For a Fannie Mae loan, a borrower earns $6,200 monthly and owes a $412 car-loan payment with seven payments remaining. The underwriter documents that this short remaining obligation does not significantly affect the borrower's ability to meet credit obligations. How may the car payment be treated in qualifying DTI?
Correct Answer
B) It may be excluded under the short-term installment-debt rule
B. The car payment may be excluded on these documented facts. Seven remaining payments put this installment obligation below the more-than-ten-payment inclusion threshold. The stem also resolves the important exception: the underwriter has documented that the obligation does not significantly affect repayment ability. Scope and exceptions: This is Fannie Mae installment-debt treatment, not a universal exclusion for all short-term debts. A materially burdensome short obligation can still require inclusion; leases have separate treatment. Source: B3-6-05, Installment Debt; Lease Payments — https://selling-guide.fanniemae.com/sel/b3-6-05/monthly-debt-obligations
Why This Is the Correct Answer
B. The car payment may be excluded on these documented facts. Seven remaining payments put this installment obligation below the more-than-ten-payment inclusion threshold. The stem also resolves the important exception: the underwriter has documented that the obligation does not significantly affect repayment ability. Scope and exceptions: This is Fannie Mae installment-debt treatment, not a universal exclusion for all short-term debts. A materially burdensome short obligation can still require inclusion; leases have separate treatment.
Why the Other Options Are Wrong
Option A: It must be included solely because any payment remains after closing
Any remaining payment is not the stated Fannie Mae threshold.
Option C: It must be reduced to half the payment for the remaining seven months
Halving the payment is not the cited treatment.
Option D: It may be excluded only when exactly six or fewer payments remain
The rule does not impose the proposed six-payment cutoff.
Exam Tip
A short remaining term is not enough without assessing repayment impact.
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