The Department of Housing and Urban Development is requiring FHA-approved lenders to pay their loan officers and their underwriting and servicing employees with W-2s as part of an update of the Federal Housing Administration handbook.FHA rules prohibit such employees from working for two or three other lenders. The requirement of W-2s means that loan officers cannot be independent contractors paid with 1099s. "Employees have to be true employees -- they can't be contractors," said Bud Carter, an FHA consultant with Potomac Partners in Washington. The newly issued handbook says that all compensation -- salary, commissions, and bonuses -- must be reported on the W-2. It is the first update of the FHA handbook since 1993.
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