Automobile Allowance refers to the funds provided by the HECM borrower's employer for automobile related expenses.
The lender must verify and document the automobile allowance received from the employer for the previous two years.
The lender must also obtain IRS Form 2106, Employee Business Expenses, for the previous two years.
The lender must determine the portion of the allowance that can be considered effective income.
The lender must subtract automobile expenses as shown on IRS Form 2106 from the automobile allowance before calculating effective income based on the current amount of the allowance received.
If the borrower uses the standard per-mile rate in calculating automobile expenses, as opposed to the actual cost method, the portion that the IRS considers depreciation may be added back to income. Expenses that must be treated as recurring debt include:
• the borrower’s monthly car payment; and
• any loss resulting from the calculation of the difference between the actual expenditures and the expense account allowance.
Automobile Allowance refers to the amount of the automobile allowance that exceeds the borrower’s actual automobile expenditures.
For additional information see Mortgagee Letter 2016-10 and the attached revised HECM Financial Assessment and Property Charge Guide, Sections 3.42 and 3.43 at https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee