Employment verification is a process to enable mortgage lenders, financial institutions, government agencies, and employers to confirm an applicant’s present and/or past job status. The process helps establish that the applicant has the requisite work background that they claim to have. Verification of employment may also help identify any fabricated job titles, gaps in employment, and false or misleading claims.
Financial institutions and mortgage providers frequently need to perform VOE checks before they may approve a loan for an organization’s current or former employee. Quentelle utilizes the advanced and reliable VeriSafeJobs solution to automate and speed up the verification of employment process based on the requests it receives from these financial lenders.
Quentelle also receives similar VOE requests from government agencies. When employees seek government assistance, the concerned agency can utilize the Quentelle platform to obtain employment verification. Quentelle offers this service free of charge to government agencies on behalf of the employers it represents.
Why do Mortgage Providers Require Verification of Employment for Loan Approvals?
Verification of employment is one of the time-tested ways for financial institutions and mortgage providers to protect their financial interests as well as serve home buyers and other loan seekers more effectively. Lenders rely on the VOE process to ensure the loan applicant or a home buyer will be in a financial position to make their loan repayments on time.
Mortgage lenders usually accept a maximum debt to income (DTI) ratio of 43 percent. In simple terms, it means that the borrower’s aggregate debts, including monthly mortgage payments, vehicle loan payments, credit card payments, and other monthly bills must not be higher than 43 percent of their gross monthly income.
Apart from the overall DTI ratio of 43 percent, mortgage providers also usually like to ensure that the monthly home loan payment of a borrower is not higher than 33 to 35 percent of their gross monthly income. Together with the DTI ratio requirement, this general condition helps in rationalizing the lending process for the mortgage company.
Verification of employment plays an important role in this because the lender can be sure that the information submitted by a loan applicant is correct. Although it may appear that VOE is an impediment in the way of borrowers who want to buy the house of their dreams, but in reality, this process helps protect prospective home buyers from obtaining a mortgage they may be in no position to afford.
Mortgage Loans and Gaps in Employment
While employment history is often a key element in a loan application, lenders usually require only a work history of the last two years. Therefore, if the borrower has had employment gaps before that period, it may not affect their loan application. However, when gaps in employment exist in the last two years, it may become a concern for the mortgage provider especially if the length of the unemployment period is 6 months or higher. An unemployment period of just one or two months in the last two years will usually not matter much for a mortgage approval.
Some Employment Gaps are Reasonable
When an employment gap occurred for a valid reason, the mortgage lender or financial institution will give due consideration to it. For instance, a loan applicant may have taken a maternity leave for six or more months, or may have taken time off to pursue higher education.
Temporary disability and layoffs may also result in extended gaps in employment, which a lender is likely to understand. However, multiple job changes within a span of a few months, a short employment history of less than two years, and substantial increase or reduction in income in recent times might be viewed as red flags by some lenders.
Loan Applicants can Explain the Employment Gaps
A loan applicant can increase their chances of their loan getting approved if they provide a valid explanation supported by relevant documents about their prolonged employment gap. Finishing school, going on maternity leave, or performing the role of a caregiver for a sick family member are the kind of reasons that can be backed by documentary evidence.
Sometimes the borrower may be able to demonstrate that they continued to make their existing debt payments consistently during the period of employment gap, which could strengthen their loan application. In general, lenders are looking for employment stability to assess a borrower’s ability to make future mortgage payments.
The Process of Verification of Employment for Mortgages
The process to verify employment for the purpose of mortgage approval is not very different from other VOE processes. However, some minor distinctions may exist. In general, the process may include the following steps:
- The borrower files a loan application detailing their employment history and income information, among other things. Documents such as W-2 forms or pay stubs may have to be submitted at this stage.
- The lending company communicated with the borrower regarding any additional proof or documentation they may require.
- The mortgage lender processes the loan application. If no specific issues are found, the lender will proceed with the verification of employment.
- The lender may choose to verbally verify employment by placing a phone call to the loan applicant’s most recent employer. If any discrepancies are found between the loan application and the employer’s version, the lender will communicate with the loan applicant.
- In case the loan applicant is self-employed, they will need to submit their proof of income from the IRS. This income document can be obtained by completing Form 4506-T. An official tax transcript issued by the IRS will show the applicant’s income, based on which the lender may approve the loan.
- Sometimes when a lender approaches an employer with a VOE request, the employer may direct them to a third party verifier. This could make the verification of employment process longer and costlier (the verifier will charge a fee). Third party employment verifiers can additionally offer background checks, but it is important to ensure the background check or background screening is performed in accordance with the FCRA (Fair Credit Reporting Act) regulations.
In general, the manual, in-house process of verification of employment for lenders can be tedious, resource intensive and time consuming. If the employment verification takes a long time to complete, it can frustrate the borrower who may sometimes turn to another lender by the time the VOE is done.
Frequent time lags in the VOE process and slow loan approvals may limit the business turnover for the financial institution. Inaccuracies or mistakes in the employment verification process may create compliance issues or increase the incidence of loan defaults and loss of profitability. Higher operational costs may also impact the bottom line when loan companies attempt to handle the complete employment verification process in-house.
Automation in VOE is Helping Improve the Lending Process
Smart automation in employment verification with a platform such as Quentelle is helping banking institutions and mortgage providers make faster and better lending decisions. Verification of employment, which is considered one of the major pain points in the lending business, becomes streamlined and easy with Quentelle. Over time, it allows the lenders to achieve higher profits and deliver superior services to home buyers and other borrowers.
Traditional Approach to Employment Verification is Inadequate for Lenders
Considering the highly unpredictable and competitive nature of the lending business, loan providers are under constant pressure to sustain their market position while remaining profitable. Using traditional in-house approaches to verification of employment, the lenders experience cost inefficiencies and compliance risks due to potential mistakes by HR teams. On the other side, borrowers are becoming increasingly demanding with high expectations for service and speed.
If it takes a slightly longer than usual time to verify employment, the lender may risk losing the business to their competitors. If they try to rush through the VOE process, mistakes may occur, which can seriously hurt the bottom line. This is where all types of lending institutions, banks, and mortgage companies are now more receptive than ever to move their verification of employment service to Quentelle, which is a cutting-edge digital platform for VOE.
Automation can Streamline the Verification of Employment Process
The decision of loan approval must fundamentally be based on the borrower’s ability to repay. Borrowers with stable employment are more likely to have this financial ability. To identify these borrowers, it is critical for a lender to have a system in place that makes the verification of the employment process reliable, speedy, and accurate. The Quentelle platform is equipped to intelligently automate this function.
Repetitive, manual, error-prone and time-consuming tasks such as verification of employment are an ideal fit for automation with Quentelle. It can relieve the employer’s in-house talent of performing mindless administrative work, improve accuracy in verification, and enable the processing of more loan applications within a shorter period of time. At the same time, the Quentelle VOE service can help maintain compliance, while delivering speedy service that drives higher customer satisfaction levels.
Why More Lenders are Choosing Quentelle for Employment Verification
Lending institutions and mortgage companies are increasingly relying on the technology platform of Quentelle for verification of employment. The platform automates the time-consuming and labor-intensive VOE process to complete it in the shortest possible time. Customers experience a dramatic reduction in the time and effort they would otherwise invest in issuing loan and mortgage approvals.
With Quentelle’s VOE solutions, lenders can process loans faster and more accurately, giving a boost to their mortgage lending turnover. Homebuyers and other borrowers are happier because of a more streamlined process and faster loan approvals. Quentelle creates a win-win for all.
More Predictable Timeline
Large and mid-sized lending companies have a regular requirement for employment verification, considering the high number of mortgage applications they receive. Automating the VOE process with Quentelle not only reduces manual paperwork and expedites the process, it also allows for a more predictable timeline. Loan officers as well as loan applicants will have a better idea of how much time the approval will take. The mortgage provider can also set more accurate revenue goals and strategies when there is greater predictability in the lending system.
Better Privacy and Security
When traditional methods of employment verification are used, the in-house handling of the paperwork and documentation does not ensure foolproof safety and confidentiality of the information exchanged. On the other hand, when the mortgage lender utilizes the Quentelle platform, concerns related to privacy and data security are virtually eliminated. The platform’s automated and technology integrated VOE software provides comprehensive data protection and cyber security. Sensitive customer information remains accessible only to the authorized personnel, and the risks of data loss are avoided with cloud storage technology.
Higher Cost Efficiency
In comparison to the traditional means of employment verification, the automated Quentelle platform proves to be significantly more cost effective for the lenders due to superior operational efficiency. The lending organization no longer needs to have a large in-house team to handle the repetitive VOE tasks manually. The automated solution from Quentelle not only makes the verification of employment process easier and friction-less, it also helps cut down the operational costs for the lender to get it done within a tight budget.
Greater Business Focus
When a bank, financial institution or a mortgage lender has access to Quentelle’s automated VOE solutions, it becomes possible to fulfill the employment verification requirements quickly, securely and more reliably. This frees up the time of the talented in-house teams to focus their attention on more strategic and valuable business work. The net result is that the lender manages to close more loans, the bottom line improves due to higher accuracies in the system, the customers are happier, and the company’s market reputation gets bolstered over time.
Improved Compliance
When financial lenders select a technology platform to automate their task of employment verification, they should make sure of the service provider’s technology capabilities, security certifications, and a track record to adhere to the FCRA compliance requirements at all times. Quentelle has robust systems in place to ensure to protect sensitive customer data and follow the norms laid out by the regulating agencies. Quentelle’s stringent verification of employment policy and procedures are designed to ensure full compliance with the law and minimize the lender’s risk of lawsuits.
How Does Employment Verification Work for Employers Looking to Hire Candidates?
Employment verification is a vital element in the pre-employment screening, which serves to assure the new employer that the candidate is a good fit for their organization and the job position they would hold. Employment verification works as follows:
- The new employer reaches out to the candidate’s past employers to verify details about the candidate, such as: (a) job titles; (b) period of employment; and (c) reasons why they left the job or why they were terminated.
- These employment reference checks may be carried out as written communication, but sometimes the HR representative of the new employer may also speak directly to the former manager or supervisor of the candidate.
- This type of background screening and reference checks with the previous employer are usually performed as part of the hiring process – prior to offering a confirmed job to the candidate.
- The new employer has a legal obligation to notify the candidate about this type of background check and their employment decision.
- Unlike employee background checks, there is no limit on how far back in time an employer can go with employment verifications from multiple past employers.
Why is Employment Verification Vital to the Hiring Process?
Employment verification is critically important because employees are the strongest asset of any company. Carrying out this meticulous verification for every new hire can be time-consuming for an employer, and errors of omission may sometimes occur.
The right way to conduct background screening and employment verification is to engage the services of a professional firm that has the capabilities and experience in this field to do it in a reliable, timely, and cost-effective manner.
Risk of Employment Fraud
Job applicants may sometimes commit resume fraud if they are desperate to get a job. In their job application and resume, they may submit false information about their academic qualifications, certifications, licenses, and prior work experience; overstate their job duties in the previous job; or fail to provide the correct reasons for exiting from their previous employment. To protect your organization from this type of fraud, verification of employment history is a time-tested approach.
Stakes are High in Positions of Trust
If you hire someone without employment verification, the risk is higher that they may be unfit for organization’s culture and may create disruptions or influence other employees in a negative way. The stakes increase further in positions of trust where the new employee will have access to the company’s confidential data and information or deal with money and finances. Data theft, financial theft, or other wrongdoings of an untrustworthy new employee may result in serious financial losses, damage to business reputation, and risk of costly lawsuits.
Challenges of High Employee Turnover
You may think that even if you end up hiring an unfit candidate in absence of employment verification, you can fire them to get rid of the problem. However, failure to have a system for employment screening tends to increase worker turnover. The hidden costs are enormous. At one end, you will lose in terms of the costs involved in hiring, training, and investing in a new employee. On the other end, frequent terminations due to theft, illicit drug use, violence, and breach of company policies will demoralizes your existing workforce and affect business productivity.
Unemployment Verification Form
When a former employee was removed from their job, they will most likely apply for unemployment benefits in their state. The individual must complete the Unemployment Verification form, which has a section for describing the reason for their removal from job.
The individual who has been terminated from employment might request that their ex-employer provides an unemployment verification letter. They may also request that the unemployment agency in their state provide this unemployment verification letter. This letter can serve as their proof of unemployment.
Unemployment Insurance and the Unemployment Audit Process
The state’s Unemployment Insurance agency will carry out an unemployment insurance audit according to the US Department of Labor guidelines. This audit process ensures compliance on part of the employers and helps answer any questions that may arise.
What Triggers an Unemployment Insurance Audit?
Most of the UI audits are performed randomly every year on a small percentage of employers in the state. The pool from which the employers are chosen includes all companies registered as employing businesses within the state.
For the purpose of the unemployment insurance tax audits, some employers may also be specifically chosen to verify whether they are accurately reporting the wages or they have appropriately classified the workers in compliance with the state’s UI laws.
Even if a company does not have an active Unemployment Insurance account, they could be chosen for the UI audit to assess whether they may be a liable employer. The UI tax audit is performed to verify that:
- The employer is correctly reporting the workers’ wages.
- The employer has appropriately classified all workers.
- The employer has filed all the required reports.
- The employer has reported the payroll correctly.
Duration and Time Period of the Unemployment Insurance Audit
The general time period of the audit is one calendar year. If the audit reveals discrepancies, it may be expanded to additional years and the tax auditor may request that you provide records for those years. The duration or length of the audit will vary according to a number of factors, such as the size of the company and the number of employees, the availability of proper records, and the extent of issues discovered, if any. The date and time of the audit will be set by the auditor, and the audit may be conducted at the employer’s premises or at their accountant’s office with authorization.
Interfacing with the Auditor
The business owner (employer) is usually not required to be personally present during the audit. They can designate their authorized representative to work with the auditor on their behalf. The auditor may work with the employer’s accountant or another service provider as long as they are an active agent on the company’s UI tax account. In a situation where the agent is unable to answer any questions from the auditor, the employer should be accessible by phone to provide answers directly.
Types of Records Examined in the Audit Process
The employer should maintain proper payroll records and all the necessary documents that are essential to track payroll. All information to the auditor should be reported correctly. Employees and independent contracts should be classified correctly. Records that the auditors typically request in an audit year are listed below. Based on the tax auditor’s findings and review, they may ask for your additional records at the time of the unemployment insurance audit.
- IRS Forms 940, 941, 1096 and 1099
- Form W-2/W-3
- Income record of every employee
- Financial statements
- General ledger of accounts
- Tax returns pertaining to business income
- Journal of cash disbursement
- Petty cash account
- Payroll timesheets, journal, or register
- Bank statements
- Master vendor files or listing
- Corporate minutes
- Documents pertaining to non-payroll payments made, such as invoices, receipts, contracts, or certificates of insurance
- Any other records pertaining to payments made to individuals towards services performed
Verification of Employment, Unemployment Insurance Claims, and Human Resources Platforms
Automating the VOE Process
Quentelle helps employers save valuable time and cut down administrative costs regarding verification of employment (VOE) and unemployment insurance claims with the use of advanced technology. Quentelle uses VeriSafeJobs for automating your VOE and income verification requests to help ensure compliance.
Advantages of VeriSafeJobs for Automation
Data Security and Privacy
Features, such as at-rest E2E encryption, FCRA compliance, vulnerability assessment, SOC 1 & 2 and SAS 70 certification, and proactive screening of potential threats keep your data private and safe.
Simple and Smart UX
You can have a simple and smart user experience with a user-friendly interface, quick implementation, and advanced metrics and reporting.
Unparalleled Client Support
Your inquiries and concerns are addressed on time, every time, thanks to the excellent personnel training, experienced account management, and reliable support and service.
Securing WOTC Credits
Quentelle can provide your company with a streamlined solution that simplifies screening for WOTC (Work Opportunity Tax Credits). We do this through our partnership with Walton, which is a top technology provider for employment tax credits. Walton administers a proven and simple questionnaire during the employer’s process of hiring or on-boarding, which enables it to determine eligibility and seek Work Opportunity Tax Credits on your behalf.
When you implement the automated solutions from Walton, you will have the assurance that no effort is spared to optimize your tax savings. At the same time, your team will be free from this workload to focus on their core business activities. With this proven solution from Walton, you can pursue your hiring requirements while knowing that Quentelle will take charge to handle things efficiently behind the scenes.
ESD Issues
The Employment Security Department (ESD) is required to conduct annual compliance audits according to the guidelines of the US Department of Labor. If you are selected for an ESD audit, you will be contacted by the Department’s auditors to schedule a mutually convenient audit date. ESD will also send you a letter confirming the appointment along with a checklist for the required records and a pre-audit questionnaire.
What Does an ESD Audit Cover?
ESD auditors will conduct a number of functions during the audit, including:
- Seeking evidence of any unreported workers, independent contractors, casual workers, and other individuals providing personal labor.
- Comparing the sample time records and payroll with the wage and hours that have been reported to ESD.
- Reviewing the nature of business and whether you have been assigned the appropriate tax rate (if you are a new employer).
- Determining whether you have correctly reported independent contractors.
Documents Required in an ESD Audit
For an ESD audit, you may be required to provide employer’s records of the last three years (or more, if business practices are found to be suspect). Records typically reviewed in an ESD audit are:
- Business ownership licenses and documents
- Accounting, payroll, and employee time records
- Financial statements, bank records, general ledgers, and check registers
- Federal and state tax records (which include IRS 1099)
- Copies of invoices, contracts, and registration numbers of each independent contractor
- Opt-in forms for the corporate officer
Transforming Mortgage Lending with Quentelle’s Automated VOE Process
Choosing a professional automated system for verification of employment not only saves time for mortgage lenders to help them close more loans, it also improves compliance, saves on potential legal challenges, keeps customers satisfied thanks to faster loan approvals, and lowers the lender’s operational costs involved in employment verification with confidentiality.
Quentelle’s automated platform for verification of employment is designed to help mortgage providers put the borrower’s interests on top by streamlining the loan approval process. Home buyers are usually making the most important purchase of their life and fulfilling a dream to own a home. Quentelle is committed to empowering mortgage providers through its platform to make the home buying process more simplified and rewarding for everyone involved.
Advantages for mortgage providers with Quentelle include:
- Superior accuracy and reliability achieved throughout the verification of employment process.
- Reduction in loan origination time and expense is possible due to minimal friction with borrowers and employers.
- Possibility to close a higher number of mortgages within a shorter timeframe thanks to an efficient, automated VOE process.
- Higher scope for generating referrals because the faster and convenient automated verification process helps exceed customer expectations and drives greater satisfaction levels.
Quentelle – Your Dedicated Partner for VOE and More
When you need a professional service provider with the technology and expertise to perform verification of employment, handle unemployment insurance claims, and provide an automated platform for various critical human resource tasks, Quentelle is here to deliver outstanding services and solutions to you. Reach out to us to learn more about how we can help your company save precious time and money with our highly rated and services. To schedule a demo, call us at (888) 565-5515 or complete this online form.