Enact Holdings, Inc. · NASDAQ:ACT
Enact — Investor Presentation (July 2020)
114 slides from Enact's investor presentation, July 2020
Slide 1: Freddie Mac Form 91, Part II: The Business Tax Returns
Freddie Mac Form 91, Part II The Business Tax Returns July 2020 Customer Education Brought to you by: Genworth Customer Development and Process Consulting ©2020 Genworth Financial, Inc. All rights reserved. 0
Slide 2: Lender Responsibility
Lender Responsibility Investors (Fannie Mae, Freddie Mac, Private Investors) require it be determined that self-employed borrowers demonstrate the financial ability to repay the mortgage. – History – Income calculation – Continuance / Stability of income Today’s Session Covers Conventional Loans And
Slide 3: Objective
Objective Learn to use the Freddie Mac Income Analysis Form (Form 91) and data from tax returns to calculate supportable Self-Employed Borrower income. – Calculate Partnership Income and Expenses from K-1s and Form 1065 – Calculate S Corp (Sub-Chapter S) Income and Expenses from K-1s and Form 1120S
Slide 4: Documentation Matrix
Documentation Matrix Updated June 2020 http://www.freddiemac.com/learn/pdfs/uw/docmatrix.pdf Freddie Mac Form 91 Part II Review 3
Slide 5: Documentation Matrix
Documentation Matrix Page 14 of Matrix Freddie Mac Form 91 Part II Review 4
Slide 6: Documentation Matrix
Documentation Matrix Page 15 of Matrix Freddie Mac Form 91 Part II Review 5
Slide 7: Documentation Matrix
Documentation Matrix Page 15 of Matrix Freddie Mac Form 91 Part II Review 6
Slide 8: Documentation Matrix
Documentation Matrix Page 16 of Matrix Freddie Mac Form 91 Part II Review 7
Slide 9: Bulletin 2020-8
Bulletin 2020-8 The temporary credit underwriting requirements below are effective for Mortgages with Application Received Dates on or after April 14, 2020, and remain in place for Mortgages with Application Received Dates on or before August 31, 2020; however, Sellers are encouraged to apply these
Slide 10: Bulletin 2020-19
Bulletin 2020-19 Updates to COVID-19 impact on originations: ▪ Temporary requirements and guidance for self-employed income ▪ Temporary flexibilities for CHOICERenovation® Mortgages ▪ Delivery requirements for “no cash-out” refinance mortgages ▪ Data requirements for mortgages that are in COVID-19 f
Slide 11: Bulletin 2020-19
Bulletin 2020-19 These temporary requirements are effective for Mortgages with Application Received on and after June 11, 2020 and until further notice. It is encouraged to implement these requirements to loans in process. Due to the pandemic’s continuing impact on businesses throughout the country,
Slide 12: Bulletin 2020-19
Bulletin 2020-19 These temporary requirements are effective for Mortgages with Application Received on and after June 11, 2020 and until further notice. It is encouraged to implement these requirements to loans in process. Reviewing YTD P&L statements, business account statements and other documenta
Slide 13: Bulletin 2020-19
Bulletin 2020-19 These temporary requirements are effective for Mortgages with Application Received on and after June 11, 2020 and until further notice. It is encouraged to implement these requirements to loans in process. Establishing Stable Monthly Income The Seller must review the YTD profit and
Slide 14: Bulletin 2020-19
Bulletin 2020-19 These temporary requirements are effective for Mortgages with Application Received on and after June 11, 2020 and until further notice. It is encouraged to implement these requirements to loans in process. Establishing Stable Monthly Income- continued ▪ The Seller must establish the
Slide 15: Bulletin 2020-19
Bulletin 2020-19 These temporary requirements are effective for Mortgages with Application Received on and after June 11, 2020 and until further notice. It is encouraged to implement these requirements to loans in process. Establishing Stable Monthly Income- continued https://guide.freddiemac.com/ap
Slide 16: Bulletin 2020-19
Bulletin 2020-19 These temporary requirements are effective for Mortgages with Application Received on and after June 11, 2020 and until further notice. It is encouraged to implement these requirements to loans in process. Business Assets Loan proceeds from the SBA Payroll Protection Plan (PPP) and/
Slide 17: Documentation Matrix
Documentation Matrix Page 29 of Matrix Freddie Mac Form 91 Part II Review 16
Slide 18: Chapter 5304.1(d) Business & Income Analysis
Chapter 5304.1(d) Business & Income Analysis https://guide.freddiemac.com/app/guide/content/a_id/1000657 Freddie Mac Form 91 Part II Review 17
Slide 19: Chapter 5304.1(d) Business & Income Analysis
Chapter 5304.1(d) Business & Income Analysis https://guide.freddiemac.com/app/guide/content/a_id/1000657 Freddie Mac Form 91 Part II Review 18
Slide 20: Chapter 5304.1(d) Business & Income Analysis
Chapter 5304.1(d) Business & Income Analysis https://guide.freddiemac.com/app/guide/content/a_id/1000657 Freddie Mac Form 91 Part II Review 19
Slide 21: Chapter 5304.1(d) Business & Income Analysis
Chapter 5304.1(d) Business & Income Analysis https://guide.freddiemac.com/app/guide/content/a_id/1000657 Freddie Mac Form 91 Part II Review 20
Slide 22: Genworth Has Form 91 And 92 Income Calculation Tools Posted To Website
http://www.freddiemac.com/singlefamily/forms/sell/pdf/91.pdf Genworth Has Form 91 And 92 Income Calculation Tools Posted To Website Freddie Mac Form 91 Part II Review 21
Slide 23: Training Tools and Information
Training Tools and Information https://new.mi.genworth.com/ Freddie Mac Form 91 Part II Review 22
Slide 24: Training Tools and Information
Training Tools and Information Freddie Mac Form 91 Part II Review 23
Slide 25: Separate Worksheet For Each Business and Borrower
When Borrowers Own Multiple Partnerships, S Corps Or Corporations, Complete A Separate Worksheet For Each Business; Complete A Separate Worksheet For Each Borrower Freddie Mac Form 91 Part II Review 24
Slide 26: Does Borrower Own > 25% of a Business?
Does Borrower Own > 25% of a Business? Can checking the Self-employed Indicator to “Yes” increase the ® risk of the loan when evaluated by Desktop Underwriter ? What about Loan Product Advisor®? No Yes Freddie Mac Form 91 Part II Review 25
Slide 27: You'll Need
You’ll Need Freddie Mac Form 91 Part II Review 26
Slide 28: The Case Study
The Case Study You will be working with John and Mary Homeowner who: – *Own a Schedule C business called Impressive Images (John) – *Have schedule B interest income earned from personal assets – *Have capital gain/loss activity reported on a Schedule D – *Own an existing rental property shown on a S
Slide 29: Calculator and Quick Reference Guide
Calculator and Quick Reference Guide In Case Study Part I We Completed Sections 1-7 With The Personal Tax Returns Freddie Mac Form 91 Part II Review 28
Slide 30: Business Classifications
Business Classifications Partnership (General or Limited) – Two or more Partners – Business Income reported on Form 1065 – Personal Income reported on Schedule E and K-1 – Income taxed at Personal Rate – All owners are issued a K-1s which are attached to the business tax return (IRS Form 1065) Advan
Slide 31: 1065 Partnership K-1 Schedule E page 2
1065 Partnership K-1 % Line 1 Ordinary Income/Loss $_________ Line 22 Ordinary Income/Loss $_________ Schedule E page 2 Part II 1040 or Schedule 1 Line 5 or (2018)17 Net Income/Loss Sch E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 30
Slide 32: Partnerships
Partnerships Check for trends or changes – Date business started – Gross Receipts – Cost of Good Sold – Gross Profit – Bottom line “Ordinary Income” – Guaranteed Payments • Payments “paid out” to all partners, review the K-1 to see how much was paid to your partner Page 22 Freddie Mac Form 91 Part I
Slide 33: 1065 Partnership K-1 Schedule E page 2
1065 Partnership K-1 % Line 1 Ordinary Income/Loss $_________ Line 22 Ordinary Income/Loss $_________ Schedule E page 2 Part II Schedule 1 Line 5 or 17(2018) Net Income/Loss Sch E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 32
Slide 34: Partnership K-1
Partnership K-1 Page 20 Freddie Mac Form 91 Part II Review 33
Slide 35: Rental Income – Partnership or S Corps
Rental Income – Partnership or S Corps No Example Freddie Mac Form 91 Part II Review 34
Slide 36: Partnership K-1
Partnership K-1 Page 20 Freddie Mac Form 91 Part II Review 35
Slide 37: 1065 Partnership K-1 Schedule E page 2
1065 Partnership K-1 % Line 1 Ordinary Income/Loss $_________ Line 22 Ordinary Income/Loss $_________ Schedule E page 2 Part II Schedule 1 Line 5 or 17(2018) Net Income/Loss Sch E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 36
Slide 38: Schedule E Partnerships and S Corps
Schedule E Partnerships and S Corps Page 14 Freddie Mac Form 91 Part II Review 37
Slide 39: 1065 Partnership K-1 Schedule E page 2
1065 Partnership K-1 % Line 1 Ordinary Income/Loss $_________ Line 22 Ordinary Income/Loss $_________ Schedule E page 2 Part II Schedule 1 Line 5 or 17(2018) Net Income/Loss Sch E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 38
Slide 40: Page 4 and 7
Page 4 and 7 Freddie Mac Form 91 Part II Review 39
Slide 41: Freddie Mac Does Not Have a Written Policy Mandating Distributions
Freddie Mac Does Not Have a Written Policy Mandating Distributions https://guide.freddiemac.com/app/guide/content/a_id/1000657 Freddie Mac Form 91 Part II Review 40
Slide 42: Balance Sheet
Balance Sheet Page 26 Freddie Mac Form 91 Part II Review 41
Slide 43: Training Tools and Information
Training Tools and Information Freddie Mac Form 91 Part II Review 42
Slide 44: Training Tools and Information
Training Tools and Information Freddie Mac Form 91 Part II Review 43
Slide 45: Liquidity
Liquidity Generally Accepted Accounting Principles Freddie Mac Form 91 Part II Review 44
Slide 46: Balance Sheet
Balance Sheet Page 26 Freddie Mac Form 91 Part II Review 45
Slide 47: Liquidity – Current Ratio
Liquidity – Current Ratio Generally Accepted Accounting Principles Freddie Mac Form 91 Part II Review 46
Slide 48: Balance Sheet: Quick Ratio or Acid Test
Balance Sheet Quick Ratio or Acid Test Current Assets : (Cash #1 + Acct Receivable #2 + #4+ #5 +Other Current Assets #6) Current Liabilities: (Acct Pay. #15 + MNB #16 + Other Current Liabilities #17) Current Assets: $59,000 + 0 + 0 +0+0 = $59,000 = $59,000/1 Current Liabilities: $0 + $0+ $0 = $0 Pag
Slide 49: Liquidity – Quick Ratio
Liquidity – Quick Ratio Generally Accepted Accounting Principles We entered $1 for liabilities to be able to get a result from the calculator Freddie Mac Form 91 Part II Review 48
Slide 50: Quick Reference Guide
Quick Reference Guide Access: – Freddie Mac Form Section 8 – The Partnership K-1 – Always evaluate the income as required by your investor Page 20 Freddie Mac Form 91 Part II Review 49
Slide 51: Partnership K-1
Partnership K-1 Can We Use Ordinary Income/Rental Income? Was There A Distribution? Solvent? Page 20 Freddie Mac Form 91 Part II Review 50
Slide 52: Quick Reference Guide Partnership K-1
Quick Reference Guide Partnership K-1 Genworth Calculator Is A Tool; Lenders/Underwriters Review Each Loan File And Determine Compliance With Freddie Mac Or Investor Guidelines Freddie Mac Form 91 Part II Review 51
Slide 53: Partnership K-1
Partnership K-1 Can We Use Ordinary Income/Rental Income? Was There A Distribution? Solvent? Page 20 Freddie Mac Form 91 Part II Review 52
Slide 54: Partnership K-1
Partnership K-1 $111,414 $ 0 $42,000 $153,414 Page 20 Freddie Mac Form 91 Part II Review 53
Slide 55: Section 8
Section 8 Page 22 Freddie Mac Form 91 Part II Review 54
Slide 56: Section 8 – Form 1065
Section 8 – Form 1065 Page 22 Freddie Mac Form 91 Part II Review 55
Slide 57: Section VII – Form 1065
Section VII – Form 1065 No Example Freddie Mac Form 91 Part II Review 56
Slide 58: Section 8 – Form 1065
Section 8 – Form 1065 Page 22 Freddie Mac Form 91 Part II Review 57
Slide 59: Section 8 – Form 1065
Section 8 – Form 1065 Page 22 Freddie Mac Form 91 Part II Review 58
Slide 60: Section 8 – Form 1065
Section 8 – Form 1065 Page 27 Freddie Mac Form 91 Part II Review 59
Slide 61: Section 8 – Form 1065
Section 8 – Form 1065 Page 22 Freddie Mac Form 91 Part II Review 60
Slide 62: Section 8 – Form 1065
Section 8 – Form 1065 Chapter 5304 Page 26 Freddie Mac Form 91 Part II Review 61
Slide 63: Freddie Mac Form 91 Part II Review
Freddie Mac Form 91 Part II Review 62
Slide 64: Section 8 – Form 1065
Section 8 – Form 1065 Page 22 Freddie Mac Form 91 Part II Review 63
Slide 65: Freddie Mac Form 91 Part II Review
Freddie Mac Form 91 Part II Review 64
Slide 66: Section VII – Form 1065
Section VII – Form 1065 Page 26 Freddie Mac Form 91 Part II Review 65
Slide 67: Freddie Mac Form 91 Part II Review
Freddie Mac Form 91 Part II Review 66
Slide 68: Partnership K-1
Partnership K-1 Page 20 Freddie Mac Form 91 Part II Review 67
Slide 69: Partnership Total Income
Partnership Total Income To Use This Income It must Report on the Personal Returns or you must verify Access to Income Freddie Mac Form 91 Part II Review 68
Slide 70: Use Manually Input Total Section
Use Manually Input Total Section Freddie Mac Form 91 Part II Review 69
Slide 71: Business Classifications: S Corporation
Business Classifications S Corporation – Can be owned by one person – “Managing Shareholder” must receive a salary – Business Income Reported on Form 1120S – Income reported on Form 1040’s • Schedule E • Could also be W-2 wage or 1099 income – All shareholders of an S Corp are issued K-1s – K-1s
Slide 72: K-1 1120S S Corp Schedule E page 2
1120S S Corp K-1 % Line 1 Ordinary Income/Loss $_________ Line 21 Ordinary Income/Loss $_________ Schedule E page 2 Part II Schedule 1 Line 5 or 17(2018) Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 71
Slide 73: S Corps
S Corps Check for trends or changes – Date Incorporated – Gross receipts – Cost of goods sold – Gross profit – Bottom line “Ordinary Income” – Were W-2 wages paid to borrower? Page 30 Freddie Mac Form 91 Part II Review 72
Slide 74: S Corps
S Corps Review 1125-E For Compensation Paid to Officers – You can be an officer, but not an owner Page 35 Freddie Mac Form 91 Part II Review 73
Slide 75: S Corps
S Corps Review for W-2 paid from business – Is this salary income or self-employed income? – Did we give credit for this income already? Page 1 Freddie Mac Form 91 Part II Review 74
Slide 76: K-1 1120S S Corp Schedule E page 2
1120S S Corp K-1 % Line 1 Ordinary Income/Loss $_________ Line 21 Ordinary Income/Loss $_________ Schedule E page 2 Part II Schedule 1 Line 5 or 17(2018) Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 75
Slide 77: S Corp K-1
S Corp K-1 Did John Get A Distribution? Page 28 Freddie Mac Form 91 Part II Review 76
Slide 78: Page 2 of K-1 and Page 3 of Form 1120S
Page 2 of K-1 and Page 3 of Form 1120S Page 29 Freddie Mac Form 91 Part II Review 77
Slide 79: K-1 1120S S Corp Schedule E page 2
1120S S Corp K-1 % Line 1 Ordinary Income/Loss $_________ Line 21 Ordinary Income/Loss $_________ Schedule E page 2 Part II Schedule 1 Line 5 or 17(2018) Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 78
Slide 80: Schedule E Partnerships and S Corps
Schedule E Partnerships and S Corps Page 14 Freddie Mac Form 91 Part II Review 79
Slide 81: K-1 1120S S Corp Schedule E page 2
1120S S Corp K-1 % Line 1 Ordinary Income/Loss $_________ Line 21 Ordinary Income/Loss $_________ Schedule E page 2 Part II Schedule 1 Line 5 or 17(2018) Net Income/Loss Sch.E Taxed at a personal rate $_________ Freddie Mac Form 91 Part II Review 80
Slide 82: Page 4 and 7
Page 4 and 7 Freddie Mac Form 91 Part II Review 81
Slide 83: Freddie Mac Does Not Have a Written Policy Mandating Distributions
Freddie Mac Does Not Have a Written Policy Mandating Distributions https://guide.freddiemac.com/app/guide/content/a_id/1000657 Freddie Mac Form 91 Part II Review 82
Slide 84: Liquidity
Liquidity Generally Accepted Accounting Principles Freddie Mac Form 91 Part II Review 83
Slide 85: Liquidity – Current Ratio
Liquidity – Current Ratio Generally Accepted Accounting Principles Freddie Mac Form 91 Part II Review 84
Slide 86: Balance Sheet
Balance Sheet Page 33 Freddie Mac Form 91 Part II Review 85
Slide 87: Balance Sheet: Quick Ratio or Acid Test
Balance Sheet Quick Ratio or Acid Test Current Assets : (Cash #1 + Acct Receivable #2 + #4+ #5 +Other Current Assets #6) Current Liabilities: (Acct Pay. #15 + MNB #16 + Other Current Liabilities #17) Current Assets: $237,777 + 51,340 +0 +$248,226+$0 = $537,343 Current Liabilities: $1,039,320 + $592,
Slide 88: Quick Ratio
Quick Ratio Freddie Mac Form 91 Part II Review 87
Slide 89: S Corp K-1: Let's Put Numbers On Our Tool!
S Corp K-1 Let’s Put Numbers On Our Tool! Page 28 Freddie Mac Form 91 Part II Review 88
Slide 90: S Corp K-1: Let's Put Numbers On Our Tool!
S Corp K-1 Let’s Put Numbers On Our Tool! * Page 28 Freddie Mac Form 91 Part II Review 89
Slide 91: S Corp K-1: Let's Put Numbers On Our Tool!
S Corp K-1 Let’s Put Numbers On Our Tool! * Page 28 Freddie Mac Form 91 Part II Review 90
Slide 92: S Corp K-1: Let's Put Numbers On Our Tool!
S Corp K-1 Let’s Put Numbers On Our Tool! * Page 28 Freddie Mac Form 91 Part II Review 91
Slide 93: S Corporation Form 1120S
S Corporation Form 1120S Page 30 Freddie Mac Form 91 Part II Review 92
Slide 94: S Corporation Form 1120S
S Corporation Form 1120S Page 30 Freddie Mac Form 91 Part II Review 93
Slide 95: Rental Income – Partnership or S Corps
Rental Income – Partnership or S Corps No Example Freddie Mac Form 91 Part II Review 94
Slide 96: S Corporation Form 1120S
S Corporation Form 1120S Page 30 Freddie Mac Form 91 Part II Review 95
Slide 97: S Corporation Form 1120S
S Corporation Form 1120S Page 30 Freddie Mac Form 91 Part II Review 96
Slide 98: 1120S Statement
1120S Statement Page 36 Freddie Mac Form 91 Part II Review 97
Slide 99: 1120S Statement
1120S Statement Page 36 Freddie Mac Form 91 Part II Review 98
Slide 100: S Corporation Form 1120S
S Corporation Form 1120S Page 33 Freddie Mac Form 91 Part II Review 99
Slide 101: 1120S Statement
1120S Statement Page 36 Freddie Mac Form 91 Part II Review 100
Slide 102: S Corporation Form 1120S
S Corporation Form 1120S Page 30 Freddie Mac Form 91 Part II Review 10 1
Slide 103: S Corporation Form 1120S
S Corporation Form 1120S Page 34 Freddie Mac Form 91 Part II Review 10 2
Slide 104: S Corp K-1: How Much Does John Own?
S Corp K-1 How Much Does John Own? Page 28 Freddie Mac Form 91 Part II Review 103
Slide 105: Freddie Mac Form 91 Part II Review
Freddie Mac Form 91 Part II Review 10 4
Slide 106: Freddie Mac Form 91 Part II Review
Freddie Mac Form 91 Part II Review 10 5
Slide 107: Genworth Underwriting Guidelines
Genworth Underwriting Guidelines Freddie Mac Form 91 Part II Review 10 8
Slide 108: Genworth Rate Express
Genworth Rate Express® Freddie Mac Form 91 Part II Review 10 9
Slide 109: LOS Connections
LOS Connections Freddie Mac Form 91 Part II Review 11 0
Slide 110: Training Tools and Information
Training Tools and Information Freddie Mac Form 91 Part II Review 11 1
Slide 111: Training Tools and Information
Training Tools and Information Freddie Mac Form 91 Part II Review 11 2
Slide 112: Additional MI Site Information
Additional MI Site Information Freddie Mac Form 91 Part II Review 11 3
Slide 113: Your Genworth Resources
Your Genworth Resources ➢ ActionCenter®: 800 444.5664 ➢ Your Local Genworth Regional Underwriter ➢ Your Genworth Sales Representative Freddie Mac Form 91 Part II Review 11 4
Slide 114: Legal Disclaimer
Legal Disclaimer Genworth Mortgage Insurance is happy to provide you with these training materials. While we strive for accuracy, we also know that any discussion of laws and their application to particular facts is subject to individual interpretation, change, and other uncertainties. Our train