Verifying Jobs Using Paystubs

Written by Erik Whitton, Spectrum Enterprises

In August 2013 HUD released an update to the 4350.3 handbook used to define income for Section 42 LIHTC housing.  As it has now been almost a year since these changes we are seeing some noteworthy industry trends.  For instance, in June 2013 there was only 1 state (Texas) which allowed property manager to use applicant-provided paystubs to verify employment instead of contacting the employer directly for a completed Employment Verification form.  A year later (June 2014) we can now add Illinois, Georgia, Virginia, and Minnesota to that list.  I am curious to see whether more states will allow this in the coming months.

For property managers this is a big deal.  And it is a deeply polarizing concept.  I have heard many strong opinions both in favor of – and against – the allowed use of pay stubs instead of requiring 3rd party forms.

Many people in favor of this practice argue that pay stubs are more accurate in reflecting true income for applicants and tenants. Managers feel this provides better discretion on who is qualified and who is not.

An additional argument is that more and more employers do not cooperate with the request for verification.  This can slow down the process of a manager trying to lease available units.  By allowing applicants to bring pay stubs to document their income it allows them to secure housing quicker.  This benefits both the property and the family.

Many of the arguments against the allowed use of pay stubs to verify income are based on the fact that the definition of income we are required to use in certifying low income families is anticipated income for the 12 month period following move in.  Pay stubs look backwards.  They don’t reflect possible promotions, year end bonuses, raises, or seasonal shifts in scheduled work (i.e. holiday retail jobs).

Regardless of how you feel it is important to consider all points of view.  It is even more important to make sure your company has a set written policy on how to verify jobs using pay stubs.  Although your state might not currently allow this, it is possible that will change.  And it is likely you are already encountering situations where employers won’t cooperate with your verification request so you are forced to use pay stubs.  Make sure your company policy is very clear on how many pay stubs are required.  Make sure the policy shows exactly how to do the math once you collect the pay stubs.  Finally make sure all staff is fully trained on this to ensure a consistent approach.

Here is a link to a useful example.  It is not a management company procedure but instead a state agency staff document.  In California, managers are required to obtain 3rd party verification along with 3 months of pay stubs.  They have prepared this document to show managers exactly how their staff will be computing income when reviewing files:

http://www.treasurer.ca.gov/ctcac/compliance/incomeexercise.pdf

 

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