Ethical obligation: should company verify employment for mortgage if employee will be laid off in near future?
![[Post New]](/jforum/templates/default/images/icon_minipost_new.gif){kind=icon}
Anonymous
|
Let's say a person is in contract to buy a home, they are excited and ready get a mortgage.
Part of the mortgage process is for the lender to confirm employment. This typically happens twice - once during the initial underwriting and then again just prior to closing. Let's say that a company intends to lay off or fire the employee in the next few months, but the employee is unaware of this. What is the ethical and legal obligation of the company to the employee and the lender? If the employee knew he was losing his job, he would likely hold back on buying the home. Purchasing a new home and then subsequently losing your job put you at a high risk of foreclosure and potentially losing your downpayment equity. Has anyone ever run into a similar situation? What usually happens? If I was the employee, I would want to know so I could pull out of the deal and conserve my downpayment monies. |
Anonymous
|
I know everyone doesn’t do this, but to me this should be factored into the calculations of whether you can truly afford a home.
If after down payment, moving expenses, etc, you have no cash— then you can’t afford it. That’s what a 3-6 month emergency fund (and in this economy and depending on if there is another earner in the house, perhaps 9 months ‘) is for: so you can weather things like job losses. You don’t know the employees finances. The bank is actually going to have a better picture than the employer and they are looking at other assets not just employment. I say you verify based on present information. |
Anonymous
|
If I was an employee I would be doing my due diligence about the health of my company and job before buying.
But most companies will not do more than confirm employment. They don’t owe anyone more than that. It is on both bank and employee to figure out the rest, and for good reason. Many times we have planned to terminate an employee and those plans have changed before we actually did it (such as a different employee left so we could shift that employer to cover some of that work, etc.). The employee would never know they were being considered for termination. I’ve put together termination packets before that didn’t end up being used. |
Anonymous
| Situation sounds weird. Why would any company keep an employee for months if they already have decided to lay them off? Companies usually just lay the person off, and pay for one pay period beyond the layoff date (in lieu of giving WARN Act's advance notice). |
Anonymous
|
Most mortgage companies probably assume any employment if you have it is likely to be flaky.
I managed to pay my 15y off in ten even though I had no less than six or seven(#6 and #7 were the same job different staffing agency) different jobs in that period. It amazes me how employers pull stuff on employees, then they trust each other. |
Anonymous
Restructuring a company takes a while. They need to know how many people they will need to keep post-restructuring to continue core functions and lines of business. It's not uncommon for folks in white collar services to be told that they will be laid off in the New Year, but we need you these X months to finish Y projects/objectives. They make severance contingent on completion of certain tasks. In the meantime, they expect you to apply for new jobs and - best case scenario - you land a new job before the layoff date so the company does not need to pay severance and unemployment. |
Anonymous
| Any home buyer should have a plan for affording the mortgage during a lapse of income. |
Anonymous
| The question is whether the person is employed. Not if they are going to remain there for X amount of time. The company should and would say yes. |
Anonymous
|
Some VOE statements are forward looking. Eg, likelihood of bonuses continuing, expected next pay increase.
Providing false information to a lender can result in substantial civil liability even for what many would consider minor mistruths; however, I’ve never heard of liability extending to a false statement from a legitimate employer on a VOE. |
Anonymous
the ethical thing to do would be to tell the employee he will be let go in x date. |
Anonymous
+1 Signed, Employment Attorney |
Anonymous
This. There are plenty of instances where an employee may have been on the chopping block, but maybe another employee decided to leave so that initial employee is no longer at risk. Or the company decides not to lay off after all. I have a Fed friend who has been on the chopping block since the inauguration, but still has a job 11 months later. |
Anonymous
|
Honestly only in a relocation sense. My buddy got a job Freddie Mac from NY. He did commute first few months then bought a house. In interim he got a new boss who planned to fire him as wanted his own guy. Day after closing he was fired. Carrying two houses. He never moved in and house was sold.
Hr should of fired him quicker |