• 0
  • Home
  • About Us
  • What We Do

Shopping Cart

GPAM
  • Home
  • About Us
  • What We Do

Fannie, Freddie want to make mortgages easier for gig-economy workers

The two biggest sources of home-mortgage money in the country — investors Fannie Mae and Freddie Mac — are quietly working on ways to make qualifying for a home purchase easier for participants in the booming “gig” economy.

The gig economy refers to hundreds of income-earning activities that allow workers to set their own hours, work for as long or as little as they choose, and function as independent contractors or freelancers as opposed to salaried employees. Prominent examples include people who work as drivers for Uber or Lyft, assemble IKEA furniture for TaskRabbit or offer rooms in their homes on Airbnb.

Estimates vary, but anywhere from just under 20 percent to 30 percent or more of the U.S. workforce participates in some way in the gig economy. Last year, Intuit, which owns TurboTax, estimated that 34 percent of the workforce earned money in gig pursuits and projected that this could rise to 43 percent by 2020.

But when it comes to buying a home, the challenge for these workers is to make their gig-sourced earnings count as income for mortgage-qualification purposes. Lenders typically look for stable and continuing income streams — two years of documented income plus reasonable prospects that those earnings will continue for another several years. Lenders also routinely obtain tax-return transcripts from the IRS to confirm an applicant’s self-reported income.

By its very nature, gig income often doesn’t fit neatly into these boxes. It can be sporadic and variable, depending on how much time an individual is able to devote to the work. Gig earnings can be substantial — thousands of dollars a month — but if that money can’t qualify as “income” under existing mortgage-industry guidelines, it may not help in buying a home with a standard mortgage.

“We’re seeing gig income becoming more and more prevalent, especially among the younger demographic — first time buyers who have embraced things like Uber and Airbnb as a means to make money,” John Meussner, executive loan officer for Mason-McDuffie Mortgage Corp. in San Ramon, California, told me.

Yet those earnings may not qualify under current rules for conventional mortgages.

Enter Fannie Mae and Freddie Mac. Fannie recently surveyed 3,000 lending executives and found that gig income on applications is increasingly common, but 95 percent said it’s difficult under current guidelines to use these earnings to approve borrowers’ applications. Two out of every three lenders said better treatment of this income would either “significantly” or “somewhat” improve “access to credit” for many buyers.

Fannie and Freddie are now actively pursuing projects that would do just that. The tricky part for both companies: Whatever solutions they develop must still produce high-quality loans with low risks of default at the end of the process, and ideally must be automatable — that is, borrower information could be entered into Fannie’s and Freddie’s electronic underwriting systems at the application stage.

Freddie’s efforts come under its “borrower of the future” initiative. Terri Merlino, vice president and chief credit officer for single-family business, told me the company is studying automated solutions “outside the box” to validate income from different sources for self-employed and gig-economy earners. Neither Freddie nor Fannie was able to discuss details on what they’re considering, but Freddie confirmed its partnership with high-tech software company LoanBeam, which provides automated verifications of multiple income streams of self-employed and other borrowers.

Meussner hopes that Fannie and Freddie take a more realistic perspective on gig earnings. “If someone is pulling income from Uber for only six months” — which won’t qualify under the two-years standard — “they may have been doing similar things for years beforehand” for a different company. “That should be [the] primary focus rather than the exact employer and position that generated the income.” After all, Meussner said, “if someone can make similar income over the course of years doing various things in various places [in the gig economy], it could be argued they’re more dependable than someone with a long history with a salaried position in a field that is being disrupted by tech, in which case the loss of a job would be devastating financially.”

You can bet Fannie and Freddie are listening to recommendations like this.

Bottom line: If you make money in the gig economy, be aware that your earnings may not be “income” for conventional mortgage purposes. But sometime soon, if pilot programs and research now underway at Freddie Mac or Fannie Mae are successful, they just might.

Powered by WPeMatico

  • 01 June 2018
  • The Real Deal
  • Uncategorized
  •  Like
National Cheat Sheet: Cushman & Wakefield plan June filing for IPO, Sears set to shutter scores more stores … & more →← Kushner, unfiltered
  • Recent Posts

    • Hoteliers sound the alarm on looming distress  May 24, 2025
    • Growth markets see retail boom even with tariff uncertainty May 24, 2025
    • Westchester resi project gets city OK after union drops objection May 23, 2025
    • WATCH: ‘Father of CMBS’ Ethan Penner to run for governor of California May 23, 2025
    • Fashion Island office fetches $756 psf May 23, 2025
  • Recent Comments

    • Archives

      • May 2025
      • April 2025
      • March 2025
      • February 2025
      • January 2025
      • December 2024
      • November 2024
      • October 2024
      • September 2024
      • August 2024
      • July 2024
      • June 2024
      • May 2024
      • April 2024
      • March 2024
      • February 2024
      • January 2024
      • December 2023
      • February 2023
      • January 2023
      • December 2022
      • November 2022
      • October 2022
      • September 2022
      • August 2022
      • July 2022
      • June 2022
      • May 2022
      • April 2022
      • March 2022
      • February 2022
      • January 2022
      • December 2021
      • November 2021
      • October 2021
      • September 2021
      • August 2021
      • July 2021
      • June 2021
      • May 2021
      • April 2021
      • March 2021
      • February 2021
      • January 2021
      • December 2020
      • November 2020
      • October 2020
      • September 2020
      • August 2020
      • July 2020
      • June 2020
      • May 2020
      • April 2020
      • March 2020
      • February 2020
      • January 2020
      • December 2019
      • November 2019
      • October 2019
      • September 2019
      • August 2019
      • July 2019
      • June 2019
      • May 2019
      • April 2019
      • March 2019
      • February 2019
      • January 2019
      • December 2018
      • November 2018
      • October 2018
      • September 2018
      • August 2018
      • July 2018
      • June 2018
      • May 2018
      • April 2018
      • March 2018
      • February 2018
      • January 2018
      • December 2017
    • Global Property and Asset Mangement, Inc.
      137 North Larchmont
      Los Angeles, California 90010
      +1 213-427-1127

    © 2025 GPAM