Major lenders are relaxing their policies with respect to buying loans from their correspondent lenders during the government shutdown.
The shutdown has created problems for lenders because the Internal Revenue Service has stopped processing 4506-T forms, which are used to verify the borrower’s income and other tax information.
Wells Fargo Home Mortgage and Chase Home Mortgage originally informed lenders they would not accept loans that didn’t include an IRS-processed 4506-T form in the loan file.
A Wells Fargo spokesman said according to new guidance, the nation’s largest lender has waived the processing requirement. However, loan officers must get the borrower to sign the IRS 4506-T form so it can be processed when the government shutdown ends.
Mortgage Network executive vice president Brian Koss said
Chase is also loosening its policy with regard to IRS 4506-Ts, according to bank officials. Retroactive to Oct. 1, Chase will buy loans from its correspondent lenders without an IRS transcript. On a temporary basis, the giant bank will only require a 4506-T form that has been signed by the borrower.
Lenders rely on IRS transcripts to protect themselves from the buyback risk. So the primary lenders are the ones that take the buyback risk when they sell a loan that doesn’t have an IRS-processed 4506-T form.
