The government shutdown is gradually impacting the mortgage industry, with more lenders creating momentary bypasses to approve loans.
Lenders are required to include a 4506-tax transcript, which allows the lender to pull and verify a borrower's income directly from the Internal Revenue Service.
But this step in the process came to halt once the IRS shutdown with most of the U.S. government.
As a result, banks crafted temporary exceptions to keep businesses running.
If we have loans with all conditions clear except the 4506-T, we will use the borrowers tax return as a replacement, Patti White, vice president of correspondent lending, with Norcom Mortgage, said.
White said lenders will still collect the 4506-T and retrieve the information once the IRS resumes operations to make sure the information is correct.
Meanwhile, Norcom Mortgage is not alone in this, as other lenders like NexBank, which is based in Dallas, also adapt to approve loans.
NexBank said it will allow conventional conforming loans without the IRS tax transcripts as long as the borrower provides a copy of the signed personal tax return for the most recent year.
“We are still closing loans, and we are still going to get what we need in a loan. Since we are a primarily purchase lender, we cannot hold-up our closing process,” White said.
Once the government resumes operations, the temporary policies will end, and business will continue on as usual.
