The Taxpayer First Act was signed into law on July 1, 2019. The act includes a provision that persons receiving tax return information must obtain the express permission of taxpayers prior to disclosing that return information to any other person. Due to the law, if a lender or a servicer obtains tax return information during the origination or servicing of a mortgage loan, the lender or servicer must obtain express consent from the taxpayer to be able to share the tax information with another party. The sharing of the tax information would include the actual or potential future owners of the loan, such as Gateway, Fannie Mae, Freddie Mac, etc. The IRS has indicated it has no plans at this time to provide a standard form related to disclosing or sharing tax return information with other parties. However, the Mortgage Industry Standards Maintenance Organization (MISMO) drafted a sample Taxpayer Consent Form designed to allow seller/servicers to share tax return information with other loan participants. This form is available to both MISMO and non-MISMO members on their website. Sellers may also prepare their own taxpayer consent form, as long as the form provides the seller with express permission to share tax return information in accordance with the law. Effective with notes dated on or after 12/28/19, Gateway will require all closed loan files to have this permission in order for the loan to be purchased. Please direct any questions to your Regional Sales Manager
As part of the Taxpayer First Act that was passed into law earlier this year on July 1, 2019, a lender who obtains a borrower’s tax transcript during the origination process must obtain the borrower’s consent to share that information with any other party, including an investor to whom the loan is sold. The part of the law requiring the specific consent of the borrower to share their tax information, Section 2202 of the Act, becomes effective December 28, 2019. The IRS has indicated they will not provide any prescribed consent language to which a borrower must agree to allow sharing of their information. Accordingly, it is the responsibility of each lender to ensure sufficient consent is obtained to share tax information. As an assistance to the industry for its members, the Mortgage Industry Standards Maintenance Organization, established an industry workgroup to develop appropriate consent language. The MBA and MISMO announced that language was available for comment beginning August 19, 2019. The MBA and MISMO announced finalization of that language November 8, 2019, making the language available for use by the industry. On November 6, 2019, FNMA and FHLMC posted a notice to their websites indicating their requirement that any loan that is sold to or securitized by FNMA or FHLMC on or after December 28, 2019, must have obtained the borrower’s consent to share their tax information with FNMA or FHLMC as appropriate. This would require lenders to obtain consent for loans that are closed before the December 28, 2019, effective date of the provision of the Taxpayer First Act, or to obtain that consent after a loan has closed. DocMagic is making available a disclosure that provides the MISMO-created consent language. DocMagic will be adding this new form, called the “Borrower Consent to the Use of Tax Return Information” (DocMagic Form ID: BCUTRI.MSC), to all Closing and Initial packages (the same packages which currently include the 4506-T) on November 14th. The form is available now to add to additional packages if clients wish to do so, or for clients to review. If you have any questions or to add the form to any packages, please contact DocMagic’s Customer Service.
By Chris Gonzalez On June 1, 2019, the Taxpayer First Act was passed into law to help improve and modernize the IRS. Among other provisions, the new law impacts the ability of lenders and third parties to receive official tax information. For financial institutions that sell loans on the secondary market or have external parties review underwriting in which tax returns and/or tax transcripts are obtained from the IRS, the act requires borrowers to consent to the sharing of their tax information effective December 28, 2019. Section 2202 of the act states: “Persons designated by the taxpayer under this subsection to receive return information shall not use the information for any purpose other than the express purpose for which consent was granted and shall not disclose return information to any other person without the express permission of, or request by, the taxpayer.” Prior to the change, only Form 4506-T was needed to disclose tax return information to third parties. Now a separate disclosure consent must be executed by the borrower, and the responsibility falls on the lender to comply with these new requirements. The new disclosure consent requirements were enacted to protect taxpayers’ confidential information from being wrongfully disclosed. Secondary market investors have referred financial institutions to the Mortgage Industry Standards Maintenance Organization (MISMO®) for model language for the consent. In summary, if financial institutions obtain and use tax return and/or tax transcript information to underwrite a loan, they must obtain express consent from the borrower to share that information with third parties (e.g., FNMA, FHLMC, FHLB, external auditors). Since any loan selected for post-closing quality control review requires evaluation of the tax transcript, not having consent from the borrower would prohibit the investor or any third-party auditor from reviewing the tax returns and/or tax transcripts during post-closing quality control. As a result, the file would not comply with post-closing quality control requirements. For this reason, we strongly encourage you to implement procedures to have a signed borrower consent form in all loan files. |
Borrower consent to the use of tax return information Mortgage pdf
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