Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2021-22
Effective 06/09/21 Page E101-1
The required documentation to verify income disclosed by the Borrower(s) on Form 710, Mortgage Assistance
Application, and the corresponding methods to calculate the income from each type are provided in this exhibit.
Servicers must refer to Section 9202.3 for instructions on processing IRS Form 4506-C, if applicable, based on
the requirements in Section 9202.3.
If the documentation provided does not support the income the Borrower stated on Form 710 or the Servicer is
unable to determine the frequency of payment from the documentation provided by the Borrower, the Servicer
must reconcile the inconsistency with the Borrower. The Servicer may request additional documentation as
acknowledged and agreed to by the Borrower on Form 710.
Rules for Grossing Up Net or Non-Taxable Income
In some cases, the Borrower may provide bank statements to document his or her income. In those instances,
the income documented on the bank statements will reflect net income and the Servicer must gross up the net
income to determine the Borrower’s gross income. In addition, the Servicer must gross up all non-taxable income
received by the Borrower provided the Borrower can provide documentation that the income is not taxable. The
Servicer must maintain such documentation in the Mortgage file.
To gross up net or non-taxable income, the Servicer must multiply the amount of the net or non-taxable income
by 1.25; if the actual amount of federal or State taxes that would be paid is more than 25% of the Borrower's net
or non-taxable income, the Servicer may use the actual percentage.
Salary or Hourly Wage
To calculate income for a salaried or hourly waged Borrower, obtain either:
• The Borrower’s most recent paystub and documentation reflecting year-to-date (YTD) earnings, if not
reported on the paystub (e.g., signed letter or printout from the employer), or
• The Borrower’s two most recent monthly bank statements showing income deposit amount
Borrower income is supported by most recent paystubs
The following table shows the monthly gross income calculation by payment frequency when the Borrower’s
income is supported by the Borrower’s most recent paystubs:
Exhibit 101
Income Calculation Guidelines for
Alternative to Foreclosure Options
Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2021-22
Effective 06/09/21 Page E101-2
Borrower Income is Supported by Most Recent Paystubs
Payment Frequency
Monthly Gross Income Calculation
Example
Weekly
Multiply the weekly gross income by 52
weeks and divide by 12 months.
Borrower is paid $500 each week.
$500 x 52 weeks ÷ 12 months =
$2,167 gross monthly income
If the Borrower is an hourly worker
paid weekly and if the number of hours
worked per week varies, determine the
Borrower’s average weekly gross
income by using the YTD earnings
information provided by the Borrower.
Once established, multiply the average
weekly gross income by 52 weeks and
divide by 12 months.
Note: If the Borrower has previously
experienced a period of unemployment
or a reduction to wages that will impact
the gross monthly income calculation,
the Servicer may use its discretion to
calculate gross monthly income based
on the most recent information
provided by the Borrower.
Borrower is paid $500 average weekly
gross income.
$500 x 52 weeks ÷ 12 months =
$2,167 gross monthly income.
Bi-weekly (every 2 weeks)
Multiply 2 weeks gross income by 26
pay periods and divide by 12 months.
Borrower is paid $1,250 every two
weeks.
$1,250 x 26 pay periods ÷ 12 months =
$2,708 gross monthly income
If the Borrower is an hourly worker
paid bi-weekly and if the number of
hours worked per pay period varies,
determine the Borrower’s average bi-
weekly gross income by using the YTD
earnings information provided by the
Borrower. Once established, multiply
the average bi-weekly gross income by
26 pay periods and divide by 12
months.
Note: If the Borrower has previously
experienced a period of unemployment
or a reduction to wages that will impact
the gross monthly income calculation,
the Servicer may use its discretion to
calculate gross monthly income based
on the most recent information
provided by the Borrower.
Borrower is paid $1,250 average bi-
weekly gross income.
$1,250 x 26 pay periods ÷ 12 months =
$2,708 gross monthly income.
Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2021-22
Effective 06/09/21 Page E101-3
Borrower Income is Supported by Most Recent Paystubs
Payment Frequency
Monthly Gross Income Calculation
Example
Semi-monthly (twice per
month)
Multiply the semi-monthly gross
income by 2.
Borrower is paid $1,250 twice a month.
$1,250 x 2 pay periods = $2,500 gross
monthly income.
If the Borrower is an hourly worker
paid semi-monthly and the number of
hours worked per pay period varies,
determine the Borrower’s average
semi-monthly gross income by using
the YTD earnings provided by the
Borrower. Once established, multiply
the average semi-monthly gross
income by 2 to determine gross
monthly income.
Note: If the Borrower has previously
experienced a period of unemployment
or a reduction to wages that will impact
the gross monthly income calculation,
the Servicer may use its discretion to
calculate gross monthly income based
on the most recent information
provided by the Borrower.
Borrower is paid $1,250 average semi-
monthly gross income.
$1,250 x 2 pay periods = $2,500 gross
monthly income.
Monthly
Use the monthly gross income amount
from the paystub.
Borrower is paid $3,000 every month.
$3,000 is the gross monthly income.
Borrowers who may be paid
less than 12 months per year
Some occupations have options on
whether their income is paid for the
time that they are working or paid over
12 months (e.g., teachers). Determine
how often and for how many months of
the year the Borrower is paid and then
determine their income based on the
calculations above.
Borrower is paid $4,000 monthly for 10
months of the year.
$4,000 x 10 months ÷ 12 months =
$3,333 gross monthly income.
Alternatively, if the Borrower has
elected to be paid for 10 months work
over a full 12 calendar months, the
paystubs will reflect a monthly gross
income of $3,333.
Borrower income is supported by most recent bank statements
If the Borrower has provided the two most recent monthly bank statements to document his or her income, the
income reflected on the bank statements as deposits will reflect the Borrower’s net income. The Servicer must
review the bank statements to determine the frequency with which income is received by the Borrower and follow
the above instructions based on the applicable frequency to determine the Borrower’s monthly net income. The
monthly net income must then be grossed up by multiplying it by 1.25. Refer to the “Rules for Grossing Up Net or
Non-taxable Income” section above. The result will be the Borrower’s monthly gross income. If the payment
frequency is not obvious based on review of the frequency of deposits on the Borrower’s bank statements, the
Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2021-22
Effective 06/09/21 Page E101-4
Servicer must request clarification from the Borrower or, alternatively, obtain additional supporting
documentation.
Self-Employed Income
For each Borrower who receives self-employed income, the Servicer must evaluate the Borrower’s income using
one of the following:
• Two most recent bank statements showing self-employed income deposit amounts
• Most recent signed and dated quarterly or year-to-date profit/loss statement
• Most recent complete and signed business tax return; OR
• Most recent complete and signed individual federal income tax return
If the Borrower submits bank statements to support the income reported on the Form 710, then the Servicer must
evaluate the bank statements in accordance with the “Borrower Income is Supported by Most Recent Bank
Statements” section above.
If the Borrower submits either individual or business tax returns, then the Servicer must analyze the Borrower’s
most recent signed individual income tax return and, as applicable, the business tax return, for both income and
any potential losses that may impact the Borrower’s income. When calculating gross income for self-employed
Borrowers, a Servicer should include the Borrower's net profit plus any salary draw amounts that were paid to the
Borrower in addition to adding any of the allowable adjustments used in analyzing the tax returns for the
business, such as non-recurring income and expenses, depreciation and depletion (if applicable).
Form 91 may be used to analyze the Borrower’s tax returns and calculate self-employed monthly gross income.
Alternatively, comparable worksheets or software may be used by the Servicer to assist in determining monthly
gross income.
If the Servicer has collected the Borrower’s most recent signed and dated quarterly or YTD profit and loss
statement, then the Servicer must evaluate the Borrower based on income earned and reported on the profit and
loss statement.
When the Borrower has experienced a significant decrease in income, the Servicer should not average the
Borrower's income and instead focus its analysis on the income that the Borrower is currently earning. When the
documentation provided by the Borrower evidences that the income has returned to an amount equal to or
greater than it was prior to the one-time occurrence, the Servicer may average the Borrower’s income.
Other Earned Income (e.g., bonuses, commissions, housing allowances,
tips and overtime)
Obtain reliable third-party documentation describing the amount and nature of the income (e.g., paystub, bank
statements, award letters, or other documentation showing the amount and frequency of the income). When
verifying annualized income based on the YTD earnings reflected on paystubs, Servicers may, based on their
good business judgment, make adjustments when it is likely that certain types of additional income (bonus,
commissions, etc.) will not continue.
The following table shows the monthly gross income calculation by payment frequency:
Payment Frequency
How to Calculate
Bonus or
commission paid
annually
Divide the annual bonus or
commission amount by 12
months.
Bonus or
commission paid
quarterly at a
consistent amount
Divide the quarterly bonus or
commission amount by three
months.
Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2021-22
Effective 06/09/21 Page E101-5
Payment Frequency
How to Calculate
Bonus or
commission paid
quarterly at a
variable amount
Add all quarterly bonuses or
commissions shown on the
documentation provided and
then divide by the number of
months.
Bonus or
commission paid
weekly at a
consistent amount
Multiply the weekly bonus or
commission amount by 52
weeks and divide by 12
months.
Bonus or
commission paid
weekly at a variable
amount
Add all weekly bonuses or
commissions shown on the
documentation provided and
then divide by the number of
months.
Tip income or
Housing allowance
Divide the YTD tip or
housing allowance income
shown on third party
documentation by the
number of months included.
Overtime and shift
differential
• Divide the YTD gross
overtime pay or shift
differential pay by the
number of pay periods
YTD to determine the
average gross pay per
pay period.
• Multiply the average
gross overtime or shift
differential per pay
period by the number of
pay periods in year and
divide by 12 months.
If the supporting documentation provided by the Borrower contains net income information (e.g., bank statements
showing net pay) the Servicer must calculate the monthly gross income by multiplying the monthly net income by
1.25, as described in the “Borrower Income is Supported by Most Recent Bank Statements” section above.
Social Security, Disability or Death Benefits, Pension, Public Assistance,
or Adoption Assistance
Document the gross monthly amount and frequency of the benefits. If the supporting documentation provided by
the Borrower denotes gross income amounts, calculate the gross monthly amount of the benefits using the chart
below. If the supporting documentation provided by the Borrower denotes net income amounts, follow the steps
below to calculate the monthly net income, and then calculate the monthly gross income by: multiplying the
monthly net income amount X 1.25 = monthly gross income
Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2021-22
Effective 06/09/21 Page E101-6
Required Documentation
• Two most recent bank statements showing deposit amounts; OR
• Award letters or other documentation showing the amount and frequency of the benefits
The following table shows the monthly gross income calculation by payment frequency:
Frequency
How to Calculate
Example
Paid annually
Divide the annual amount by 12
months.
Yearly amount is $5,000.
$5,000 12 months = $417 gross
monthly amount
Paid quarterly
Divide the quarterly amount by 3
months.
Quarterly amount is $1,250.
$1,250 3 months = $417 gross
monthly amount
Paid monthly
Use the gross monthly amount
received.
Borrower is paid $600 every month.
$600 is the gross monthly income.
Paid weekly at a
consistent amount
Multiply the weekly amount by 52
weeks and divide by 12 months.
Weekly amount is $75.
$75 x 52 weeks = $3,900 12 months
= $325 gross monthly amount
Paid weekly at a variable
amount
Add all weekly amounts shown on the
payment history provided and then
divide by the appropriate number of
weeks, multiply by 52 weeks, divide
by 12 months.
Weekly amount varies between $50
and $75, with a total of $500 received
over 8 weeks.
$500 8 = $62.6 per week x 52 weeks
= $3,250 12 months = $271 gross
monthly amount
Rental Income
To evaluate a Borrower’s rental income, the Servicer must collect:
• Two most recent bank statements demonstrating receipt of rent; OR
• Two most recent deposited rent checks
Rental income is calculated as follows:
Required
Documentation
Determining Monthly Income
Example
Two most recent
bank statements
or deposited rent
checks
supporting receipt
of the rental
1. Determine the average monthly
gross rental income for the subject
property
The Borrower’s supporting documentation
shows bank deposits or cashed checks in the
amount of $500 per month for the two months
represented by the supporting documentation.
The average monthly gross rental income is
$500.
Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2021-22
Effective 06/09/21 Page E101-7
Required
Documentation
Determining Monthly Income
Example
income stated on
Form 710
2. Multiply the average monthly gross
rental income by the number of
months per year the Borrower has
stated the income will be available
(e.g., the Borrower receives rental
income for 6 months of the year) to
establish and annual gross rental
income.
$500 average monthly gross rental income X
6 months = $3,000 annual gross rental
income
3. Multiply the gross monthly rental
income amount by 75%.
Note: 25% is considered vacancy
loss and maintenance expense.
$500 x 75% = $375 net rental income. $375
must be included in the total monthly income
amount.
Property securing the Mortgage is an Investment Property
1. Determine the average monthly
gross rental income for the subject
property.
The Borrower’s supporting documentation
shows bank deposits or cashed checks in the
total amount of $780 per month for the two
months represented by the supporting
documentation. The average monthly gross
rental income is $780.
2. Multiply the average monthly gross
rental income by the number of
months the property was owned
during the tax year to determine
the annual gross rental from the
Investment property.
$780 x 12 = $9,360
3. Multiply the gross monthly rental
income amount by 75%.
3. $780 x 75% = $585 (75% of gross monthly
rent)
4. Subtract from the result derived in
step 3 above as follows:
4. As applicable:
a. For pre-workout calculation on
the subject Investment
Property, subtract 100% of the
current (pre-modification/pre-
trial) monthly debt service on
the Investment Property
(PITIAS); OR
a. $585 - $650 (current debt service) =
negative $65 net rental income that must
be added to the monthly housing expense
on the Borrower’s primary residence; OR
b. For post-workout calculation
on the subject Investment
Property, subtract 100% of the
post-modification monthly debt
service (PITIAS) on the
Investment Property
b. $585 - $450 (post-modification monthly
debt service) = $135 net rental income
must be included in the Borrower’s gross
monthly income amount
Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2021-22
Effective 06/09/21 Page E101-8
Required
Documentation
Determining Monthly Income
Example
Other Investment Properties owned
To calculate the net rental income on
any other Investment
Property/Properties owned, subtract
100% of the current monthly debt
service (i.e., principal, interest, taxes,
insurance, including mortgage
insurance and association fees, if
applicable) on each Investment
Property from 75% of the gross
monthly rent.
The aggregate net rental income is
determined by combining the positive
or negative income from each
property. If the result is positive,
include the net rental income in the
Borrower’s total gross monthly
income. If the result is negative, the
negative net rental income must be
treated as a debt when calculation
of the total debt ratio is required
(e.g., when evaluating for imminent
default, the Freddie Mac Flex
Modification
®
, certain short sales,
etc.).
As determined in accordance with the above
instructions, the gross rental income is
$15,000 from one property that has been in
service as an Investment Property for the full
year.
$15,000 ÷ 12 = $1,250 gross rental income
per month
The debt service on the property is $825.50
per month.
Multiply the gross monthly rent by 75% and
subtract the debt service:
$1,250 x 75% = $937.50 - $825.50 = $112 net
rental income.
$112 must be included in the gross monthly
income amount.
Note: This calculation must be performed for
all properties reported on the Borrower’s
credit report.
Monthly Investment Income
The following table shows the required documentation and income calculation:
Required Documentation
Calculation
Two most recent investment statements
or bank statements supporting receipt of
the investment income stated on Form
710
Determine the payment frequency of the investment income
(monthly, quarterly), then calculate the monthly average.
• If the investment income is paid monthly, average the
two months’ income. $150 +$160 = $310 2 months =
$155/month
• If the investment income is paid quarterly, divide the
quarterly investment income by 3 to determine the
monthly income. $240 quarterly investment income 3
months = $80/month
Alimony, Separate Maintenance and Child Support
Alimony, child support or separate maintenance income need not be revealed if the Borrower does not
choose to have it considered for repaying the Mortgage.
If the Borrower chooses to have this income type considered, document the income as follows:
Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2021-22
Effective 06/09/21 Page E101-9
Required Documentation
Calculation
Example
• Two most recent bank
statements showing receipt of
income; OR
• Other documentation showing
the amount and frequency of the
income
Establish the monthly gross
income amount by following
the steps in the first chart
above.
$300 per month is the awarded
income on the legal agreement.
• The bank statements or other
documents support the monthly
awarded income. Use $300 per
month.
• If the bank statements or other
documents reflect variable
amounts each month, then the
Servicer must use its best
judgment when determining
whether to use the awarded
amount or an average of the
amounts received as shown on
the bank statements or other
documentation.
The following table shows the monthly gross income calculation by payment frequency:
Payment Frequency
Monthly Gross Income
Example
Paid annually
Divide the annual amount by 12
months.
Yearly amount is $5,000.
$5,000 ÷ 12 = $417
Paid quarterly
Divide the quarterly amount by
three months.
Quarterly amount is $1,250.
$1,250 3 = $417 gross monthly amount
Paid monthly
Use the gross monthly amount
received.
Borrower is paid $600 every month.
$600 is the gross monthly amount.
Paid weekly
Multiply the weekly amount by 52
weeks and divide by 12 months.
Weekly amount is $75.
$75 x 52 = $3,900 12 = $325 gross
monthly amount
Paid weekly at a variable
amount
Add all weekly amounts as
shown on the two most recent
bank statements or other third-
party documents and divide by
two months.
Weekly amount varies between $50 and
$75, with a total of $500 shown for the
two-month history.
$500 2 = $250 gross monthly amount