Effective January 7, 2013, the Internal Revenue Service (IRS) will begin accepting electronically-signed 4506-T and 4506-EZ documents, which are the income verification forms that are part of the processing of most all mortgages and loan modifications. Currently, signatures on these “request for transcript of tax return” forms are required to be original wet- ink signatures. Because of this existing requirement, mortgage lenders and consumers have traditionally experienced delays in the mortgage loan process as a lengthy period of time elapsed between the request for transcripts being submitted to the IRS and the lender’s actual receipt of the transcripts, which are used to vet a borrower’s ability to pay off a loan, as well as to protect from fraud.
In order to take advantage of this new methodology, lenders must be current participants of, or may register to participate in the IRS’s Income Verification Express Service (IVES). Through this service, the IRS charges $2 per transcript, and lenders often hire third-party vendors to handle the IVES income verification process. The new IRS rule won’t necessarily lead to the development of new technology, but will allow existing electronic signature technology to be used to execute income verification, and will open the door to broader use of electronic signatures to transmit documents between borrowers and lenders, which can speed processing since the parties don’t have to be in the same location to sign documents. Broader use of electronic images can save closing time, and may also improve accuracy, since all parties typically will access the documents from the same centralized location online for viewing and for electronic signatures. For more information on the electronic signature requirements, please click here.