Lenders to Treasury: Allow alternative to IRS income verification
WASHINGTON — To prevent a slowdown in mortgage application processing due to problems with the Internal Revenue Service's income verification system, an industry group is urging the Treasury Department to allow lenders and servicers to use an alternative.
Problems with the IRS-managed Income Verification Express System, or IVES, have stoked concerns about delayed mortgage closings when volume picks up this spring.
The Consumer Mortgage Coalition wants the Treasury Department to allow mortgage lenders to access the National Directory of New Hires that is maintained by the Department of Health and Human Services to compensate for flaws with the IRS verification system.
This proposal would enable qualified mortgage lenders “to pull the current and past year's income information only from the NDNH database and transmit the information in an encrypted format” to Fannie Mae and Freddie Mac's underwriting systems, according to a Jan. 31 letter that Anne Canfield, executive director of the coalition, sent to Treasury Secretary Steven Mnuchin and acting IRS Commissioner David Kautter.
"Unlike the IVES system, the NDNH database also has current year income information to the past quarter, so underwriters would be able to verify mortgage applicants' current and past year's income within seconds," Canfield wrote.
"We would like to stress that the information pulled from the National Directory of New Hires database would be limited solely to verifying the mortgage applicant's income and only with the consumer's signed consent."
Canfield also noted that many people in today's economy have multiple jobs and sources of income.
"Allowing a lender to verify the applicant's consistent forms of income through the NDNH database will help to responsibly expand the credit box, thus enabling more first-time, low-to-moderate-income borrowers to become homeowners," she said.
The Consumer Mortgage Coalition is also urging the Treasury Department to request funding from Congress so the IRS can upgrade its "antiquated" IVES system.