In response to the COVID-19 pandemic, Fannie Mae temporarily suspended employment validation within its Desktop Underwriter® (DU®) validation service, a component of Day 1 Certainty®. During this period, lenders were given the option to verbally verify a mortgage loan applicant’s employment status. According to a recent release from Fannie Mae, the suspension was lifted this month.
Here are four things lenders need to know:
1. What is DU validation service?
The DU validation service leverages data to allow faster and streamlined decisioning by mortgage lenders with Fannie Mae as the investor. Desktop Underwriter helps lenders efficiently complete credit risk assessments to establish a home loan’s eligibility for sale and delivery to Fannie Mae with easy-to-use, automated tools. With validation, lenders can get relief from certain reps and warrants – which might otherwise require lenders to buy back loans.
On average, Fannie Mae Day 1 Certainty can reduce application-to-close time by 12 days, when verifying income and employment at the loan level.
2. What does the employment validation reinstatement mean for lenders?
If a borrower’s employment data is verified via an approved DU validation service employment verification vendor, no further employment verification or information is required.
But note that if lenders leverage employment verification from a third-party provider, Fannie Mae requires that the provided data be no more than 35 days old as of the note date.
The Work Number® database from Equifax® makes fulfilling these requirements easy. The industry leading centralized commercial repository of income and employment data gives credentialed verifiers instant access to more than 119 million active employment and income records. These records come directly from employers and are updated each pay cycle.
3. How can The Work Number® benefit lenders and borrowers –no matter who the underwriter is?
Help mortgage lenders get loans to borrowers faster and with potentially less risk.
Less paper. Less consumer friction. Expedited time to close. Automating the employment (and income) verification step within the loan origination process can help shorten the time to close on a home loan.
4. Third-party Employment Verifications are the Way to Go
No matter what loan underwriting service lenders use, third-party verification services are a great choice to balance efficiency and mitigate risk. Having instant access to secure and up-to-date employment data directly from employers is a reliable way to gain visibility into consumers' income levels and ability to pay.