Thanks for your perspective, Kent.
“One thing to realize is that the 4506T only authorizes a transcript, not the actual return. It retains most of te privacy issues raised.”
Yes, the transcript is less revealing, but only slightly. The transcript will not include supporting documentation and backup (e.g., list of all sales on Sch. D). The figures for each line on the 1040 and each line of all accompanying schedules are included in the transcript, though.
“The reason that they may want to see the transcripts is to ensure that the W-2 income is not offset by other losses.”
Good point on potential offsetting losses (Sch. C, Sch. D, partnership, etc.). I didn’t think of that.
Kent, akaagassi said: “Fannie and Freddie require the 4506-T...”
My understanding is that Fannie does not require a signed 4506-T for all loans. Maybe I’m mistaken. Kent (or anyone else), can you verify that Fannie requires a 4506-T for the type of loan I described? How about DU Refi Plus? My question also assumed that Fannie did not require it. If Fannie does require it, then, as Kent noted, the options are more limited.
“Privacy concern??? I suppose providing social, date of birth, paystubs, W-2's, etc...is not a privacy concern???”
Of course they are. The point of the question, though, was a desire to reduce the amount of financial information disclosed, if possible. C’mon, just because some financial information is required does not make other financial information any less private. When you go to the dentist for the first time for a filling and dutifully complete the medical condition checklist I’m sure you disclose on the “other medical conditions” line your scorching case of genital herpes, right? :-)
Seriously, there are people who prefer to keep private as much of their financial information as possible. Let’s say you have 250K in total income. Suppose you have 150K in W2 income and need 100K to qualify for the loan. Some people prefer to put 150K on the loan app and leave it at that. This is truthful, correct, and perfectly legal. Your income is 150K. Your income is also more than 150K. It’s a nice position to be in. I suspect many borrowers are not. Do people actually calculate the present value of an accrued pension or itemize their assets in the “other assets” column on the loan doc. “Honey, how much is that cookie jar Aunt Jean gave us as wedding gift?” “I don’t know, dear, it may be a collectible. I’ll check eBay.” :-). And, there are also privacy considerations of others. Say one spouse can qualify on his/her income alone. Pulling the tax transcript reveals the spouse’s information on a joint tax return.
“if you/they don't want to sign it, then you don't have to get a loan...go to a private lender charging 8,9,10%...
The question was a serious one. I’m aware of the consequences.
Supreme 882 said:
“if you find a lender that doesn't require it for closing, it's probably going to be in your loan package at closing and will be a prior to funding condition if not signed. Even in the sub-prime and non-conforming days 4506T's were required to be signed. Lenders never pulled them, but they are ALWAYS going to be there for investors to pull if they want to double check or smell fraud on the file.”
The lender on my purchase loan did not require a 4506-T. That was 3 years ago. Lenders have since tightened requirements. I know lenders now require 4506-Ts. That’s why I asked are there any lenders that do not. I’m operating under the assumption that if a lender tells me a 4506-T is not required, I can rely on that representation.
BTW, this file smells of fraud anyway. What's the deal with pulling a 4506T anyway. It's just a verification to make sure things match. If you are a W-2 employee, then the lender is just going to make sure what you're giving the lender matches what the IRS has on file. One of three things will happen when you pull the 4506T...
1. The IRS W-2 won't match what the borrower sent you, ie. fraud.
2. He hasn't filed his taxes and thinks he's going to pull one over on the lender.
3. Everything matches and he can get himself a loan
Trust me, it’s not fraud. Even if you don’t trust me, assume for the sake of argument that it’s not fraud for your responses. I understand your (and others’) suspicions and they’re probably not unwarranted given the nonsense that has gone these past few years in housing. But take the facts as given; do not change the assumed facts for your responses.