source:
  type: guide
  id: fnma-sel-b3-3.7-03
  authority: Fannie Mae Selling Guide B3-3.7-03 — Analyzing Returns for a Corporation
  description: Fannie Mae Selling Guide B3-3.7-03 — Analyzing Returns for a Corporation.
  coverage_tier: operative
obligations:
- id: fnma-sel-b3-3.7-03-full
  canonical_id: fnma-sel-b3-3.7-03-full
  section: Fannie Mae Selling Guide B3-3.7-03 — Analyzing Returns for a Corporation
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B3-3.7-03 — Analyzing Returns for a Corporation
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B3-3.7-03, Analyzing Returns for a Corporation (06/05/2019)
      Introduction This topic contains information on analyzing returns for corporations,
      including: Overview Corporate Fiscal Year Determining the Corporation’s Financial
      Position Borrower’s Share of Income or Loss Adjustments to Cash Flow Overview
      Corporations use IRS Form 1120 to report their taxes. See B3-3.5-02, Business
      Structures, for more information on corporations. Corporate Fiscal Year When
      funds from a corporation that operates on a ﬁscal year that is diﬀerent from
      the calendar year are used in qualifying a self-employed borrower, the lender
      must make time adjustments to relate the corporate income to the borrower’s
      individual tax return, which is on a calendar year basis. Determining the Corporation’s
      Financial Position After determining the income available to the borrower for
      qualifying purposes, the lender must evaluate the overall ﬁnancial position
      of the corporation. Ordinary income from the corporation can be used to qualify
      the borrower only if the following requirements are met: the business income
      must be stable and consistent, the sales and earnings trends must be positive,
      and the business must have adequate liquidity to support the borrower’s withdrawals
      of cash without having severe negative eﬀects. Borrower’s Share of Income or
      Loss The cash ﬂow analysis can only consider the borrower’s share of the business
      income or loss, taking into consideration adjustments to business income provided
      below. Earnings may not be used unless the borrower owns 100% of the business.
      Published May 6, 2026 387 Adjustments to Cash Flow Items that can be added back
      to the business cash ﬂow include depreciation, depletion, amortization, casualty
      losses, net operating losses, and other special deductions that are not consistent
      and recurring. The following items should be subtracted from the business cash
      ﬂow: travel and meals exclusion, tax liability and amount of any dividends,
      and the total amount of obligations on mortgages, notes, or bonds that are payable
      in less than one year. These adjustments are not required if there is evidence
      that these obligations roll over regularly and/or the business has suﬃcient
      liquid assets to cover them. Recent Related Announcements The table below provides
      references to recently issued Announcements that are related to this topic.
      Announcements Issue Date Announcement SEL-2019-05 June 05, 2019'
  judgment: false
