Verification Nightmares

Verification IRS says use the HUD Handbook However Theallocating agency can make stricter requirements

CTCAC VERIFICATIONREQUIREMENTS Income of every prospective occupant over 18 Head, spouse or cohead – no matter what ageUnearned income from persons under 18 SocialSecurity, etc.

CTCAC VERIFICATIONREQUIREMENTSAll regular income including income from assetsmust be verified Verifications must be received prior to executionof TIC and move-in Verifications must contain complete anddetailed information At a minimum Directwritten verification from all sources of regularincome and income from assets Owner’s burden to perform due diligence

CTCAC VERIFICATIONREQUIREMENTS Information that is not verifiable or unclear Maybe questioned by CTCAC during an audit Mayresult in reportable noncompliance to IRS

How Old Can Verifications Be? Effective Term of Verification Third-partyverifications Valid Iffor 120 days prior to move-inafter 120 days Newwritten verification must be obtained

Methods of Verification Written Verification Written,third party verification is required

Methods of Verification Income verification State reason for request Release statement signed and dated by prospective tenant Section for third-party source to state Hire date Current anticipated gross annual income or rate of pay Number of hours worked YTD including when annual pay period began Frequency of pay Bonuses, tips, commissions, other additional income sources Uniform allowance or mileage must be included Spaces available for a signature, job title, phone number, and date Probability and effective date of any increase during next 12 months

Methods of Verification CTCACrequires three months of consecutivepay stubs at initial move-in on addition to theVerification of Employment (VOE) for wageearners only

Methods of Verification For tenants with less than 3 months pay stubsdue to recently starting a job CTCACwill allow paystubs issued prior to move-ininstead of full three months as long as: Totalincome calculation on both the VOE and paystub(s) isless than 75% of maximum limit There Ais at least one full pay period accounted forsingle partial pay period will not be accepted

For tenants where pay stubs issued prior to move-in showan income that is lower than maximum limit, but greaterthan 75% threshold noted on previous slide, CTCAC willdefer owner to determine if they want to move inapplicant and continue to collect additional paystubsuntil a total of three months of stubs have been received If pay stubs obtained after move-in show income over limit forany deeper targeted unit (30%, 40%, etc.) but below maximumfederal limit (50% or 60%), CTCAC will not issue negative points orfines as long as owner meets deeper targeting requirement withnext available unit For households that exceed federal threshold, CTCAC will reportunit as over-income to IRS on Form 8823 during federalcompliance period or issue either negative points or fine afterfederal compliance period

Methods of Verification If applicant is returning from a medical,maternity/paternity, or disability leave into thesame job and Verification of Employment (VOE)clearly indicates they were continuouslyemployed during their leave period CTCACwill accept a lesser amount of paystubs or aW-2 as long as paystub income provided reflectswage amounts noted on VOE

Negative Verifications CTCAC only requires Negative Verificationswhen documentation in file indicates theapplicant may have had additional income asof move-in date Orannual recertification date in mixed use properties

The Work Number and otherEmployment Verification Services At initial move-in, CTCAC requires all tenant filesmust contain 3rd party verification for all wageearners Verification of Employment (VOE) along with pay stubsFor applicants whose wage earnings can only beverified via The Work Number or another third partyemployment verification service Ownermay pass on cost of verification to applicant For projects layered with HUD and tax credits, ownermust pay for the cost to obtain The Work Numberverification for the file and include the required 3months of pay-stubs as well

Self Employment CTCAC looks for the following information Previous IRSYear’s 1040 Tax Return and Schedule C OR:Form 4506-T and one of the following: Profitand Loss Statement Statementsfrom recurring clients

Income from Uber or Lyft Self Employment They get statements

Day Labor CTCAC will accept a Self-Certification of Wagesfrom tenant

Cash Wages If the tenant is claiming they do not receive paystubs and are paid in cash, CTCAC will require acopy of the 1040 filing for the tenant and a thirdparty statement from the employer on companyletterhead, indicating Nameof tenant Position title How much employer pays tenant in cash each week If household is claiming they do not file taxes,CTCAC will require a completed IRS form 4506-T,received back from the IRS, to be in the file, inaddition to third party statement from employer

Farm Labor To determine income eligibility for farm laborcommunities, CTCAC strongly suggestsimplementing the following: Maintaina spreadsheet tracking growing seasons offarms in area Obtain completed VOE showing Lay off period(required) Obtain payroll printout, in addition to piece countpaystubs, that shows gross amounts earned per payperiod Mustinclude at minimum Name of applicant/tenant Farm they work for Pay rate of employee

Social Security and SupplementalSecurity Income CTCAC will accept current year’s Social SecurityAward letter for regular Social Security Mostcurrent verification letter dated within 120 daysfor SSI

EDD and AFDC/TANF CTCAC will accept award letter for AFDC/TANFand/or EDD/Unemployment payments datedwithin 120 days of move-in effective date

Pensions, Annuity Payments, or anyother form of recurring payment CTCAC will accept a formal statement/letter oraward letter from entity providing payment

Gifts CTCAC will accept signed and dated statementfrom person providing gift indicating Amountand frequency of gift Updatedstatement must be in file at each annualrecertification

Methods of Verification Verbal Verification Verbalverification of income and assets will not bepermitted by CTCAC Verbaltelephone clarifications of existing writtendocumentation will be allowed for minor issuesrelating to dates or blanks Ifverbal clarification would reduce incomecalculation, third party clarification must be obtained

Methods of Verification Verification must be sent directly to source ofincome and returned by source to owner/agentUnder no circumstances should applicant/residentbe allowed to send or deliver verification form tothird party sourceSuggested self-addressed, stamped envelope beincludedAll verifications should be date stamped as they arereceived CTCACwill determine time validity of verificationbased on when the source of income signed anddated the verification 120 days

Discrepancies in Reported Income Should give applicant opportunity to explainsignificant differences between amountsreported on application and amounts reportedon third-party verifications in order to determineactual income Discrepanciesnoted between the VOE and thepaystubs may require third party clarification

Methods of Verification Third party verification of assets is required whencombined value of assets exceeds 5,000 Owners will not have to obtain third-partyverification of income from assets if tenantsubmits a signed, sworn statement that value ofcombined assets is less than 5,000 Tenant’s income from net household assets thatare less than 5,000 must be included incalculation of annual income

Foreclosure CTCAC will require copies of final foreclosuredocuments Noticesof Foreclosure will not be accepted as validdocumentation

Short Sale If there is a difference in the sale in favor oftenant it must be 3rd party verified if it is over 5000 Documentation that is required in the file is 1099-Cshowing amount and final debt forgiveness Or Iftenant has not received 1099-C, followinginformation needs to be 3rd party verified: MarketValue (as determined by bank and tenant agreeingto a transaction Minus Minuscosts of Transaction (commission, closing costs, etc.)Loan Balance owed on Property Equity / CashProceeds from Transaction

Reverse Mortgages Need to obtain 3rd party verification fromlending institution stating applicant does notneed to live in home full-time Ifverification shows applicant can live outside homewith reverse mortgage, income from reversemortgage is considered an asset To determine value of house, subtract principalbalance due on reverse mortgage from home’smarket value

Electronic Banking Cards If over 5000, a statement or receipt

Assets in another country

No income Zero-Income Certification form, stating how theywill be paying rent and/or other bills Note- If no tenant in household is earning wages norhas a different source of income, CTCAC will questionhow bills are being paid Ananticipated wage statement will not be sufficientdocumentation as there is no guarantee of wages

What happens when information is foundduring that annual recertification that was notprovided the prior year?