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QUESTION:

Did the U.S. Department of Housing and Urban Development (“HUD”) recently issue guidance on the use of Third Party Verification Services?

ANSWER:

Yes, on February 15, 2019, HUD published Mortgagee Letter 2019-01, which specifically authorized the use of Third Party Verification (“TPV”) services to verify a borrower’s employment, income and asset information.  The Mortgagee Letter explained that “TPV provides an alternative means for verifying a Borrower’s employment, income, and assets [and eliminates] the requirement for a Mortgagee to collect paystubs, W-2s, and bank statements.” HUD explained this revision is meant to align HUD policy with industry practice.

The revised HUD Handbook 4000.1 (the “Handbook”), issued March 27, 2019, indicates a Mortgagee may use contract support for administrative, human resource, and clerical functions including TPV.  The Handbook further explains that TPV refers to a process through which a Borrower’s employment, income, and asset information is verified directly by the Mortgagee with a Borrower’s employer or financial institution via a third-party vendor.

The Mortgagee must still obtain the Borrower’s authorization to verify the information needed to process the mortgage application as set forth in the Handbook.