An IRS form 4506T is form that a borrower signs when applying for a home loan. This form allows a Lender (Bank) to contact the IRS and request a copy of the tax payers tax return. Under Federal Law it has been mandatory for several years that a Lender (Bank) verify a borrowers tax return with the IRS by requesting a copy of the return. This is done with a completed and signed IRS form 4506. The reason being is that it is relatively easy to draft a false tax return showing higher income to qualify for a larger loan. In the hay day of the mortgage boom, Banks had borrowers sign the form, but to my knowledge only did spot check. Now a loan cannot close without that process being completed.
A big problem is that lender often do not request the transcript
till towards the end of the loan underwriting process. If the IRS flags a tax return for whatever
reason, it could be a long time till the IRS contact the tax payer to get
clarification of an issue. Till that happens the IRS will not verify a tax
return, this can hold up a loan closing for months.
There is a special division, separate from the main IRS, acting as
advocates for tax payers. In recent
transaction of mine, the tax payers return was flagged due to a question
regarding a dependent deduction. Even after many weeks numerous phone calls and
visits to a local IRS office nothing helped.
The Mortgage Banker Robert Valene of Choice Mortgage Bank Boca
Raton suggested that they contact Senator Marco Rubio and Senator Bill Nelson.
The borrowers contact both senators. My thanks go out to the office of Maroc
Rubio, they contacted the IRS and within 24 hours the special division of the
IRS had provided an Taxpayer Advocate. We are still waiting for Bill Nelson
office to call us. All said it took over 60 day to resolve the issue. My advised
is to stay on top of the IRS if they cannot find a transcript, can maybe contact
your senator within a couple of weeks of not being appointed a Tax Payer
Advocate.
Karl R Schulz
561-Three-Seven-Nine-7881
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