Why We Need a Request for Transcript of Tax Return, 4506-T

In recent years there has been a significant upsurge in first payment defaults and defaults in general, on mortgages. It is presumed that the reason for this increase in defaulted mortgages is the excessive use of “stated income” on the mortgage application. One of the most potent preventers of fraudulently overstating income on a mortgage application is the use of the IRS from 4506-T. This form is for the protection of the, broker, lender, loan officer, etc., and helps them confirm, to the best of their ability, that a borrower has sufficient income to repay the mortgage. The major documentation gathered at the time of application are W-2's, pay stubs, and tax returns. The 4506-T can be used by the lender/servicer to confirm that the income documentation is true; that it is not fraudulently overstated. The 4506-T is also included with every securitized mortgage file even if the lender doesn't pull it so that in the event there is a first payment default, the lender/servicer can require the company and/or the originator to buyback the mortgage if the income was overstated. Lastly, the 4506-T is required for the auditing process. Should the file be tagged as a potentially predatory loan such as high cost, rate, or high rate adjustments, the tax returns may be secured, via the authority of the 4506-T, which then may prove or disprove the assertion that the mortgage is predatory.

At 1^st Metropolitan Mortgage we are required to provide a 4506-T with every file submitted to underwriting. Generally speaking, in today’s mortgage world, the only people who don’t care about a 4506-T are Hard Money Lenders, who keep their LTV low and their rates high.

If you have questions, just call Dave Skibowski at