Q: Did the U.S. Department of Housing and Urban Development ("HUD") recently issue guidance on the use of Third Party Verification Services?
A: 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 resources, 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, through the services of a third-party vendor.
The Mortgagee must still obtain the Borrower's authorization to verify the information needed to process the mortgage application as more fully set forth in the Handbook.