Resolving Failed Borrower Validation

Written By: Stacey Sprain, Op-Ed Writer

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This week I had a situation come up that I myself have never encountered before in the 16 years I’ve been processing but I suspect it’s an issue we will see more of in these trying times. Often fraud will be involved but sometimes, such as in the case I dealt with this week, there may simply be error on the part of Social Security Administration that causes this occurrence.

What do you do when a Borrower Validation fails in FHA Connection?

Your first step is to double-check your data entry to make sure that the borrower name, birth date and social security number have all been entered correctly based on the DOCUMENTATION you have within the loan file. If you receive a failed validation, it’s best not to rely on the verbal information that may have been given for the loan application. Make sure you verify the data to other documentation in the loan file such as copy of the borrower’s photo id, paystubs, W2s, etc.

If you determine that you indeed mistyped your data when you initiated the FHA case request, you will need to edit your data in FHA Connection and resubmit the borrower data for validation. To accomplish this, follow these instructions:

• Log on to FHA Connection
• Choose Single Family FHA
• Choose Single Family Origination
• Choose Case Processing
• Choose Borrower/Address Change and enter the FHA Case Number
• Next, simply re-enter or edit the borrower data field(s) that you entered incorrectly.
• Click Send.

You will receive a message indicating the borrower validation data has been resent to HOC Processing and to check Holds Tracking in one business day.
Be sure to create a reminder to pull the update from Holds Tracking in FHA Connection the following business day.

If you retrieve the re-submitted Borrower Validation from Holds Tracking and the message still indicates “Borrower Failed Validation,” you must utilize other third party resources to validate the borrower’s identity data.

HUD recognizes several national third party vendors to accomplish identity verification:

• Inco-Check- ICheck-ID product
• Rapid Reporting- DirectChek
• FraudGUARD by Interthinx/ Sysdome- SSN Direct

Your organization would need an account set up with any of the recognized vendors and you would need to obtain ID verification through their product sources. I would expect most often that obtaining one of those verifications would resolve the issue and will confirm the identity for the borrower is a match.

However, such as has occurred in the case I worked through this week, there may be times when even the additional third party vendor identity check comes back as a “no match.” When this occurs, it requires a bit more thorough “digging for answers” and you will need to get the borrower’s involvement. The borrower may need to provide his/her birth certificate, photo identification, any immigration papers and any other supporting documentation. He/she may also need to address the issue with the local Social Security office.

In my specific case, we had a borrower whose ID report came back as a “no match” because he and two of his brothers were named the same name by his parents. Two of the three brothers also have the same middle initial. It appears that between SSA and the credit bureaus, these three brothers’ data has been mixed within several databases and it is causing havoc when trying to verify any of their identities. He is providing his personal birth certificate, driver license and the information from his brothers to prove his story is true. I am waiting on SSA now to see what information they will provide to us for purposes of validating his identity so we can close his loan.

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Note that according to HUD, it is the lender’s responsibility to validate and verify the identities of all borrowers for credit granting purposes and thus, we must document our file accordingly so that HUD will insure the loan. I will keep you posted on how this all turns out!

About The Author

Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. 


Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.