Government Greases the Wheel. Finally. - Blown Mortgage

Government Greases the Wheel. Finally.

News flash (and it is really a news flash): the federal government is stepping into the 21st Century but not until after the first of the year. Hey, it’s a start.

As mortgage loan and loan modification applications are reviewed by lenders, one vexing bit of paperwork has always been the IRS form 4506-T. This form, signed by the borrowers, allows the lender to independently request and review federal tax returns directly from the IRS. Lenders want to do that because, well, sometimes tax returns provided by the borrower don’t quite match up to the returns filed with the federal government. The problem with this form is it required live, wet signatures from the borrowers who then provide the signed form to the lender. The lender faxes the form to the IRS and waits. And waits. And sometimes waits some more. This process of faxing and waiting have held up many a home loan application, sometimes pushing the loan approval past the scheduled closing date.

Beginning January 7, 2013, the IRS will accept an electronic version of the request. This means the lender can receive tax return validation almost immediately and not have to wait for the faxed reply. Many consumers won’t notice the difference unless their loan has been delayed due to government sloth, but lenders will notice the effect immediately. The 4506-T form is the only document required in a loan file that has not approved electronic signatures.

Welcome to the brave new digital age, Mr. IRS! A few years late, but hey, who’s counting?

David Reed

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