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We are now in unprecedented times, and the importance of verifications and reverifications are even more heightened as the industry deals with the current health crisis triggering a tsunami of unemployment and economic strain.
Advancements have been made in the industry to streamline the verification process, certainly helpful in a time like today, which ends up having a downstream effect on whether a post close QC reverification is required. This blog post will discuss the relationship between the two. At the end of the day, with investor and GSE guidelines in flight amidst Covid-19, documenting all verifications and reverification within the history of a loan is more important than ever.
Over the past three or four years, a growing number of lenders now use third-party outsourcing services to obtain the required initial confirmations during processing and underwriting. The goal being to offload the heavy lifting to organizations solely focused on this type of work.
Verification of employment (VOE) is one popular process being managed externally. Mortgage lenders are using third party VOE providers who offer order fulfillment from various employment verification sources with data from employers around the world. Lender’s staff can easily access the providers’ system and pull the data down. As well, these vendors can also help manage the countless letters and phone calls that must be made to small businesses and mom and pop shops who are not integrated into a verification source to manually verify a borrower’s employment.
During processing, assets also need to be verified, which has become easier because of direct connections to financial institutions through a third-party provider. Borrower authorization starts the process and enables verifiers to request and access information through secure portal connections to confirm asset information relied upon in the loan decision. However, some lenders who opt not to use these direct connections can use third-party providers to request a completed verification of deposit (VOD) form. In these instances, there is a third- party vendor report that validates the customer’s assets.
While VOE and VOA vendor partnerships help to streamline loan production, some may be surprised to know that the post close QC process requires a reverification of both regardless of whether the initial verification was done by a lender’s processing team or a third-party provider. In that regard, it is always good to understand what quality control practices these outside vendors have in place to provide an audit trail of the information obtained in support of the reverifications process. It is also important to understand what technology your QC provider is using to document the complete history of reverifications that have been completed in the quality management process.
Of note, GSE tools like Day 1 Certainty are helping to alleviate the need for reverification of income, assets and employment in the QC process in some instances. GSE guidance continues to be provided regarding lending in the current environment, but it is good to understand that when lenders use GSE approved vendors for direct electronic access to information during the loan decisioning process, these approved vendor tools may provide representation and warranty (reps and warrants) enforcement relief when certain requirements are met.
In the post close QC process LoanLogics’ reverification team, managed by my colleague Ann Dragon, will compare the investor provided reference number received from programs like Day 1 Certainty, to the reference number in the loan file to ensure that it is valid or hasn’t expired before deciding to place a request for reverification of either the income or the assets.
In talking with Ann, she shared with me that while she does see programs like Day 1 Certainty being used, she also sees many loans that are not leveraging these programs.
As you consider using any of the growing number of providers offering verification services to help streamline your processes, it’s always good to understand which vendors are GSE approved if you want to take advantage of programs like Day 1 Certainty. It is also extremely important, particularly in light of the May 6th update to Day 1 Certainty that temporarily suspended reps and warrants relief for employment, to document manual verification of employment and have reliable reverifications services that may be done through the life of the loan. We can help!
Looking for QC support or just want to know more? Reach out to us at loanlogicsinfo@loanlogics.com or request a demo here.
Be sure to check out one of our prior blogs that discussed how reverification have changed over the years in a post from our, “Hey, Boomer” blog series.
