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Announcement 19-0064: Updated Expense Factor Guidelines for CFA/CFA+ Bank Statement Products

August 5, 2019


Carrington Mortgage Services, LLC (CMS) permits the use of Expense Factors to calculate qualifying income using business bank statement documentation for the Carrington Flexible Advantage and Flexible Advantage Plus (CFA/CFA+) products. Effective for submissions dated August 12, 2019 and later, CFA and CFA+ self-employed borrowers using business bank statements for income qualifying must meet the following requirements:

  • The business owner must provide a signed letter of explanation describing the business in order to differentiate as a “Service Business” or “Product Business”. The letter must include the number of years the business has been in operation.
  • Default Expense Factors will be applied as follows:
    • Service Business = 50% Expense Factor (examples include Consulting, Accounting, Legal, Counseling, Therapy, Financial Services, Insurance, IT)
    • Product Business = 60% Expense Factor (examples include Retail, Food Services, Restaurant, Manufacturing, Contracting, Construction)
  • If the type of business operates more efficiently or typically has a materially different expense factor (higher or lower than 50% Service or 60% Product), then reduced expense factors are acceptable with a signed statement from a licensed or registered tax preparer. Tax preparers must be a Certified Public Accountant (CPA), Enrolled Agent (EA), hold a state license for tax preparation, or belong to a professional trade organization within their state, such as the California Tax Education Council (CTEC). Letters from tax preparers must not include unacceptable disclaimers or exculpatory language regarding its preparation. Expense factors may never be lower than:
    • Service Business = 20% Expense Factor Floor
    • Product Business = 35% Expense Factor Floor


Please contact with any questions.

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