d. Verification and Procedural Errors

Deficiencies included

·   requiring the veteran to sign partially completed or blank forms

·   permitting income or asset deposit information to be hand carried by the applicant, real estate/sales agent, or a party other than the lender’s specifically-designated employee

·   addressing verification forms to an individual chosen by the applicant rather than to the employer’s personnel or payroll department, and

·   obtaining multiple/revised credit reports without validating the need for the subsequent reports.

e. Income Analysis Errors

Deficiencies included

·   showing that an applicant is a salaried employee when, in fact, the applicant works solely on a commission basis, is a contract employee, or is actually self-employed

·   failure to use net profit or net income from Schedule C of IRS Form 1040 rather than the gross income of an applicant who is self-employed

·   using short-term, temporary, or sporadic income to qualify an applicant for a loan, and

·   Examples of unreliable income sources include

-   overtime pay in an industry or area that is experiencing an economic slowdown or decline

-   income from a second job even though the applicant does not have a record of steadily working 2 jobs

-   rental income even though the applicant does not have verified experience as a landlord, and

-   poorly documented income from self-employment.

·   qualifying a marginal applicant for a loan by using a buydown or graduated payment mortgage without establishing that the applicant’s income will keep pace with the scheduled increase in mortgage payments.  This is especially important in times of low inflation and stagnant or declining real estate markets.