U.S. Department of Housing and Urban Development

Office of Inspector General

451 7th St., S.W. 

 Washington, D.C. 20410-4500 

 

June 5, 2007 

MEMORANDUM FOR: Brian D. Montgomery, Assistant Secretary for Housing-Federal 

Housing Commissioner, H 

FROM: John P. McCarty, Assistant Inspector General for Investigation, GI 

SUBJECT: Social Security Number Validation for Single Family Loans 

 File: IED-06-0011 

 The Inspections and Evaluations Division conducts independent, objective 

examinations of Department of Housing and Urban Development (HUD) activities, 

programs, operations, or organizational issues. 

 We completed a limited review of social security number validation procedures used 

by lenders to qualify single family loans for FHA mortgage insurance. Prior to 2005, the use 

of invalid or false social security numbers (SSNs) by borrowers and co-borrowers to obtain 

FHA insured mortgages was an issue. Effective June 2005, FHA required the lenders to 

validate borrowers social security numbers by matching their names and dates of birth 

through FHA Connection. The FHA outlined specific procedures for the lenders to follow. 

 The objectives of our review were to determine: whether lenders are using the social 

security number validation procedures, if the procedures are working, and how lenders 

resolve validation failures. 

We determined that: 1) lenders were using the validation procedures and the 

procedures were working; 2) use of invalid SSNs and total loans originated by lenders, 

significantly decreased since HUD’s implementation of the revised validation procedures; 3) 

the findings reported in the Quality Assurance Division’s reviews of the mortgage companies 

on the use of invalid or false social security numbers has declined considerably; and 4) 

lenders properly resolved validation failures when the SSNs failed initial verification through 

FHA Connection.

BACKGROUND 

 Congress created the Federal Housing Administration (FHA) in 1934. The FHA became 

a part of the Department of Housing and Urban Development’s (HUD) Office of Housing in 

1965. The FHA provides mortgage insurance on loans made by FHA approved lenders 

throughout the United States and its territories. The FHA mortgage insurance provides a lender 
 

2

with protection against loses as the result of homeowners defaulting on their mortgage loans. 

The loans must meet certain requirements established by FHA to qualify for insurance. 

 HUD Handbook 4155.1, Mortgage Credit Analysis for Mortgage Insurance One to Four 

Family Properties, paragraph 3-1c, requires the lender to document a valid SSN for each 

borrower, co-borrower, and co-signer on the mortgage. The handbook allows lenders to use 

various means for validating the SSN including examining the borrower’s pay stubs, passport, 

valid tax returns, and they may use service providers including those with direct access to the 

Social Security Administration (SSA). The lender is also required to resolve any inconsistencies 

or multiple SSNs for individual borrowers that are revealed during loan processing and 

underwriting. 

 On May 24, 2005, HUD issued Mortgagee Letter 2005-27. The letter stated that the 

FHA began validating SSN with the borrowers name and date of birth beginning on June 18, 

2005. If the data elements do not match, the lender can correct any or all of the three data fields 

(date of birth, name and SSN) or if the lender believes the information fields are correct, may 

override the online validation, continue with all other data entries and the application will be 

placed in the “holds tracking” mode. An attempt will be made to verify the information 

overnight with the SSA’s database. If the information is still not validated the borrower may 

produce conclusive documentation that the SSA database is in error and the lender may supply 

the information to the jurisdictional Homeownership Center (HOC). If the HOC believes the 

information is correct, the HOC can issue a manual case number. 

 In FHA Connection, SSNs are validated through Pay.Gov. Pay.Gov enables lenders 

to authenticate borrower information, such as, name, SSN and date of birth in real-time. The 

verification service references government and commercial databases to confirm the 

authenticity of the information provided, such as ChoicePoint, eFunds, Equifax, RAF Crystal 

(a proprietary database containing postal data used to verify name, but not SSN), Telecheck, 

and ACER (an extract from the Federal payments database called PACER). FHA 

Connection is an Internet based system that allows FHA approved lenders to have real-time 

access to several of FHA’s systems for the purpose of originating and servicing FHA insured 

loans. Each lender employee is given his or her own identification and password to access 

the system. 

If borrower information is not validated, a warning is displayed on the SSN 

Validation Warning Report. The loan will not be endorsed unless all case warnings are 

remedied. The lender must submit documentation to the applicable HOC to validate the 

borrower’s failed SSN verification. It is the responsibility of the HOC to review and 

determine the adequacy of the documentation provided. Once verification is cleared, the 

HOC will override the SSN validation warning for loan endorsement. SSN Validation 

Warning Reports can be generated through FHA Connection. However, these reports only 

include SSN warnings for the past 13 months, by case number, lender identification and 

lender name. 
 

3

SCOPE AND METHODOLOGY 

 To achieve our objectives, we identified all loans originated in the Chicago and 

Denver Metropolitan areas during June 2004 through June 2006 through the Single Family 

Data Warehouse (SFDW). We compared the social security numbers and dates of birth of 

borrowers and co-borrowers of these loans to the SSN’s database, SSN Detect, to determine 

the trends in number of loans originated and invalid social security numbers for the twelvemonth period before June 2005 and the twelve- month period after June 2005. SSN Detect is 

a proprietary software application developed by Comserv, Inc. 

 We reviewed the reports of mortgage company reviews done by Atlanta and Denver 

HOCs in their regions from June 2004 to June 2006. This was done to determine the trends 

on findings regarding the use of invalid or false social security numbers. There were 22 

reports in Atlanta and 4 reports in Denver that included social security number findings. 

 To review whether the lenders were following HUD’s validation procedures, we 

extracted the loan origination data from the Single Family Data Warehouse for the 13-month 

period, October 21, 2005 to November 21, 2006. The number of loans originated and 

insured by HUD totaled 8,901 for Chicago and 7,730 for Denver. There were 186 loans with 

initial SSN validation failures for Chicago and 165 for Denver, for a total of 351. We 

determined that HUD endorsed 93 of 351 loans. We obtained and reviewed the case binders 

for these loans to verify whether the social security numbers were properly validated. 

 We contacted the Chicago and Denver HOCs’ Processing and Underwriting Branches 

to determine procedures established by HUD to ensure borrowers’ SSNs initially failing 

FHA Connection’s validation process are properly verified before HUD endorsement. 

 We contacted HUD’s contract staff at Advance Technology Systems to obtain 

information pertaining to FHA Connection’s Warning System relating to SSN number 

validations. We reviewed SSN Validation Reports. 

OBSERVATIONS 

OBSERVATION 1: Loans Originated and Invalid SSNs Declined 

We found that the loans endorsed by HUD and the number of invalid social security 

numbers for endorsed loans declined considerably, during the 12-month period after the 

implementation of the revised validation procedures. The rate of decline for endorsed loans 

was 28% for the Chicago area and 39% for the Denver area. Also, the rate of decline for 

invalid social security numbers was 88% for the Chicago and Denver areas. The following 

tables show the decrease since HUD’s implementation of the validation procedures in June 

2005. 
 

4

Chicago Metropolitan Area: 

Period 

Loans 

Endorsed 

Total 

SSNs 

Valid 

SSNs Invalid SSNs 

June 2004 – June 2005 9,225 19,667 19,543 124 

June 2005 – June 2006 6,610 13,013 12,998 15 

Denver Metropolitan Area: 

Period 

Loans 

Endorsed 

Total 

SSNs 

Valid 

SSNs Invalid SSNs 

June 2004 – June 2005 10,553 20,267 20,116 151 

June 2005 – June 2006 6,394 12,639 12,631 18 

OBSERVATION 2: Findings Regarding the Use of Invalid or False Social Security 

 Numbers Declined

 For the period June 2004 to June 2006, we reviewed the findings on the use of invalid or 

false social security numbers issued by the Atlanta and Denver HOCs after their reviews of the 

mortgage companies. The HOCs used AutoTrackXP, a subscriber based system, which cross 

references data, such as: addresses, driver’s license numbers, and SSN. The HOCs also used 

documentary evidence from individual borrowers. The Atlanta HOC issued 22 reports for the 

Chicago area and Denver issued 4 reports that included social security number findings. 

For 22 reports issued for Chicago, the Atlanta HOC, Quality Assurance Division, 

identified 93 loans in which the borrowers may have used invalid or false social security 

numbers. Eighty-six of 93 loans were endorsed before June 2005 and only seven were 

endorsed after June 2005. The validation issues for these seven loans included: borrowers’ 

use of various names, borrowers’ use of different SSNs, a pay stub with a different SSN, and 

a borrower and co-borrower using the same SSN. For Denver, 30 loans were identified in 

the reports as having social security number issues. All loans were endorsed prior to June 

2005. 

Since HUD’s implementation of its revised SSN validation procedures, it appears that 

reported borrower use of invalid or false SSNs as evidenced by the Quality Assurance 

Division’s review of the mortgage companies has significantly declined. 

OBSERVATION 3: Proper Validation of Initial SSN Validation Failure 

 For the past 13 months, November 21, 2005 to November 21, 2006, there were 186 

loans (out of 8,901 endorsed) with SSN Validation warnings in the Chicago area and 165 

loans (out of 7,730 endorsed) with warnings in the Denver area. HUD endorsed 50 of the 

186 Chicago loans and 43 of the 165 Denver loans. 
 

5

We reviewed 40 of the 50 loan files for Chicago, and 32 of the 43 loan files for 

Denver. For the Chicago area, we found social security numbers were properly verified and 

documented for 37 loans. We could not find documentation in the files for three loans. For 

the Denver area, we found social security numbers were properly verified and documented 

for 24 loans. We could not find documentation in the files for 8 loans. We verified the SSNs 

in AutoTrackXP for the loans in which validation documentation was not found. No 

discrepancies were noted. It appears that the lenders and the HOCs properly validated those 

SSNs failing initial validation through FHA Connection. 

Recommendations 

We recommend that the Assistant Secretary for Housing require HUD and the lenders to: 

1. maintain documentation in the loan files supporting the Social Security Number 

validations. 

ACKNOWLEDGEMENTS 

The report was prepared under the direction of Ruth A. Ritzema, Deputy Assistant 

Inspector General for Inspections and Evaluations, Office of Inspections. 

The assignment was supervised by Michael Groszkiewicz, Special Agent in Charge, 

Inspections and Evaluations Division, Office of Investigation. 

The following field staff persons worked on the assignment and report: 

Muhammad M. Akhtar, Supervisory Forensic Auditor 

Jacqueline Billmeyer, Senior Forensic Auditor 

Anne-Marie Vanderberg, Senior Forensic Auditor