When calculating the net income for a self employed borrower, we are calculating a net loss. If we put the net loss in our LOS, the income is coming over on the LAR as that amount as a positive figure. In the case where there is truly no income but a loss, would you report 0 as your income?

How can you rely on a $0 net income to approve a loan? How can this meet ATR requirements?

Doesn't appear too safe and sound, lol. But, what if they are not approving it and actually denying because of said net loss?

Thanks JPC, that's what I was going to question - still have to address that for denials.....

Seems like you may have to use '0' in such situations.

I'm wondering why you are reporting/using a net, instead of a gross income as required.

But, in reading the threads on income for HMDA, there does appear to be validity in reporting a negative number if one is 'considered'. How you get it to present that way, I have no experience to share!

The loan was denied. We would never approve such a loan. My understanding is you need to report the income used for underwriting which in the case of the self employed Schedule C borrower, would be the net.

See, I still have a bit of an issue with that. Where there no add-ins to that net income...like depreciation or some other 'not real' expense? There may not have been, but typically there are, so I have to ask.

I did not look at the underwriting on the loan. I have to trust that the underwriter involved followed secondary market guidelines and added back any non cash expenses.

From the CFPB Final Rule, dated August 24, 2017:

Finally, the Bureau notes that the 2015 HMDA Final Rule and the 2018 FIG do not
include any language that would bar a financial institution from reporting an applicant’s gross
annual income as “0” or even a negative number when that is the accurate figure that it relied
on.117

when that is the accurate figure that it relied on
The key wording is what did you rely on.

But we're still required to report gross income we relied on, right?

I don't believe so. I understand that the reg says "gross", but it also allows for negative income. I've always said "Use the income you relied upon".