B3-6-01, General Information on Liabilities (05/04/2022)

The lender’s risk analysis must include all liabilities affecting income or assets that will affect the borrower’s ability to fulfill the mortgage payment obligation.

A borrower’s liabilities include the following:

• housing payment (mortgage or rent) for each borrower’s principal residence,

• all revolving charge accounts,

• installment loan debts with a remaining payment term greater than 10 months,

• installment debts secured by virtual currency,

• lease payments,

• real estate loans,

• HELOCs,

• alimony and child support,

• maintenance payments, and

• all other debts of a recurring nature.

For each liability, the lender must determine the unpaid balance, the terms of repayment, and the borrower’s payment history, and verify any other liability that is not shown on a credit report by obtaining documentation from the borrower or creditor.

If the credit report does not contain a reference for each significant open debt shown on the loan application—including outstanding mortgage debt, bank, student, or credit union loans—the lender must provide separate credit verification.

If a current liability appears on the credit report that is not shown on the loan application, the borrower should provide a reasonable explanation for the undisclosed debt. Documentation may be required to support the borrower’s explanation.

If the borrower discloses, or the lender discovers, additional liabilities after the underwriting decision has been made, up to and concurrent with closing, the lender must recalculate the borrower's debt-to-income ratio.

See B3-6-02, Debt-to-Income RatiosB3-6-02, Debt-to-Income Ratios and B3-6-03, Monthly Housing Expense for the Subject PropertyB3-6-03, Monthly Housing Expense for the Subject Property for additional information.

Some obligations, often identified on a borrower’s paystub, are not considered a liability and will not be included as a debt or deducted from the borrower’s gross income when calculating the borrower’s debt-to-income ratio. These obligations include items such as

• federal, state, and local taxes;

• Federal Insurance Contributions Act (FICA) or other retirement contributions, such as 401(k) accounts (including repayment of debt secured by these funds);

• commuting costs;

• union dues; and

• voluntary deductions.