The mortgage meltdown has brought a return to the process of proper verification of a borrower’s assets. But just how long is the information stated on your home-loan application considered valid? If you retire or lose your job after your loan closes, can the lender demand payment in full?

Those questions, and others like them, were raised recently by a longtime nurse whose lender demanded that a "reverification form" be signed at closing. She was especially concerned because she had already given financial information — bank deposits, stocks, income — at the time of application. She was a widow and was planning to retire in the next 18 months.

Although lenders sometimes disclose at the time of application that employment, assets and credit may be reverified near or on the closing date for quality control purposes, a reverification form does not usually accompany the closing papers.

The nurse also was confused when the mortgage broker told her that it would be necessary to recheck her credit and assets if their lender decided to sell their loan on the secondary market to another lender or investor. The broker said the new lender or investor would need to know if the borrower still had the means to repay the loan.

Post-closing verifications are done on about 10 to 20 percent of a lender’s loans to make sure the lender is meeting quality standards and not selling loans of lesser quality in the secondary market.

But there is no way of guaranteeing the borrower’s employment or specific assets for any significant time period, especially for the entire term of the loan. If it could be done, lenders would certainly welcome the practice because they would be funding what would really be no-risk loans.

The reason lenders require verifications of employment, bank accounts and credit before funding a loan is to determine if the borrower has the necessary down payment and can make the monthly payments at the time the loan is made. However, there is no way of anticipating the main reasons borrowers fail to make payments. Most of the time, defaults occur due to serious illness, loss of job, divorce, or the death of a partner.

Deliberately falsifying statements on a home-loan application can result in stiff penalties and fines. Lying on a Federal Housing Administration loan application is a federal offense.

***

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