[BDyess]

Due to a Q & A via email with HUD back in 2010, we stopped including the 4506-T and borrower’s authorization in our application packages (to difficult to show we weren’t requiring it in order to issue a GFE – although we weren’t). We’d like to revisit this as it really slows the process up not having that signed at application. What are your thoughts? Here’s the Q & A with HUD on 5/7/10:

Q: Is the bank allowed to require the applicant to complete the blank 4506-T form (Request for Transcript of Tax Return) at application prior to giving the applicant the GFE and receiving the applicant’s intent to proceed? As you know, this form is used to request the tax transcript from IRS in order to verify income. We do not believe it is permissible – see FAQ 31 on page 11; however, our investor disagrees and is requiring us to get this signed by the applicant at application. We want to verify HUD’s position on this before we do what the investor is requesting.

A: As you state, item 31 on page 11 of FAQs states:

31) Q: May the originator require the borrower to sign consents to verify employment, income or deposits prior to issuing a GFE without violating 3500.7(a)(5)‘s prohibition on requiring the applicant to submit supplemental documentation to verify information provided on the application?

A: No, a loan originator may not require a borrower to sign consents to verify employment, income or deposits as a condition of issuing a GFE as such a requirement may inhibit borrowers from shopping for the best loan by leading borrowers to believe that they are committed to obtaining a loan from that loan originator (see 24 CFR § 3500.7(a) (5) and (b) (5)). However, the borrower may voluntarily sign consents prior to the issuance of the GFE to facilitate the loan process.

Requiring that IRS Form 4506 (tax transcripts) be signed prior to issuing a GFE would be considered the same as requesting consents to verify employment, income, or deposits.

Deborah Marcum
Consumer Protection Compliance Specialist
Office of RESPA
U.S. Department of Housing and Urban Development
Washington, D.C. 20410
ph: 202-708-0502
fax: 202-708-4559
https://www.hud.gov/respa

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[jholzknecht]

As I am sure you are aware on July 21, 2011 the responsibility for interpreting Regulation X (RESPA) transferred from HUD to the Consumer Financial Protection Bureau(CFPB). So far, the CFPB has not issued any interpretations that change the answer you previously received from HUD.

You may want to consider written procedures that indicate the you REQUEST that the borrower sign the documents at application, but you issue the GFE within three business days of receiving the application, whether the documents are signed or not.

[Author]

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