No, the ATR rules do not require you to call an applicant's employer to verify employment status or income. Using an employer's website may not be sufficient to verify employment status, but it may be relied on together with other documentation of an applicant's employment status. The ATR rules also apply to a self-employed applicant, but the types of documentation obtained may differ. For example, the rules suggest that a profit-and-loss statement reviewed by an accountant may be used to verify a self-employed applicant's income.

Verifying Employment Status

To verify an applicant's employment status for purposes of the ATR rules, any “reasonably reliable third-party records” will suffice. (Note that these rules differ from the more stringent Qualified Mortgage” requirements.) The ATR rules specifically permit creditors to verify an applicant's employment status orally as an alternative to obtaining third party records, but oral verification of employment is not required.

We have confirmed with a CFPB attorney that pay stubs and tax returns may be used as reasonably reliable third-party records to verify employment status, unless those records include indicators that the employment relationship is going to terminate or that the applicant is an independent contractor rather than an employee (such indicators would include the absence of payroll deductions for social security, health insurance, and other taxes or benefits that would be consistent with an employment relationship).

If an employer maintains a website that lists specific individuals as employees, that may be indicative of an employment relationship. However, we would not advise solely reling on a website, which could be out of date and might not distinguish between independent contractors and employees (in other words, the website may not be viewed as being “reasonably reliable”). We would recommend obtaining other documentation to verify employment, such as pay stubs and tax returns, and using an employer's website only as a backstop.

Verifying Income

Verifying income is a simpler matter for purposes of the ATR rules, which specifically state that a tax return transcript will suffice. Other examples of documents that can be relied on when verifying income include state tax returns and W-2 forms.

These documents also may be used to verify a self-employed applicant's income for purposes of the ATR rules. In addition, the Official Staff Commentary on the rules suggest that you may use a profit-and-loss statement that has been reviewed by an accountant for a self-employed applicant. (Again, we note that these rules differ from the more stringent QM requirements and Appendix Q's verification procedures for self-employed applicants.)

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.43(c)(3) (a creditor must verify the information used to determine a borrower’s repayment ability using “reasonably reliable third-party records . . . .”)
• Regulation Z, 12 CFR 1026.43(c)(4) (“a creditor may verify the consumer’s income using a tax-return transcript issued by the Internal Revenue Service (IRS). Examples of other records the creditor may use to verify the consumer’s income or assets include: (i) Copies of tax returns the consumer filed with the IRS or a State taxing authority; (ii) IRS Form W-2s or similar IRS forms used for reporting wages or tax withholding . . . .”)
• Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 43(c)(4), Comment 3 (“a creditor may verify a consumer’s income using an Internal Revenue Service (IRS) tax-return transcript, which summarizes the information in a consumer’s filed tax return, another record that provides reasonably reliable evidence of the consumer’s income, or both.”)
• Regulation Z, Official Interpretations, 12 CFR 1026, Paragraph 43(b)(13)(i), Comment 1 (“For example, a profit-and-loss statement prepared by a self-employed consumer and reviewed by a third-party accountant is a third-party record under § 1026.43(b)(13)(i).”)