What's wrong with my DTI calc?

[Jay Williams]

Hi all,

Background: 

I've submitted an application for a refinance on a SFH. The house belonged to a grandparent with a reverse mortgage. I'm trying to use a refinance product to clear the balance of the reverse mortgage and pull some cash for minor reno.

Currently house hacking. I understand rental income will only count 75% because of Fannie Mae underwriting. My tenants cover 93% of the PITI of primary residence (70% of PITI under FNMA's 75% standard), but the bank is not recognizing any of this income because on the whole the property isn't covered 100+% by tenants (I rent 2 of the 3 units, live in the last with 2 years of tax returns available).

Question:

Why is the bank not recognizing any of the income, but in turn are recognizing the full amount of PITI against me in the DTI calc? According to the loan officer, there are no questions re: credit or reserves, so I'm at a loss why the DTI calc is not more straightforward.

Best,
Jay