December 5, 2014
FHA loan rules require your loan officer to perform credit and employment checks, examine the source of down payment funds, and verify your income. In order to accomplish this, the FHA requires the lender to get documentation from the source; the borrower cannot provide the lender with credit reports, for example, and must contact your employer directly for verification of your income and work history.
The rules governing these procedures are found in HUD 4155.1 Chapter One, Section B. which includes permission for the lender to ask the borrower for “blanket authorization” as described below:
“The lender may ask the borrower to sign a general authorization form that gives the lender blanket authority to verify information needed to process the
mortgage loan application, such as
•past and present employment records
•bank accounts, and
•stock holdings.
If using a blanket authorization form, the lender
•must attach a copy of the authorization to each verification sent…”
But there are restrictions to this practice. Your loan officer cannot ask you to sign blank or incomplete paperwork. Those restrictions on credit reports coming from the borrower mentioned above? FHA loan rules also say these documents can’t be handed over to the lender by “interested third parties”.
“Lenders may not accept or use documents relating to the credit, employment, or income of borrowers that have been handled by, or transmitted from or through the equipment of interested third parties, such as
•real estate agents
•builders, or
•sellers.”
These rules protect both buyer and lender from accusations of misconduct in the lending process, as does the following rule also found in Chapter One Section B:
“The mortgage loan application package must contain all documentation that supports the lender’s decision to approve the mortgage loan. When standard documentation does not provide enough information to support the approval decision, the lender must provide additional, explanatory statements that are consistent with information in the application. The explanatory statements must clarify or supplement the documentation submitted by the borrower.”
Do you have questions about FHA home loans? Ask us in the comments section. All comments and questions are held for review.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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