For a Fannie Mae loan, a borrower has eight remaining $310 monthly payments on an automobile installment loan, not a lease. The lender determines the obligation does not significantly affect the borrower's ability to meet credit obligations. May this debt be excluded from recurring monthly debt?
Correct Answer
B) Yes, the short remaining term and assessed repayment impact permit exclusion
B. Exclusion is permissible on the stated facts. Eight remaining payments fall within the short-term installment-debt category. The stated repayment-impact assessment matters: a short remaining term alone does not require the lender to disregard a significant obligation. Scope and exceptions: Do not extend this treatment to automobile leases, which remain recurring obligations regardless of months left. Excluding a payment from DTI does not forgive the debt or remove the borrower's duty to pay it. Source: Installment Debt; Lease Payments — https://selling-guide.fanniemae.com/sel/b3-6-05/monthly-debt-obligations
Why This Is the Correct Answer
B. Exclusion is permissible on the stated facts. Eight remaining payments fall within the short-term installment-debt category. The stated repayment-impact assessment matters: a short remaining term alone does not require the lender to disregard a significant obligation. Scope and exceptions: Do not extend this treatment to automobile leases, which remain recurring obligations regardless of months left. Excluding a payment from DTI does not forgive the debt or remove the borrower's duty to pay it.
Why the Other Options Are Wrong
Option A: It may be excluded once 6 or fewer payments are left to run
Six payments is not the cited policy threshold.
Option C: It counts in full, because an installment debt always counts
It denies the available exclusion.
Option D: It counts at half, or $155, for the 8 months that remain on it
The cited rule does not authorize halving the monthly payment.
Exam Tip
Check debt type, remaining term and repayment impact together.
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