Since the Internal Revenue Service (IRS) is closed they have suspended the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted.

The changes being considered right now are to allow for processing and closings of loans with income verification to follow when the IRS is open again.  As long as the borrower signs the Form 4506T the transcripts can be ordered and verification of income can be completed AFTER the loan funds and closes.

On Fannie Mae and Freddie Mac loans the verifications will be required before these GSE entities will purchase the loans in the secondary market.

I don’t know what the consequences are to the borrower if the loan funds, sale closes and then the lender discovers inconsistencies between the loan application and the verification statement from the IRS.  The borrower would certainly have some liability for entering fraudulent information on his application, which I believe is a felony.

Let’s hope our legislators will come to some agreement soon and help us all get back on track doing the work that needs to get done!

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