Fannie Mae – Calculating Reserves When a Borrower Owns Multiple Properties

Question:

Our borrower has investment properties. How do I calculate the required reserves?

Answer:

You need to calculate reserves based on the total number of properties that have been financed. See the breakdown below.

IMPORTANT: When calculating reserves for borrowers with multiple financed properties, DU does not automatically calculate the aggregate UPB (Unpaid Principal Balance) for you. This calculation must be performed manually by the underwriter, documented, and verified in the file.

Check out the examples from Fannie Mae for this calculation in the link below.

If the borrower owns other financed properties (determined in accordance with B2-2-03, Multiple Financed Properties for the Same Borrower), additional reserves must be calculated and documented for financed properties other than the subject property and the borrower’s principal residence. The other financed properties reserves amount must be determined by applying a specific percentage to the aggregate of the outstanding unpaid principal balance (UPB) for mortgages and HELOCs on these other financed properties. The percentages are based on the number of financed properties:

• 2% of the aggregate UPB if the borrower has one to four financed properties,
• 4% of the aggregate UPB if the borrower has five to six financed properties, or
• 6% of the aggregate UPB if the borrower has seven to ten financed properties (DU only).

The aggregate UPB calculation does not include:

• the mortgages and HELOCs that are on the subject property,
• the borrower’s principal residence,
• properties that are sold or pending sale, and
• accounts that will be paid by closing (or omitted in DU on the online loan application).

Reference:

• Fannie Mae Examples for Calculating the Minimum Reserve Requirements
• Mortgage Guideline Supporting Resources – Found Under Guideline References in the Charts & Checklists Section.
• Maximum Number of Financed Properties
• Rental Income – All Agency Comparison

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