OREANDA-NEWS. September 30, 2015. In case you missed the announcement earlier this summer, Fannie Mae, one of the major Federal Agencies that buys mortgages on the secondary market, has made several data fields on The Verification of Employment (Form 1005) optional. In the mortgage origination and underwriting process, the Form 1005 or 1005(S) may be used to document income for a salaried or commissioned borrower in lieu of a paystub and W-2 forms. However, some of the data requested by the form is not generally provided by employers, nor is it available on paystubs or W-2s.  The specific fields include the following:

#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)

Historically, mortgage lenders would contact employers directly to fill in this missing information not obtained from the borrower – although most were not able to divulge this specific detail around the employee income and future pay. This specific information is also not provided in payroll data, therefore, even those employers who use third parties such as Equifax Workforce Solutions to fulfill verification requests from lenders may still feel the impact of these continual requests, creating interruption in day-to-day work efficiency.

Over the past year, Equifax has been advocating on behalf of employers to Fannie Mae, voicing concerns that these specific questions around employee income cannot or will not be answered by most employers and should not be required as part of the mortgage underwriting process.  Fannie Mae has now announced that the aforementioned fields are now optional and need not be completed. For now, this change only applies to loans sold to Fannie Mae. Equifax believes that the other GSEs will likely follow Fannie Mae’s lead, and Equifax will keep employers posted if and when other GSEs follow suit.  Employers should still begin to see an overall decrease in the number of verification requests from lenders, with fewer interruptions to work productivity.

Bottom Line
As the need for income and employment verifications continue to increase based on changing lending regulatory requirements and growing benefit enrollment rates, employees are encountering more life events and financial choices that require these verifications as part of the decision process. It is important that employers focus on their verification process to establish a method that keeps employee data secure, while completing the request promptly, to the end benefit of employees.