As part of the Taxpayer First Act that was passed into law earlier this year on July 1, 2019, a lender who obtains a borrower’s tax transcript during the origination process must obtain the borrower’s consent to share that information with any other party, including an investor to whom the loan is sold. The part of the law requiring the specific consent of the borrower to share their tax information, Section 2202 of the Act, becomes effective December 28, 2019.
The IRS has indicated they will not provide any prescribed consent language to which a borrower must agree to allow sharing of their information. Accordingly, it is the responsibility of each lender to ensure sufficient consent is obtained to share tax information.
As an assistance to the industry for its members, the Mortgage Industry Standards Maintenance Organization, established an industry workgroup to develop appropriate consent language. The MBA and MISMO announced that language was available for comment beginning August 19, 2019. The MBA and MISMO announced finalization of that language November 8, 2019, making the language available for use by the industry.
On November 6, 2019, FNMA and FHLMC posted a notice to their websites indicating their requirement that any loan that is sold to or securitized by FNMA or FHLMC on or after December 28, 2019, must have obtained the borrower’s consent to share their tax information with FNMA or FHLMC as appropriate. This would require lenders to obtain consent for loans that are closed before the December 28, 2019, effective date of the provision of the Taxpayer First Act, or to obtain that consent after a loan has closed.
DocMagic is making available a disclosure that provides the MISMO-created consent language. DocMagic will be adding this new form, called the “Borrower Consent to the Use of Tax Return Information” (DocMagic Form ID: BCUTRI.MSC), to all Closing and Initial packages (the same packages which currently include the 4506-T) on November 14th.
The form is available now to add to additional packages if clients wish to do so, or for clients to review.
If you have any questions or to add the form to any packages, please contact DocMagic’s Customer Service.
