Structuring Liabilities with LO Toolkit

With LO Toolkit, loan teams can view, add, and edit liabilities returned from the credit report.

• Viewing Liabilities
• Liabilities details in the Monthly Debt section
• Liability exclusion logic
• Linking a Real Estate Owned (REO)

Viewing Liabilities

Liabilities will appear on the Monthly Debt page after credit is pulled. To see, edit, and add liabilities:

1. Go to the DTI/LTV side panel.
2. Click Edit next to Monthly Debt.
   
   

Click Save & Close to apply any changes you have made on this screen. The DTI ratio will update in real time when debt and income details are entered on the loan application.

Liabilities details in the Monthly Debt section

1	Liabilities	The sum of liabilities per month. Updates in real-time with changes to any value in the Liabilities section.
2	Front-end (FE) and Back-end (BE) Debt to Income (DTI) ratio	The FE and BE DTI ratio is visible and updated in real-time.
3	Creditor Name	The name of the creditor and borrower on the tradeline.
4	Liability Type	The type of liability. Lenders can choose from a list of liability types using the drop-down menu.
5	Monthly Payment	Monthly payments are sorted from highest to lowest.
6	Months Left	Number of months remaining on the installment debt.
7	Unpaid Balance	The outstanding balance on the tradeline.
8	Link to Property	Link to property offers the following options: Subordinate Link to Real estate owned Liabilities that are linked to real estate owned will be identified by with . Note: Linking to Real estate owned will overwrite with monthly payment from liabilities.
9	Omit/Paid	You can mark the liability as omitted or paid at close. Checking this box will present the following options for Purpose: Omit/exclude from liabilities Will be paid at close
10	Taxes/Insurance	This is required for mortgage liabilities and indicates whether the mortgage liability amount listed includes taxes and insurance.
11	Reset/Remove	Removes the liability  Resets the liability. Note: Only liabilities that were manually added can be removed.
12	Add additional liability	Click this button to add new liabilities manually and fill out the following details: Creditor Name Account Number Note: Both Creditor Name and Account Number are required fields.
13	Reset all	Resets all liabilities back to what was originally retrieved from the credit report (non-0 or open tradelines).

Liability exclusion logic

Three rules will automatically exclude liabilities all of which have tooltips:

• Certain liability types have a 10-month unpaid balance requirement for the liability to be included in DTI.
• Certain liability types must have a greater than $1 balance to be included in DTI.
• Certain liability types must have a greater than $0.01 to be included in DTI. 

Debts will be automatically excluded in DTI based on Fannie's DU exclusion logic. Hover over  for more details.

Linking a Real Estate Owned (REO)

Mortgages entered on the Application page must be linked to the mortgages returned from the credit report.

• These mortgage payments are always excluded from the DTI. 
• To include a mortgage in DTI, it needs to be added as a liability and linked.

See Debt-to-Income (DTI) Calculation for more details. Mortgages not linked to a property will show a  indicator.

To link an REO to a liability:

1. Go to the Real estate owned section in the Application tab.
2. The question "Mortgage payments on this property?" must be answered with "Yes" to see the Link liability option.
3. Click Link liability to be directed to the Liabilities section in the Monthly Debt screen.
   
4. In the Liabilities section, click the link  button to link to the property.
5. Check the Link to Real estate owned box.
6. Choose the REO from the dropdown menu.
   
7. Click Save & Close to apply changes.