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FAQs: Monthly Debt Obligations (Feb. 2023)

Top Lender Questions on Monthly Debt Obligations

Updated: 02/14/2023

A borrower's monthly debt obligations must be considered when underwriting a loan. To support our customers in understanding requirements for the various types of monthly debt obligations, see the FAQs below that are broken out by trending categories. For more information, refer to B3-6-05, Monthly Debt Obligations in the Selling Guide

Note: Changes since the last update are marked either NEW or UPDATED. Minor (non-substantive) wording, number, and heading changes are not marked. 

FAQs noted by an asterisk* were curated directly from Ask Poli customer inquiries to provide clarity and guidance on trending topics.

Alimony, Child Support, and Separate Maintenance Payments

  1. Can I exclude the credit report mortgage payment history if my borrower is separated but not yet divorced?
  2. Can separate maintenance payments be deducted from income in the same way as alimony payments?
  3. In what situations may a divorce decree or separation agreement be required?
  4. What is required for child support or alimony obligations?

Bridge Loan

  1. How do I treat a monthly obligation on a bridge loan?

Business Debt in Borrower's Name

  1. How is commercial lien debt evaluated?
  2. When can business debt be excluded from the DTI ratio?
  3. What documentation can be used to evidence a business debt was paid out of company funds? 

Debts Paid by Others/ Non-Applicant Accounts

  1. How are non-applicant accounts handled?
  2. Can loans using the debts paid by others option be manually underwritten?
  3. When can debt paid by others be excluded from the DTI ratio?
  4. For debts paid by others, if only a portion of the debt is paid by another party, can that portion be excluded in the DTI ratio? * 
  5. For debts paid by others, what if the 12-month payment history shows more than one party has made the payments? * 
  6. When a debt is being paid by another party can payment histories be combined if there was an interruption in payments due to a refinance or trade-in? 

Debt to Income Ratio

  1. What is included in the total monthly debt obligation?
  2. What is required if additional debt or reduced income is discovered after the underwriting decision?
  3. If a borrower owns other property, where they are on title, but not obligated on the mortgage note, what are the considerations for the property expenses and mortgage payment history of the property?

Deferred Non-Mortgage Debt 

  1. What is required for deferred installment debt that does not have a monthly payment?  

Federal Income Tax Installment Agreements

  1. What is the policy on Federal Income Tax Installment Agreements?
  2. If a Notice of Federal Tax Lien is recorded in the county where the subject property is located, is subordination acceptable for delinquent federal taxes in lieu of pay-off? *
  3. Why does the policy on Federal Income Tax Installment Agreements exclude repayment of delinquent state and local taxes?

Garnishments/ Court-Ordered Assignment of Debt

  1. What is required for court-ordered assignment of debt?
  2. What is the policy on garnishments?

Installment Debt

  1. What is required for installment debt?
  2. Are maintenance fees from a timeshare included in the DTI ratio? *  

Lease Payments/ Rental Housing Payments

  1. How are monthly lease payments considered in the DTI ratio?
  2. What is required to evaluate a rental housing payment?

Revolving Charge/ Lines of Credit

  1. Are revolving charge accounts and lines of credit considered long-term debts?
  2. What if the credit report does not show a minimum payment for a revolving charge or personal line of credit? 
  3. When is a HELOC payment required to be included in the monthly debt obligation?
  4. How is the monthly payment for a HELOC calculated?

Student Loans

  1. Where can I find answers to questions on student loans?

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