The IRS has announced a temporary suspension of their Income Verification Express Service (IVES) due to their COVID-19 procedures. IVES is used by mortgage vendors to obtain IRS transcripts. It appears that orders placed on and prior to March 26, 2020 will continue to be processed by the IRS, albeit with significant delays, and it is unclear when orders placed on and after March 27, 2020 will be processed.
During this time, CMS will follow our Government shutdown policy for all loan products with the exception of USDA, Chase Jumbo and Non-Agency. Please note: This bulletin has been updated with additional FHA guidance. The changes are show in red font.
Internal Revenue Service (IRS)
In the event a shutdown impacts the IRS issuing tax return transcripts the following guidance is applicable:
Refer to the product specific underwriting guidelines for detailed requirements.
As a reminder, CMS has the following policies related to IRS transcripts:
USDA – Updated 04/03/2020
USDA requires the lender to independently obtain two years of transcripts for all adult household members prior to loan closing.
However, in the event transcripts are not available from the IRS, USDA will permit the loan to proceed to closing when the lender documents their correspondence to and from the IRS in the loan file. CMS will permit USDA loans to proceed to closing with the following documentation:
All supporting documentation must be contained in the loan file.
As a reminder, transcript results received with a “no record of return” or similar message are not acceptable if tax returns were required based on income type. The underwriter must review deposits on bank statements for all adult household members to verify all sources of income are considered in the annual income analysis.
As a reminder, CMS is not currently accepting new submissions or locks of non-agency loans.
For existing locked loans, the following products require verification of all full doc and 1-year alt doc income types using IRS transcripts:
IRS transcripts are not required for Carrington Investor Advantage and borrowers qualified using 12- or 24-months bank statements.
FHA, VA, Fannie Mae, & Freddie Mac
CMS does not require IRS transcripts to validate income for FHA, VA, Fannie Mae, or Freddie Mac loans.
Underwriters may request IRS transcripts under circumstances such verifying recently-filed tax returns used for qualifying, the filing of amended tax returns, or when inconsistencies are revealed with income documentation during the underwriting process. The following may be used as alternatives:
To evidence 2019 returns are filed:
To verify amended returns:
When inconsistencies are revealed during the underwriting process, Underwriting Supervisors and Managers will continue to use the “Request Suspicious Activity Review” function in Encompass so that QC may review on a case-by-case basis.
FHA – Updated 4/20/20
FHA does not require tax transcripts directly from the IRS.
Lenders must obtain the borrower’s signature on the appropriate IRS form to obtain tax returns directly from the IRS for all credit-qualifying mortgages at the time the final Uniform Residential Loan Application (URLA) is executed.
If FHA requires tax returns as required documentation for any type of effective income, in lieu of signed individual or business tax returns from the borrower, the Lender may obtain a signed IRS Form 4506, Request for Copy of Tax Return, IRS Form 4506-T, Request for Transcript of Tax Return, or IRS Form 8821, Tax Information Authorization, and tax transcripts directly from the IRS.
The following resources and FAQ provided by the IRS may be helpful for borrowers when borrower-provided transcripts are requested to verify current tax return and amended tax return filings: https://www.irs.gov/individuals/get-transcript-faqs
Q9. How long must I wait before a transcript is available for my current year tax return?
If you filed your tax return electronically, IRS's return processing takes from 2 to 4 weeks before a transcript becomes available. If you mailed your tax return, it takes about 6 weeks. If you didn’t pay all the tax you owe, your transcript may not be available until mid-May or a week after you pay the full amount owed. Refer to transcript availability for more information.
Once your transcript is available, you may use Get Transcript Online, you may order a tax return transcript and/or a tax account transcript using Get Transcript by Mail or call 800-908-9946. Please allow 5 to 10 calendar days for delivery. You may also request any transcript type listed below by faxing/mailing Form 4506-T, Request for Transcript of Tax Return as instructed on the form. The time frame for delivery is the same for all available tax years.
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Government Agency Approval | FHA Non-Supervised Mortgage Approval #: 24751-0000-5 | VA Automatic Lender Approval #: 902324-00-00