What DU Validation Service Actually Does
Think of DU Validation Service as an electronic fact-checker for your mortgage application. Instead of your lender manually reviewing bank statements and pay stubs, authorized third-party vendors pull data directly from your bank, employer, or the IRS. This data gets sent electronically to Fannie Mae's Desktop Underwriter system, which then compares it against what your lender entered in your loan application.
Say you're applying for a mortgage and list $5,000 in monthly base salary plus $80,000 in your checking account. Your lender orders an employment verification report and an asset verification report from an authorized vendor. DU receives this data electronically and checks whether your actual salary and account balance match what's in your application.
The system works for specific types of income, employment, and assets. Not everything can be validated this way. Self-employed income from partnerships or corporations cannot be validated, but sole proprietorship income from Schedule C can be.
How Your Lender Gets Verification Reports
Your lender must work with vendors that Fannie Mae has approved. These come in two flavors: report suppliers and report distributors.
Report suppliers have direct agreements with Fannie Mae. Companies like The Work Number or FormFree are examples of report suppliers. They generate the verification report and send the data directly to DU.
Report distributors work with the report suppliers but don't have direct Fannie Mae agreements. Your lender might use a distributor, but the actual data still comes from an approved supplier. The report will show both company names.
Fannie Mae maintains a current list of authorized vendors on their website. Your lender cannot use just any verification company for this service.
What Income Types Can Be Validated
DU can validate several income types, but each requires specific verification reports. Base employment income, overtime, bonus, and commission can all be validated using either employment and income verification reports or asset verification reports that show direct deposits.
Asset verification reports work for income that shows up as regular deposits in your bank account. This includes alimony, child support, military income, retirement benefits, Social Security, and VA benefits. The system looks for consistent deposit patterns that match what you reported.
Self-employed income gets validated differently. DU uses tax return transcripts pulled directly from the IRS, but only for sole proprietorships filing Schedule C. If you're a partner in a business or own an S-corp, this validation method won't work for you.
Income types not on Fannie Mae's approved list cannot be validated through this service. Your lender will need to document these the traditional way with pay stubs, tax returns, and other standard paperwork.
Employment Verification Through the Service
When DU validates your employment, it satisfies the normal requirement for verbal verification of employment. Your lender won't need to call your HR department to confirm you still work there.
The system can validate employment related to base pay, overtime, bonus, commission, and military service. It uses the same types of reports as income validation: employment verification reports, income verification reports, or asset verification reports showing direct deposit patterns.
Here's where timing matters. DU will give your lender a "Close by Date" when employment gets validated. If your loan doesn't close by that date, your lender needs to reverify your employment. They can do this by ordering a supplemental asset report or performing verbal verification the traditional way.
If your lender uses a supplemental asset report for reverification, they lose the warranty protection that comes with DU validation. The manual review option exists, but it doesn't carry the same benefits for your lender.
Asset Verification Requirements
DU can validate assets held in checking accounts, savings accounts, certificates of deposit, money market accounts, mutual funds, stocks, and retirement accounts. All assets must be in US dollars and held at US or state-regulated financial institutions.
The verification report must show recent account activity. For refinance transactions, you need 30 days of account history. Purchase transactions require 60 days. If your account reports quarterly, the most recent quarter works.
Your lender must confirm you're listed as an account owner on every account. They also need to investigate any conflicting information between the verification report and your application.
Large deposit analysis gets automated when assets are validated. DU will flag any large deposits that need documentation and tell your lender exactly which deposits require explanation. If DU doesn't issue a message about large deposits, no documentation is required.
The Three Validation Results
When DU processes your verification reports, you get one of three outcomes: validated, not validated, or unable to validate.
Validated means the electronic data supports what your lender entered in your application. The verification report becomes acceptable documentation for that component of your loan. Your lender gets representation and warranty relief, which reduces their risk.
Not validated means the data doesn't fully support your application information. Maybe your reported income is higher than what the verification shows, or there are discrepancies in employment dates. DU will tell your lender what additional documentation they need to collect.
Unable to validate happens when DU can't access the verification data or there isn't enough information in the report. This could occur if the vendor's system is down, your employer doesn't participate in electronic verification, or your account history is too limited.
Required Documents and Borrower Consent
You must provide written authorization for vendors to share your information with Fannie Mae. This isn't optional. The lender cannot participate in DU Validation Service without your explicit consent.
Your lender must keep copies of all verification reports in your loan file, even when DU validates the information. These reports supplement traditional documentation requirements rather than replace them entirely.
For asset verification reports used to validate income or employment, your lender needs reports with at least 12 months of data. Shorter reports won't work for validation purposes, though they might be acceptable for other loan requirements.
If your lender gets an updated verification report after the initial DU submission, they must resubmit your loan to DU. The validation only applies to the most current report data.
Common Complications and Gotchas
Business accounts create complications for self-employed borrowers. If your asset verification report shows business accounts, your lender must analyze whether withdrawing funds for your home purchase would hurt the business. If so, those assets get removed from your application and you need a new report.
Retirement account restrictions can derail asset validation. If your retirement account only allows withdrawals when you quit, retire, or die, those assets cannot be validated. Your lender must remove them and get a new verification report.
Gift funds require extra attention when assets are validated. If gift money appears as deposits on your asset verification report, your lender must ensure those deposits meet Fannie Mae's gift fund requirements outlined in other guidelines.
Age of documents matters differently for validation. Asset and employment verification reports must meet standard credit document age requirements. Tax return transcripts have special rules based on when your loan application was created and whether recent tax returns have been filed.
The validation service is all-or-nothing for participating lenders. Once your lender opts in and provides the required reports, every DU submission automatically gets assessed for validation. Lenders cannot pick and choose which loans to validate.
References
For the official guidelines, see B3-2-02: DU Validation Service in the Fannie Mae Selling Guide.
Mortgage guidelines change. Stay current.
Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
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Original Fannie Mae Guideline Text
B3-2-02, DU Validation Service (02/05/2025)
General Information
Authorized Vendors and Verification Reports
Employment Validation
Verbal Verification of Employment Alternative for Employment Validated using an Asset Verification Report
General Information
The DU validation service offers lenders an opportunity to deliver loans with more certainty. Certain components of the loan file – income, employment, and assets – are eligible for validation by DU using electronic verification reports obtained from vendors. When a component of the loan is validated by DU, the loan may be eligible for representation and warranty enforcement relief related to that component. Different lender quality control and documentation requirements may also apply. See the following for additional information:
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The DU validation service is an optional service available only for conventional loans underwritten through DU. Lenders are not required to participate in the DU validation service in order for a loan to be underwritten through DU, and may not require a borrower to participate in the DU validation service.
Authorized Vendors and Verification Reports
A lender may obtain a verification report directly from a “report supplier” or from a “report distributor” as described below:
Report suppliers have entered into an agreement with Fannie Mae to participate in the DU validation service. Report suppliers generate the report and send the report data electronically to the DU validation service. This report reflects the report supplier’s name and/or logo.
Report distributors have not entered into an agreement with Fannie Mae, but have an agreement with an eligible report supplier. The report supplier (not the distributor) sends the report data electronically to the DU validation service. The verification report reflects both the report distributor’s name and the name and/or logo of the applicable report supplier.
The DU Validation Service Verification Report Vendors list provides a listing of authorized report suppliers and report distributors and is available on Fannie Mae’s website.
Asset Verification Reports
Asset verification reports provided by third-party vendors may include:
a 30- or 60-day report;
data covering up to 12 months (or more) of asset account data;
a report showing a subset of information typically found on an asset verification report (for example, deposit transaction information with no corresponding amount or account balance) intended to be used to verify employment using direct deposit transactions (a "supplemental asset report").
To validate income or employment using an asset verification report, the lender must order an asset verification report with a minimum of 12 months of data from an authorized vendor.
Lender Requirements
No special approval is required from Fannie Mae to use the DU validation service, however, lenders must “opt-in” to validate income and employment using an asset verification report.
When a lender provides the required reports, all loans that are submitted to DU will automatically be assessed through the DU validation service for validation of the related component.
To participate in the DU validation service, the lender must
have a relationship with, and have entered into a contract for the services provided by, a vendor(s) –either a report supplier or a report distributor – that is authorized to obtain a verification report;
have an agreement with a vendor(s) that
allows for the report supplier to share the information contained within the verification report (obtained by the lender) with Fannie Mae electronically for use by the DU validation service; and
ensures the lender receives, or has access to, the same data that is shared with Fannie Mae electronically in accordance with ; and
establish controls to manage and monitor the vendors in accordance with its own regulatory requirements.
For loans assessed by the DU validation service, the lender must
obtain borrower authorization to receive the information from the vendor;
confirm that the verification report matches the borrower;
ensure information entered by the lender in DU is properly documented;
investigate and resolve any conflicting or contradictory information;
retain a copy of all verification reports in the loan file (see for details), in addition to any other documentation required by DU; and
ensure that the most current version of the verification report is used by the DU validation service. If the lender obtains an updated verification report, the lender must resubmit the loan to DU and receive a message that the component has been validated in order for the representation and warranty enforcement relief to apply.
Validation Results
When a component of the loan file is assessed by the DU validation service, three results are possible: validated, not validated, or unable to be validated. DU will issue a message providing the validation results.
Validated
DU has determined that the information provided on the verification report supports the information entered into DU for the component being validated.
The DU message(s) will indicate that the verification report is acceptable documentation to support the component that has been validated.
Not Validated
DU has determined that the information provided on the verification report does not fully support the information entered into DU for the component of the loan file eligible for validation.
The DU message(s) will indicate what documentation, in addition to the verification report, is required.
Unable to Validate
DU is unable to validate the information entered into DU for the component eligible for validation. This could be due to DU’s inability to access the verification report data, or insufficient data in the report.
The DU message(s) will indicate what documentation is required.
Note: Regardless of the validation result, DU will continue to use the information provided by the lender in determining the DU underwriting recommendation. The results of the validation service do not override, impact, or alter any information submitted by the lender.
Income Validation
The following table lists the income types that can be validated, and the documentation that DU will require, which may be different than the standard documentation required in this Guide. For all eligible income types, the lender must determine the income type, amount, and source and enter this information in the applicable field in DU.
Note: Income types not listed below are not eligible for income validation by DU.
Asset Verification Report
Employment and Income Verification Report
Asset Verification Report
Tax Return Transcript (Taxpayer Tax Return Summary Report)
Social Security (retirement, disability, supplemental, survivor benefits)
Asset Verification Report
Tax Return Transcript (Taxpayer Tax Return Summary Report)
Self-employed (IRS Form 1040 Schedules C or C-EZ for sole proprietorships only)
Tax Return Transcript (Taxpayer Tax Return Summary Report)
Asset Verification Report
Note: Additional supporting documentation may be required for some income types (such as child support or alimony).
Income—Additional Information
The following additional information applies to income validated by DU:
If an employment and income verification report is used, the vendor must obtain income information using data obtained from the report supplier’s existing database of employer-provided information.
All income or direct deposit amounts shown on the income or asset verification report must be reflected in U.S. dollars.
When DU validates income, the lender
is not required to determine if the borrower is employed by a family member or interested parties to the property sale or purchase.
must continue to obtain employment verification as described in
The verification report may contain sufficient information to satisfy this requirement. See Employment—Additional Information below.
.
must review the verification report relied upon by DU for validation and
investigate and resolve any conflicting or contradictory information, and
when an asset verification report is used to validate income, the lender must confirm that the borrower is listed as an owner of the asset account and that the report reflects the borrower's name as account holder. The lender need only review the report the covering the period of time (30- or 60- days) required for asset verification for the transaction type, or if no asset verification is required for the transaction, the account activity covering the most recent 30-day period, for these purposes.
Age of Income Document Requirements
Asset Verification Reports and Employment and Income Verification Reports: The date of the report must comply with Fannie Mae’s standard age of credit document requirements as outlined in
.
Tax Return Transcripts: To ensure that the income validation is completed using the most recent tax transcripts, the following will be used to determine if the transcript contains the most recent tax return information. Lenders are not required to comply with the age of credit documents as outlined in
, when DU issues the message that income has been validated.
For loan casefiles created on or before April 30, the most recent tax transcript must be provided. The most recent tax transcript would be for the prior year (current year minus 1). If the prior year tax return has not yet been filed or the transcript is not yet available, the most recent tax transcript will be the current year minus 2.
For loan casefiles created after April 30, the most recent year tax transcript must be provided for validation to be completed. The most recent tax transcript will be for the prior year (current year minus 1).
Employment Validation
The following table describes the employment that can be validated and the documentation that DU will require, which may be different than the standard documentation required in this Guide.
Eligible Verification Report
Employment related to the following income types:
Supplemental Asset Report
Employment and Income Verification Report or Employment Verification Report
Employment—Additional Information
The following additional information applies to employment validated by DU:
If an employment and income verification report is used, the vendor must obtain employment information using data obtained from the report supplier's existing database of employer-provided information.
Income and employment are assessed independently; however, the results of the employment validation may impact income validation.
When employment is validated by DU, the validation satisfies the requirement for verbal verification of employment described in . Lenders must comply with all DU messages, including ensuring the loan closes by the “Close by Date” stated in the DU employment validation message.
The lender must review the verification report relied upon by DU, including any Employer Disclaimer information, if applicable, and:
investigate and resolve any conflicting or contradictory information, and
when an asset verification report is used to validate employment, the lender must confirm that the borrower is listed as an owner of the asset account and that the report reflects the borrower's name as account holder. The lender need only review the report covering the period of time (30 or 60 days) required for asset verification for the transaction type, or if no asset verification is required for the transaction, the account activity covering the most recent 30-day period, for these purposes.
Verbal Verification of Employment Alternative for Employment Validated using an Asset Verification Report
When employment is initially validated using an asset verification report and the loan will not close by the "Close by Date" stated in the DU employment validation message, the lender may obtain a supplemental asset report from an asset verification report vendor and either submit it to DU or perform a manual review of the report to satisfy the verbal verification of employment described in
.
When used to reverify employment (whether through an automated or a manual review), the supplemental asset report must contain
the account numbers and the account holder name for each account included in the report,
the date of the report, and
the date and deposit details of the deposits reflected on the report.
The lender must review the report to confirm the borrower is listed as an account holder. The lender must not have any information indicating the borrower may no longer be employed and must investigate and resolve any contradictory or conflicting information.
When a manual review is performed, the lender must obtain the report within the same timeframe required for a verbal verification of employment and additionally, review the report to confirm
the deposit details of the direct deposits that are being used to reverify employment
match the ACH details identified in the DU findings messages for the direct deposit streams used by DU to validate employment, and
are consistent with the income source provided in DU;
the pattern of receipt of the identified direct deposits used to reverify employment does not reflect missed payments, and the latest expected payment prior to the date of the report is present.
Note: When a lender performs a manual review of the supplemental asset report to reverify employment, the enforcement relief from representations and warranties related to the employment validation through the DU validation service described in
does not apply.
All supplemental asset reports must be retained in the loan file.
Asset Validation
The following table lists the asset types that can be validated and the documentation that DU will require, which may be different than the standard documentation required in this Guide.
Assets held in the following accounts:
Asset—Additional Information
The following additional information applies to asset validation:
All assets shown on the asset verification report must be in U.S. dollars and held in a U.S. or state regulated financial institution.
The account statements obtained from the vendor must cover the most recent:
30 days of account activity for refinance transactions
60 days of account activity for purchase transactions
The most recent quarter, if account information is reported on a quarterly basis
The lender must review the verification report (covering the account activity for the period of time required) and investigate and resolve any conflicting or contradictory information. The lender must also confirm that the borrower is listed as an account holder for each asset account.
The DU validation service automates the assessment of large deposits on purchase transactions required in . When a large deposit needs to be documented, DU will issue a message specifying the amount of the large deposit, as well as the institution name and account number of the account that includes the large deposit. If no message is issued by DU, then no documentation of any large deposit appearing on the asset report is required when assets have been validated.
When the DU validation service validates assets on transactions with gift funds, the lender must ensure that the gift funds that appear as deposits on the asset verification report (if any) meet the requirements in .
If the actual amount of funds required to complete the transaction is greater than the Funds Required to Close specified in DU, the lender must document liquid assets to cover the additional amount. See for additional details on whether the loan must be resubmitted to DU.
For self-employed borrowers, if an eligible asset account is reflected as a business account on the verification report, the lender must perform a business cash flow analysis to confirm that the withdrawal of funds for this transaction will not have a negative impact on the business. If the lender determines the withdrawal would have a negative impact on the business, the lender must remove the assets from the online loan application, obtain an updated verification report that excludes the business account, and resubmit the loan to DU.
When retirement assets are entered in DU, DU issues a message requiring the lender to ensure that withdrawals are permitted, and that withdrawals are not limited to those completed in connection with the borrower’s employment termination, retirement, or death. If any of these conditions are present, the lender must remove the retirement account assets from the online loan application, obtain an updated verification report that excludes the retirement account, and resubmit the loan to DU.
Note: If the lender would like to use the asset verification report to supplement the credit risk assessment in DU, see Rent Payment History in
for additional information.
SEL-2021-08 SEL-2020-06 SEL-2019-06
