Don't Get Tricked by the 4506

Don't Get Tricked by the 4506

 

What better time of year than Halloween to talk about being tricked?  One of the ways unsuspecting borrowers can fall prey to one of the worst tricks in the mortgage business is to run into issues with IRS Form 4506T.  This form, which can be found HERE, allows a third party, such as a mortgage lender, to request a transcript of your tax return. 

 

And request it we will!  Any time we have a "fully documented" loan, which is the vast majority of cases, we'll make sure that what the borrower shows us on his tax returns is the same information provided to the IRS.  The 4506-T will be sent from the lender to the IRS and the transcript that comes back permits the lender to, line by line, make sure that what we are using for credit approval is exactly what the IRS processed for that year's return.

 

Why does this matter?  Your curious mind might think, "Aha! We'll catch those who hope to defraud us!"  However this is, fortunately, the extreme minority of cases.  Mortgage fraud does occur and it's always serious, but more often than not, discrepancies between the 4506 and the actual tax return are honest mistakes.  For example, a CPA prepares a borrower's return and provides a draft to his client.  The client/borrower keeps a copy of the draft but then revisions are made and, ultimately, the CPA files the revised return.  Two years later, a lender asks for the borrower's returns and, shuffling through boxes of paperwork, the borrower uncovers the draft return and provides it to the lender.  All is well in the underwriting process until the 4506-T comes back from the IRS and doesn't exactly match the return provided.

 

So again, all intents of committing fraud aside, this is the dastardly trick that we work to prevent befalling our clients.  Where a purchase contract is on the line and time is of the essence, the last partner we want in our transaction is the IRS.  Waiting on them is a no-man's-land in which none of us wish to be found.  So be advised, make sure the tax returns you provide to your lender are the exact same ones that were filed and of course, do your best to provide these UP FRONT.  It goes a long way to cementing the treat of a smooth and timely close of escrow.

 

 

Lastly, before I lurch off into the night, we still do offer a loan program that does not require a 4506-T.  It's a non-QM loan and uses a borrower's assets for the qualification.  No tax returns are required.  So if you find yourself in the traditional mortgage graveyard, give me a call before the sun comes up.

 

'Cause this is thriller, 

 

 

Robert J. Spinosa
Executive Loan Advisor
NMLS: 22343 
Cell/Text: 415-367-5959 Fax: 415-366-1590
rspinosa@rpm-mtg.com    www.rpm-mtg.com/rspinosa 
1058 Redwood Highway, Frontage Road, Mill Valley, CA 94941

 

LendUS, LLC dba RPM Mortgage NMLS #1938   Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act.