What should the lender do when informed of a change in the borrower’s pay structure?
If the lender is notified that the borrower is transitioning to a lower pay structure, it must apply due diligence in determining the qualifying income amount. For example, if an employer lowers a borrower’s base salary, the lender must use the lower amount for qualifying. Or if an employer reduces a borrower’s potential for variable income, for example with a decreased bonus payment plan, additional analysis must be conducted to determine whether the new income amount can be used for qualifying. See B3-3.1-01, General Income Information.
For more information, refer to the published Lender Letter LL-2020-03, Impact of COVID-19 on Originations.