B3-3.1-02, Standards for Employment Documentation (03/06/2024)

The lender must verify employment income for all borrowers whose income is used to qualify for the loan. This verification can be provided by the borrower, by the borrower’s employer, or by a third-party employment verification vendor.

When employment is validated through the DU validation service using an asset verification report, the lender is not required to obtain the employment documentation described below. DU will provide messaging indicating the documentation required. Lenders must comply with all requirements pertaining to the DU validation service. See B3-2-02, DU Validation ServiceB3-2-02, DU Validation Service .

Employment Documentation Provided by the Borrower

The following table provides requirements for documentation provided by the borrower.

”Most recent” W-2 is defined as the W-2 for the calendar year prior to the current calendar year. Alternative documentation, such as an IRS Wage and Income (W-2) Transcript, a written Request for Verification of Employment (Form 1005) (see below) or the final year-to-date paystub, may be used as long as adequate information is provided.

Employment Documentation Provided by the Borrower’s Employer

The lender may use the Request for Verification of Employment (Form 1005) to document income for a salaried or commissioned borrower. The date of the completed form must comply with B1-1-03, Allowable Age of Credit Documents and Federal Income Tax ReturnsB1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns .

The information on the Form 1005 must be legible. The following fields on the form are optional:

Field # Title of Optional Field
11 Probability of continued employment
14 If overtime or bonus is applicable, is its continuance likely?
16 Date of applicant’s next pay increase
17 Projected amount of next pay increase
18 Date of applicant’s last pay increase
19 Amount of last pay increase
24 Reason for leaving (Part III — Verification of Previous Employment)

The remaining fields on the form must be completed as applicable to the borrower. For example, overtime may not be completed if the borrower is in a position that does not pay overtime.

When the borrower authorizes the lender to obtain verifications of employment and income directly from the employer, the lender must have the borrower sign Form 1005.

Alternatively, the lender may have the applicant sign a signature authorization form, which gives the lender blanket authorization to request the information it needs to evaluate the applicant’s creditworthiness (see B1-1-02, Blanket Authorization FormB1-1-02, Blanket Authorization Form ).

Employment Documentation Provided by a Third-Party Employment Verification Vendor

The lender may receive employment and income verification directly from a third-party employment verification vendor. These verifications are acceptable as long as

If necessary, the lender must supplement these verifications by obtaining any missing information from the borrower or their employer.

Loans that are submitted through the DU validation service must comply with all requirements pertaining to the DU validation service. See B3-2-02, DU Validation ServiceB3-2-02, DU Validation Service .

Recent Related Announcements

The table below provides references to recently issued Announcements that are related to this topic.

Announcements and Release Notes Issue Date
Announcement SEL-2024-02 March 06, 2024
Announcement SEL-2020-07 December 16, 2020

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(Published: Sept 04 2024)

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