COVID-19: Are alternative methods for the reverification of employment prior to closing available due to the COVID-19 outbreak?

As announced in Mortgagee Letter (ML) 2020-05 and extended by Mortgagee Letter 2020-20, FHA is allowing flexibility related to the Mortgagee’s process of completing re-verification of employment, which includes verbal verification of employment.  This alternative is available for all FHA Title II forward and reverse mortgage programs, where re-verification of employment is required.  The re-verification of employment guidance in Mortgagee Letter 2020-20 extends the use of these alternatives for cases closed on or before August 31, 2020.
 
Forward Mortgage Transactions
Mortgagees do not need to provide a re-verification of employment within 10 days of the Note date as described in Handbook 4000.1, Sections II.A.4.c.ii(C)(1)-(2) and II.A.5.b.ii(C)(1)-(2) Traditional and Alternative Current Employment Documentation, provided that the Mortgagee is not aware of any loss of employment by the borrower and has obtained:

  • Evidence the borrower has a minimum of 2 months Principal, Interest, Taxes and Insurance (PITI) in reserves; and
  • A year-to-date paystub or direct electronic verification of income from the pay period that immediately preceded the Note date, or
  • A bank statement showing direct deposit from the Borrower’s employment for the pay period that immediately preceded the Note date.
Home Equity Conversion Mortgage Transactions
Mortgagees do not need to provide a re-verification of employment within 10 days of disbursement as described in Section 3.8 and 3.9 of the HECM Financial Assessment and Property Charge Guide, provided that the Mortgagee is not aware of any loss of employment by the borrower and has obtained:
  • A year-to-date paystub or direct electronic verification of income for the pay period that immediately precedes the Note date, or
  • A bank statement showing direct deposit from the Borrower’s employment for the pay period that immediately precedes the Note date.

 
Mortgagee Letters 2020-05 and 2020-20 are available at: https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee

Related information for FHA Mortgagees, borrowers and other interested parties is available at: https://www.hud.gov/program_offices/housing/sfh  and on the https://www.hud.gov/answers  website.
FHA continues to revise its FHA Single Family COVID-19 information as needed to keep stakeholders updated with the latest information about FHA’s response to the Presidentially-Declared COVID-19 national emergency.


All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-05427