Fannie Mae Guidelines: Verbal Verification of Employment

Why Lenders Must Verify Your Employment Right Before Closing

The verbal verification of employment (VOE) exists to catch last-minute job changes that could derail your loan. You might have been employed for years when you applied, but if you quit or get fired between loan approval and closing, your ability to repay the mortgage changes dramatically.

Say you applied for a mortgage in January while working as a marketing manager. Your loan gets approved in February, and you're scheduled to close in March. Two weeks before closing, you decide to quit your job to start your own business. Without the verbal VOE requirement, this critical change might go undetected until after you've already signed the loan documents.

The timing matters because employment verification through pay stubs and tax returns can be weeks or months old by closing. The verbal VOE provides a real-time snapshot of your employment status when it matters most.

How the 10-Day Rule Works for W-2 Employees

For hourly, salary, and commission employees, your lender must complete the verbal VOE within 10 business days before your loan's note date. The note date is typically your closing date, when you sign the promissory note.

Your loan officer or processor will call your employer's HR department or your direct supervisor. They'll confirm basic details: that you still work there, your job title, your employment status (full-time or part-time), and sometimes your current salary.

The conversation is brief and straightforward. The lender isn't conducting a new employment investigation. They're simply confirming that nothing has changed since your original employment verification.

What Happens If You're on Temporary Leave

If your employer tells the lender you're currently on temporary leave, you're still considered employed under Fannie Mae guidelines. This covers situations like maternity leave, medical leave, or short-term disability.

Your lender will need to document the nature and expected duration of your leave. They'll also need to confirm that you have a job to return to and that your income will resume. The specific requirements for temporary leave income are covered in B3-3.1-09: Other Sources of Income.

Alternative Methods When Direct Contact Isn't Possible

Sometimes your lender can't reach your employer directly. Maybe your company has a policy against employment verifications, or your HR department doesn't return calls. Fannie Mae allows several alternatives to the traditional phone call.

Your lender can accept a recent pay stub dated within 30 days of the note date. They can also use third-party employment verification services that many large employers use instead of handling verification calls internally.

Written verification of employment is another option, though it's less common because of the timing requirements. The written VOE must be dated within 10 business days of closing, which can be challenging to coordinate.

Special Rules for Military Personnel

If you're active-duty military, your lender doesn't need to complete a verbal VOE at all. Instead, they can use your most recent Leave and Earnings Statement (LES) or a written verification from your commanding officer.

This exception exists because military employment is generally more stable and predictable than civilian employment. Your LES provides current information about your military status and pay, making a separate employment verification redundant.

Extended Timeline for Self-Employed Borrowers

Self-employed borrowers get much more flexibility with timing. Your lender has 120 calendar days before the note date to complete your employment verification, compared to just 10 business days for W-2 employees.

This extended timeline recognizes that verifying self-employment is more complex. Your lender might need to contact your accountant, review business records, or verify that your business is still operating. The 120-day window provides enough time for this more involved process.

The verification itself is different too. Instead of calling an HR department, your lender might contact your business directly, speak with your accountant, or review recent business bank statements to confirm your business is still active.

When Lenders Can Verify After Closing

Fannie Mae allows lenders to complete the verbal VOE after closing in some cases, but there's a catch. The verification must be completed before the lender sells your loan to Fannie Mae.

This flexibility helps when closing timelines are tight or when employers are difficult to reach. However, most lenders prefer to complete the verification before closing to avoid any complications that might prevent them from selling the loan.

If the post-closing verification reveals that you lost your job before closing, it creates significant problems for the lender. They might not be able to sell the loan to Fannie Mae, leaving them stuck with a loan that doesn't meet guidelines.

What Could Go Wrong

The most obvious problem is losing your job between loan approval and closing. If the verbal VOE reveals you're no longer employed, your loan will likely be denied, even if you're scheduled to close the next day.

Job changes can also create complications. If you switch employers right before closing, your lender will need to reverify your new employment, which could delay closing. Even a promotion or significant change in job duties might require additional documentation.

Some employers have policies against providing employment verifications over the phone. If your company only provides written verifications or uses a third-party service, make sure your lender knows this well before closing. Last-minute surprises about verification procedures can delay your closing.

Commission-based employees face additional scrutiny. If your recent pay stubs show a significant drop in commission income compared to your historical average, the lender might need to reevaluate your qualifying income even if you're still employed.

References

For the official guidelines, see B3-3.1-07: Verbal Verification of Employment in the Fannie Mae Selling Guide.