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Archive for October 12th, 2009

New IRS form lets loan officers see your IRS income info — twice

     Are you going to be applying for a mortgage anytime soon?  Here’s something you need to know:
     Your loan officer may ask you to sign IRS Form 4506-T. If you do, you will authorize the loan officer to get IRS electronic transcripts of your federal income tax filings.
     This may not seem like anything terribly new — the IRS has been giving lenders tax-return info for years. In the past, however, that information wasn’t requested until settlement, and it usually was requested only in the case of people who were self-employed.
     What’s changed is that Fannie Mae is working harder to spot fraudulent claims of income, and to limit losses from bad loans. So… Fannie Mae now wants lenders to get two sets of electronic IRS transcripts for all borrowers, no matter what their sources of income are.
     One copy is pulled at the time of the application, while the other gets requested before the closing.
     All of this seems to be a response to the old “stated income” or “no-doc” loans, in which borrowers were asked to simply say what their incomes were without providing any evidence. Some people inflated their incomes, and a percentage of those loans went bad when the market deflated.
     Because of all that, Fannie Mae (and other lenders) are tightening up their requirements, and IRS Form  4506-T is one of the consequences. Lenders now want to verify those income claims — not once, but twice.
     Remember, you need to take this form seriously when the loan officer puts it in front of you. Make sure that the information you provide is accurate, and make sure the years you specify are the years you actually want the loan officer to see.
     You are going to see a request for a Form 4506-T request twice during the mortgage loan application process, so be ready for that, too.
     If you would like to see a copy of the form before the loan officer actually presents it to you, you can get one on the IRS Web site, which is http://www.irs.gov