COVID-19 FAQs Selling - DU Validation Service
Last Updated: Jan. 14, 2021
In response to the COVID-19 national emergency, Fannie Mae and Freddie Mac have provided temporary guidance to lenders on several policy areas to support mortgage originations. These FAQs provide additional information on the temporary policies. We will be adding more FAQs, therefore we encourage you to check in frequently for updates - refer to the "NEW" or "UPDATED" notations after the question.
Why did Fannie Mae temporarily suspend representation and warranty relief for employment validation?
The COVID-19 pandemic has caused job loss, income reduction, and other issues impacting businesses and borrowers. This change along with the other temporary changes to the DU validation service announced in the DU Release Notes on Apr. 9, including age of documentation requirements and use of market-based assets, are part of broader measures put into place to continue to provide sustainable homeownership opportunities while managing risk prudently.
- What changes did lenders see in DU? UPDATED
The DU validation service temporarily suspended representation and warranty relief for employment validation. The standard DU verbal VOE message appears in the DU Underwriting Findings (Findings) report, even if a VOI/VOE report is submitted to DU. The DU Findings report suppresses the DU validation service message that normally appears for “employment validated.” This update applies to all new casefiles created in DU on or after May 4, 2020. Lenders should reference the Selling Guide and LL-2021-03 flexibilities to satisfy the verbal VOE requirement message. Employment verification reports provided by third-party vendors are acceptable for verbal employment verification requirements.
How does suspending representation and warranty relief for employment validation impact income validation?
We will continue to offer income validation with representation and warranty relief through DU. When a borrower’s income is validated through DU, the lender can rely on DU’s income validation provided the close-by date is met. In addition, DU will continue to review the employment status on the VOI/VOE report and will not validate income if there is any indication that employment is not active. When income is validated, lenders must follow the close-by dates and instructions issued in the income validation DU messages and the Selling Guide to obtain representation and warranty relief.
Because income validation for a borrower is still dependent on the borrower being employed, lenders should continue to verify the employment of the borrower as near to closing as possible and in accordance with the Selling Guide. If the lender discovers that the borrower is no longer employed, the associated income can no longer be considered in the qualification of the borrower, and the employment and associated income information should be removed from the 1003 and the casefile should be resubmitted to DU.
Can third-party verification reports be used for the verbal VOE?
Yes. Lenders can still obtain an automated VOE as a way to gain efficiencies in the loan manufacturing process. Employment verification reports provided by third-party vendors are acceptable for verbal employment verification requirements, per the Selling Guide B3-3.1-07, Verbal Verification of Employment.
Will DU still process VOE/VOI reports?
Yes. DU will still process VOE/VOI reports to issue income validation.
What is the impact to the DU messages?
During this time, DU will no longer issue the “employment validated” message. Instead, DU will issue the standard “verbal verification of employment” message for all casefiles. Lenders can expect to see combinations of the “employment not validated,” “income validated,” and “income not validated” messages, along with the verbal VOE message.
For technology considerations, an Integration Impact Memo will be posted on the Technology Integration page.
What is the plan to reinstate employment validation with representation and warranty relief? UPDATED
We will continue to monitor the economic environment closely and will inform lenders when the decision has been made to reinstate representation and warranty relief.
Does the temporary flexibility allowing lenders to use bank statements or other alternatives to verify a borrower’s employment status still apply in light of the changes to the DU validation service?
Yes. The flexibilities outlined in LL-2021-03 under “Verbal verification of employment” continue to apply for loans with application dates subject to the terms of the Lender Letter.
How should lenders apply the temporary policy on age of documentation to third-party vendor employment or income verification reports that are not used as part of the DU validation service?
LL-2021-03 did not change the age of documentation requirements for third-party vendor employment verifications. Therefore, lenders must continue to comply with the requirements in B3-3.1-07, Verbal Verification of Employment, which require the vendor report date to be no more than 10 days prior to the note date, and the information in the vendor’s database (For example, “current as of” date) to be no more than 35 days prior to the note date.
LL-2021-03 did update the age of documentation requirements for third-party vendor income verifications:
- For loan applications prior to Apr. 14, 2020, the vendor report date must be no more than 120 days prior to the note date.
- For loan applications on or after Apr. 14, 2020, the information in the vendor’s database (For example, “current as of” date) must be no more than 60 days prior to the note date.