Fannie Mae Selling Guide B3-3.3-09 — Temporary Leave Income

Fannie Mae Selling Guide B3-3.3-09 — Temporary Leave Income

B3-3.3-09, Temporary Leave Income (03/04/2026) Temporary leave from work is generally employee-initiated, short in duration and for reasons, including, but not limited to maternity or parental leave, short-term medical disability, or other temporary leave types acceptable by law or to the borrower's employer. Borrowers on temporary leave may or may not be paid during their absence from work. Note: Mandatory leave initiated by an employer, such as a furlough or layoff, is not considered Published May 6, 2026 330 temporary leave regardless of an expected return to work date. For income from unemployment benefits received as a result of mandatory leave initiated by an employer, see B3-3.4-17, Unemployment Benefits Income. If a lender is made aware that a borrower will be on temporary leave at the time of the loan closing and that borrower's income is needed to qualify for the loan, the lender must determine allowable income and confirm employment as described below. The following table provides requirements for temporary leave income. Criteria Requirements Documentation The lender must obtain • documentation to support the borrower's qualifying income in accordance with the specific income type in Section B3-3.3, Sources of Employment-Related Income, and must include: ⚬ the amount and duration of the borrower's "temporary leave income," which may require multiple documents or sources depending on the type and duration of the leave period; and ⚬ the amount of the "regular employment income" the borrower received prior to the temporary leave. Regular employment includes, but is not limited to, the income the borrower receives from employment on a regular basis that is eligible for qualifying purposes (for example, base pay, commissions, and bonus). • written confirmation from the borrower of their intent to return to work; • documentation produced by the employer (or a designee of the employer when the employer is using the services of a third-party to administer employee leave) that confirms the borrower's expected return to work date. The documentation may be provided to the lender by the borrower, the employer, or the employer's designee. Acceptable documentation may include, but is not limited to: ⚬ previous correspondence from the employer or designee that specifies the duration of leave or expected return date, or ⚬ a computer printout from an employer or designee's system of record. (This documentation does not have to comply with the Allowable Age of Credit Documents policy in B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns.) Additionally, a verbal VOE is required. See B3-3.1-04, Verbal Verification of Employment, for specific requirements. If the employer confirms the borrower is currently on temporary leave, the lender must consider the borrower employed. Published May 6, 2026 331 Criteria Requirements Income History The borrower's employment and income history must meet standard eligibility requirements as described in Section B3-3, Sources of Employment-Related Income. Income Continuance Income continuance must be established by income type as described in Section B3-3.3, Sources of Employment Related Income. The lender must not receive any evidence or information from the borrower's employer to indicate the borrower does not have the right to return to work after the leave period. Published May 6, 2026 332 Criteria Requirements Determination of Qualifying Income If the borrower will return to work as of the first loan payment date, the lender can consider the borrower's regular employment income in qualifying. If the borrower will not return to work as of the first loan payment date, the lender must use the lesser of the borrower's temporary leave income (if any) or regular employment income. If the borrower's temporary leave income is less than their regular employment income, the lender may supplement the temporary leave income with available liquid financial reserves (see B3-4.1-01, Minimum Reserve Requirements). The following are instructions on how to calculate the "supplemental income": Supplemental income amount = available liquid reserves divided by the number of months of supplemental income • Available liquid reserves: subtract any funds needed to complete the transaction (down payment, closing costs, other required debt payoff, escrows, and minimum required reserves) from the total verified liquid asset amount. • Number of months of supplemental income: the number of months from the first loan payment date to the date the borrower will begin receiving their regular employment income, rounded up to the next whole number. After determining the supplemental income amount, the lender must calculate the total qualifying income. Total qualifying income = supplemental income + the temporary leave income The resulting, total qualifying income may not exceed the borrower's regular employment income. Example Regular income amount: $6,000 per month Temporary leave income: $2,000 per month Total verified liquid assets: $30,000 Funds needed to complete the transaction: $18,000 Available liquid reserves: $12,000 First payment date: July 1 Date borrower will begin receiving regular employment income: November 1 Supplemental income: $12,000/4 = $3,000 Total qualifying income: $3,000+$2,000 = $5,000 For loan casefiles underwritten with DU, refer to the DU Job Aids, for data entry guidance. Note: These requirements apply if the lender becomes aware through the employment and income verification process that the borrower is on temporary leave. If a borrower is not currently on temporary leave, the lender must not ask if they intend to take leave in the future. Recent Related Announcements Published May 6, 2026 333 The table below provides references to recently issued Announcements related to this topic. Announcements Issue Date Announcement SEL-2026-02 March 04, 2026 Section B3-3.4, Other Sources of Income

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