The QLMS Suspense team is there for you. They take loans that need extra attention and get them back on track to the closing line faster, and smarter, than anyone in the business.
Avoid Loan Suspension
URBES – A.K.A. Unreimbursed Business Expenses
URBES can be your friend or a really annoying foe.
If it sounds like you have a problem, it’s probably just URBES – unreimbursed business expenses – and you can avoid them by starting with a careful check of Schedule A (or Form 2106) for any unreimbursed business expenses the Client is writing off. These must be deducted from their income. Pay special attention to union employees, police officers, firefighters and other civil servant Clients as they frequently incur unreimbursed employee expenses. It’s a good idea to ask your Clients up front if they take these deductions; even if tax returns aren’t required, as we will order tax transcripts on every Client. Use this quick checklist with your Clients, and avoid getting sent to suspense for URBES!
- Ask the Client if they have any URBES at the time of application.
- Know how to calculate URBES: If URBES are increasing year-over-year, take an average of the most recent year. If they are declining, take a 24 month average. Subtract this figure from your overall positive income.
- Recognize professions that have a higher propensity for URBES deductions: URBES are commonly seen with Union Workers, Teachers, Police, Firemen and other civil servants as their roles require them to procure tools, supplies and resources that are often not reimbursed by their employers.
- URBES follow the person, not the job: Just because a Client starts a new job does not necessarily mean they will no longer deduct URBES, so we still need to factor them into our calculation.
- Provide the 2106 forms if the Client has a joint tax return: If the URBES belong to a non-borrowing spouse, we can ignore their portion.
- Look for URBES on the Tax Transcript Summary: If any, they will be listed under “Jobs and Miscellaneous”.
Keep your Loan out of Suspense
Top 10 ways
- Get the rental income right. This can be a complicated process, ensure you have this buttoned up.
- Self-Employed Calculation – Utilize our self-employment calculators and see training material that breaks down every line of your client’s tax returns to ensure you are using the right income to qualify under resources.
- Part-time and Second Jobs without two years history can quickly get things off track. Make sure your client has been on the job for at least two years so that the income can be considered a stable and continuing source.
- URBEs Unreimbursed Business Expenses. Start a careful check of Schedule A (or form 2106) for any unreimbursed business expenses the client is writing off. These must be deducted from their income. Pay special attention to union employees, police officers, firefighters, and other civil servant clients as they frequently incur unreimbursed employee expenses. It’s a good idea to ask your clients up front if they take these deductions; even if tax returns aren’t required, as we will order tax transcripts on every client.
- Overtime/ Bonus/ Commission without two years history creates another caution flag. Remember that a written VOE must be obtained to confirm that the client will still receive these types of income in the future, as continuance is required.
- Condo Issues like Reserves, Investor Concentration, Incomplete, and Fidelity Insurance. These can be tough will, like rain on the track, it’s often out of your control. We will let you know if any of these items are insufficient and work to get them resolved ASAP. Please see the Condo section in GURU for complete requirements for each category.
- Union/ Entertainment Industry workers often have many jobs throughout the course of the year, and it can be challenging to calculate income. The best way is just to add them all income together for two years and average. Union workers can now qualify if not currently employed, but will need to provide proof they are an active union worker.
- Delayed Financing occurs when a client paid cash for a house and now wants to refinance to get their investment out in the form of cash. This is allowed on an exception basis and we will need to see additional documentation. Like a prerace tune up, please use Underwriting Clarity Notes in the Folder Receive submission process so that we can catch these before the file goes to Underwriting and provide the proper initial evaluation; otherwise your loan will be suspended.
- Agricultural/ Mixed Use Properties are like truck racing – is it a race car or truck? When a property’s highest and best use is not residential, we must look at what it actually is. QLMS will not do loans on properties that are working farms, but can look to make exceptions on small hobby farms – like having one or two horses, or a small patch of land that is farmed for family consumption and the client has a full time W2 job.
- Unusual Scenarios not explained at submission will always create a visit to the pits. Please, please, please, use the comment box and complete the questions asked about the loan when you are submitting the loan for Conditional Approval. If you have a story that is not presented in a black and white manner with documentation, please take a few minutes to explain it up front. Your underwriter is required to read the comments, so paint the picture with words to avoid any gray.