Gross-up non-taxed Social Security benefit income

This post is from Bankersonline.com from member listed below
arye23
Member

Registered: 03/09/11
Posts: 85
Loc: Ohio "Grossing up" means taking non-taxable sources of income (social security as an example), and adding a percentage (I've seen anywhere from 15-25%) to give it equal footing with gross W-2 wages.

Example:

Someone earning $24,000 in gross W-2 Income would have $2,000/month in gross monthly income.

Someone earning $19,200 in non-taxed social security annually would have gross monthly income of $1,600. Taking the $1,600 x 1.25 would provide a "taxable equivalent" of $2,000/month for determining "gross monthly income".

Usually, social security, disability, other types of public assistance, etc are recieved without being subject to income tax withholding. Grossing up that amount puts it on equal footing with W-2 earnings; comparing "apples to apples".

When doing this, a bank needs to be consistent in treatment, by either grossing-up or not grossing-up all types of non-taxed income.

Hope this helps...

Hi tmvoy,

Please post your query in details. It will help me as well as other members to offer you suggestions.

Thanks

We have a Fannie Mae loan serviced by Flagstar Bank in which Mortgage Outreach Services initially set up our trial period. Apparently during that period, Fannie Mae instructed all of their servicers to cease using MOS to modify loans. MOS grossed up our income by 25% also, and when questioned by our housing counselor, we were told that it is standard practice for all types of loans to gross up non-taxable income by 25%, and gross "down" taxable income by 25% to "level the playing field". Flagstar Bank could not make any changes to our trial payments, but are now looking into it before they offer a permanent modification. Thank goodness MOS required us to get a housing counselor, because she has been invaluable during this whole process, and tenacious as a bulldog!

As cliched as it may be, for a person to have the tenacity of a bulldog in a position such as a housing counselor is an extraordinarily good thing to have.

From the tone of your post, it seems that you're getting the help that you require, Cyndi. I hope that's true.

Favorable stories, of any sort, are beneficial to the entire readership of MortgageFit.

My loan servicer is also grossing my disability SS up by 25%. I don't have this extra money and it calculates my payment at 31% that is more than $300 more than my payent should be. I wrote to my loan servicer which is wells fargo and freedie Mac is the investor. I have been working on this for over two years. I have even talked to my Senators office in Iowa, but wells fargo still tells me that they need to gross my social security up 25%. I need to know what my next option or someone that I need to talk to.

Talk to your local attorney in this regard and check out if he can help you in this case.

Guest, this is not something an attorney is going to want to take on, and it's also not something that an attorney can rectify. Lenders use specific guidelines - sometimes self-directed, sometimes directed by the secondary market(s).

This week, we received the permanent loan modification, and Flagstar Bank removed the 25% "gross up" that Mortgage Outreach Services had placed on our income. It took two long years to get to the permanent modification, but it is finally over!

Congratulations cyndimacafee!!! :-)

Cyndi, I'm gratified to learn of this success on your part. Unfortunately, your experience is probably typical of the effort that must be put forth. Lenders are grossly inefficient in their processing of modification requests, as noted by recent government action against three of the biggest lenders. Two years is a long time; there needs to be serious consideration given to determine what needs to be done to shorten that process.

Borrowers ought not to have to struggle so severely in their attempts to get their lenders and/or servicers to give reasonable service to the process.

my husband and I are in a similar position where our bank took 5 months before telling us that we do not qualify for anything. I just found out today that Wells Fargo grossed up my husband's SSDI 25%. This took our income up more than $600.00 per month. If they didn't do anything, we would have saved more than $200.00 a month on a remodification plan. George you said that not all lenders gross up, can you let us know who does not follow this practice. We are so frustrated and the banks lawyers seem to be moving rather quickly since we were turned down.

mrsmoe, you can directly have a word with your lender so that you can negotiate with him to not gross up your husband's income. This might help your situation.

just would like to get a modification on my mortgage on my ACTUAL income....the money I actually have in my hand to pay my mortgage. Is there any program that helps you stay in your home by using what your REAL CASH IN YOUR HAND IS???

Hi janner,

It will depend upon your lender as to whether or not you will be able to qualify for a modification provided you can convince your lender about your financial crisis.

Thanks,

Jerry