Fannie Mae income calculator integration

The Fannie Mae Income Calculator integration enables rep-and-warranty-backed income calculations for borrowers with self-employed and rental income directly from Ocrolus. It automates the workflow from document ingestion through Encompass export, including extracting rental income data from IRS Schedule E (Form 1040) when applicable, submitting required fields to the Fannie Mae Income Calculator, and returning GSE-backed qualifying income results. This reduces manual entry and rework, improves confidence in income calculations, and supports scalable, compliant underwriting while helping lenders reduce repurchase risk.

Key capabilities

• Automated Schedule E extraction: Ocrolus automatically extracts all relevant fields from IRS Form 1040 Schedule E, including rents received, itemized expenses, fair rental days, depreciation, HOA dues, and extraordinary expenses, grouped by property address and tax year for the rental income.

• Automated data submission: Once fields are extracted, the system validates completeness of all required inputs and submits the data to the Fannie Mae Calculator. Missing non-documented fields (such as PITIA, property type, or fair rental days detail) are flagged, guiding users to complete them before submission.

• Recommended income display: The Fannie Mae-calculated rental income appears as a dedicated section in Analyze with a Fannie Mae Recommended label, alongside the standard Ocrolus calculation. Inline alerts from Fannie Mae are displayed for transparency and review.

• Multi-year tax return support: The system supports up to two years of Schedule E data per property. For Fannie Mae guidelines, the most recent tax year is selected by default, with the option to include both years. When both years are selected, the qualifying income is averaged across the selected years.

• Per-property income breakdown: Each rental property identified on Schedule E is calculated individually, with its own parsed data, calculated results, alerts, and qualifying income. Properties are grouped by address using the Schedule E column qualifier (A, B, C).

• Property exclusion logic: Properties are automatically excluded from income calculations when they have unsupported property types (codes 7, 8, 9 on Schedule E), missing fair rental days, or exist only in the prior tax year but not the most recent year.

• Income override warning: When users manually override Fannie Mae-calculated rental income, a warning modal clearly states the rep-and-warranty forfeiture before confirming changes.

• Re-run income calculations: Users can resubmit rental income to Fannie Mae when supporting documents are updated. The system maintains the same Case File ID, tracks submission history, and supports versioning for compliance.

• Export to Encompass: Fannie Mae rental income can be exported directly to borrower income fields, and the Case File ID is pushed to the Fannie Mae screen in Encompass for downstream auditability.

Supported income types

The integration supports the following business structures:

• Self-employed
• Rental

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Self-employed

Self-employed income is reported under several business structures, including the following:

• Sole Proprietor
• Partnership
• S-Corp
• C-Corp

The Sole Proprietor screen is unique, while other business structures share the same layout except for the right-hand panel, where forms and schedules differ based on the business type.

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Note

We are currently working on displaying the alerts and adding additional requirements for each business structure (as provided by Fannie Mae on July 2025) in line with the new design.

Fannie Mae required fields

The Configuration section includes switches and required inputs that control how income is calculated. Fields marked with an asterisk (*) are required to generate the income result.

As you complete the required fields, the system can calculate income and display results in Analyze. If any required fields are missing, the screen prompts you to enter them before the calculation can proceed.

Based on your selection, you must enter the required extraordinary one-time expenses for either one year or both years. Extraordinary one-time expenses capture any non-recurring, exceptional expenses in a given tax year that should be considered when calculating income. For example, include one-time business costs, unusual medical expenses, legal settlements, or other exceptional items that may distort the year’s income picture.

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Tip

Alternatively, you can click on the VIEW INPUT FIELDS button to fill in the required field values required for calculation.

As you complete the required fields, the system can accurately calculate total income and reflect any adjustments or exclusions based on your selections. If any required fields are missing, the screen prompts you to enter them before the calculation can proceed.

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Rental

The integration supports the following rental property types as configured through the Fannie Mae metadata:

• Single Family Residence
• Multi-Family Residence
• Vacation/Short-Term Rental
• Commercial
• Land
• Royalties
• Self-Rental
• Other

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Fannie Mae rental income support is in beta!

This section discusses functionality that is in beta. You may occasionally experience unannounced changes or bugs. We'd greatly appreciate your feedback on this feature and its accompanying documentation.

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Note

Properties with IRS Schedule E property type codes 7 (Self-Rental), 8 (Royalties), and 9 (Other) on Line 1b are automatically flagged with a Non-Rental Property alert and excluded from rental income calculations. These property types are not eligible for standard rental income treatment under Fannie Mae guidelines.

Forms required for rental income calculation

The following forms are used to extract and validate rental income information for calculation purposes:

Primary form: IRS Form 1040 Schedule E (Supplemental income and loss)

Schedule E is the primary source document for all rental income calculations. The system extracts key rental income and expense fields from Schedule E, grouped by property and tax year.

Supporting forms (Fannie Mae recommended only)

When using the Fannie Mae Recommended calculator, the following additional forms are used to provide broader tax return context:

Appraisal forms (referenced for market rent)

When market rent data is needed for lease- or appraisal-based rental income calculations, the following forms may be referenced:

Fannie Mae required fields

The Configuration section includes switches and required inputs that control how income is calculated. Fields marked with an asterisk (*) are required to generate the income result.

Rental income calculation approach

Rental income is calculated using a standardized methodology based on Fannie Mae guidelines. The system supports the following two calculation approaches:

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Note

Step 2A (Schedule E method) is the default and primary method. Step 2B is available as an alternative when Schedule E data is not available or when lease/appraisal-based income is required.

Multi-year tax return support

The system supports up to two years of Schedule E data per property. Income treatment varies based on the selected guideline:

Alerts and validations

The following alerts, categorized by severity, guide underwriters through rental income review:

Schedule E Line 19 handling

Schedule E Line 19 ("Other expenses") may include multiple types of rental expenses. When calculating rental income, the system reviews this line and automatically identifies HOA dues and extraordinary one-time expenses such as casualty losses or amortization. These amounts are incorporated into the rental income calculation when applicable. If Line 19 contains additional expenses that cannot be categorized, the system generates a review alert so the underwriter can evaluate whether any further adjustments are needed.

Property exclusion rules

A rental property may be excluded from the income calculation if no Schedule E form is available, if the property type is not eligible under Fannie Mae guidelines (Schedule E Line 1b type codes 7, 8, or 9), if fair rental days are missing for all available tax years, or if the property appears only in the prior tax year but not in the most recent year under Fannie Mae or Freddie Mac guidelines. When a property is excluded, the system generates an alert explaining the reason and sets the qualifying income for that property to zero.

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Downloading the Fannie Mae income ZIP

You can download the Fannie Mae income in ZIP format from the same location where the income PDF is usually downloaded. To download the ZIP, click the Export dropdown menu and select the ZIP beside Income data. A ZIP file will be downloaded to your local machine.