For a Fannie Mae loan, a borrower has $9,000 in verified monthly qualifying salary and must pay $1,300 monthly alimony under a documented legal agreement for three more years. What permitted alternative to including alimony as a monthly debt avoids counting it twice?
Correct Answer
C) It may be treated as a reduction of income rather than a debt
C. Reduce qualifying income by $1,300 instead of also counting it as debt. $9,000 − $1,300 = $7,700 in monthly qualifying income under this alternative. The payment is still accounted for, but it is not also added to the DTI numerator. Scope and exceptions: Retain the legal agreement and follow the applicable underwriting and DU entry instructions. The remaining debts are not supplied, so no final DTI can be calculated. This alternative does not establish a universal rule for child support, other programs or tax treatment. Source: Alimony, Child Support, Equalization Payments, and Separate Maintenance Payments — https://selling-guide.fanniemae.com/sel/b3-6-05/monthly-debt-obligations
Why This Is the Correct Answer
C. Reduce qualifying income by $1,300 instead of also counting it as debt. $9,000 − $1,300 = $7,700 in monthly qualifying income under this alternative. The payment is still accounted for, but it is not also added to the DTI numerator. Scope and exceptions: Retain the legal agreement and follow the applicable underwriting and DU entry instructions. The remaining debts are not supplied, so no final DTI can be calculated. This alternative does not establish a universal rule for child support, other programs or tax treatment.
Why the Other Options Are Wrong
Option A: It is disregarded entirely, since alimony is not consumer debt
It ignores a continuing required obligation.
Option B: It must always be counted as a monthly debt in the back ratio
It denies the permitted income-reduction alternative.
Option D: It counts as a debt and reduces the income by the same $1,300
It applies both treatments to the same obligation.
Exam Tip
Use the permitted treatment consistently without double counting.
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