be excluded if the program’s documented-payment conditions are met. The stem expressly permits an exclusion for debt paid by the other party and requires evidence over the relevant period. Statements or canceled checks must establish the qualifying payment history; the asserted 18 months must be verified, not merely accepted verbally. Scope and exceptions: Excluding a payment from DTI does not release the cosigner from the debt. Under Fannie Mae’s cited policy, the relevant evidence is the most recent 12 months with no delinquency; other program conditions still apply. Source: B3-6-05, Debts Paid by Others — https://selling-guide.fanniemae.com/sel/b3-6-05/monthly-debt-obligations
Why This Is the Correct Answer
A. The payment may be excluded if the program’s documented-payment conditions are met. The stem expressly permits an exclusion for debt paid by the other party and requires evidence over the relevant period. Statements or canceled checks must establish the qualifying payment history; the asserted 18 months must be verified, not merely accepted verbally. Scope and exceptions: Excluding a payment from DTI does not release the cosigner from the debt. Under Fannie Mae’s cited policy, the relevant evidence is the most recent 12 months with no delinquency; other program conditions still apply.
Why the Other Options Are Wrong
Option B: It counts at half, split between the 2 parties on the loan
There is no automatic half-payment allocation in this rule.
Option C: It may be excluded only after the borrower is released in writing
Release from contractual liability is different from DTI treatment.
Option D: It counts in full, because the borrower is liable on the note
Legal liability alone does not defeat an otherwise applicable underwriting exclusion.
Exam Tip
DTI exclusion changes underwriting treatment, not the creditor’s contractual rights.
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