Why 4506T on full doc?

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ubud

34 Posts

Posted - 07/23/2008 : 8:26:48 PM

Stupid newbie question.... Why does a lender pull a 4506T on a full doc loan?

MoneyLenderP

1617 Posts

Posted - 07/23/2008 : 8:28:05 PM

verify that they filed & everything else.

That is todays mortgage world.

VVance

2489 Posts

Posted - 07/23/2008 : 8:29:42 PM

I hear this is being requested more and more by secondary.

financeone

1646 Posts

Posted - 07/23/2008 : 8:55:48 PM

Full doc with no white out- you'll be fine!

Quicksilver

4630 Posts

Posted - 07/23/2008 : 8:59:33 PM

B/C people had been doing full doc loans with doctored paystubs, filings etc, its to protect against fraud.

dkendall1979

10261 Posts

Posted - 07/23/2008 : 9:00:36 PM

I've been seeing this more and more. Actually had one come back saying the borrower hadn't filed in 2yrs (the 2 we ran)

It was an FHA loan!

AndrewSoss

359 Posts

Posted - 07/23/2008 : 9:02:51 PM

A better question would be why do they pull it on stated files. On full doc, it's simple. Anyone who has $40 can make tax returns on TurboTax that show $15k/month.

financeone

1646 Posts

Posted - 07/23/2008 : 9:06:12 PM

Huh? Info on 4506 comes from what's filed with IRS not what's generated by turbo tax?

KSCOTTMIDACAP

101 Posts

Posted - 07/23/2008 : 9:07:10 PM

This is very common with full doc self employed people. Ever since stated/nodocs went out the window, borrowers(and their cpa's) have become much more educated on what they need (income wise) to get approved. A 1040 you receive can be printed off any computer and sent to you, but not real tax returns. After my 5th loan turned down in UW because of people giving fake returns, I have since got my self access to pulling 4506's myself so i dont have to waste resources processing a loan that is never going to close....plus it doesnt make you look good with lenders to have this problem multiple times.

ComLender

1266 Posts

Posted - 07/23/2008 : 9:47:45 PM

You would be amazed at how many people apply for full doc loans and sign a 4506-T even though they provide false returns. It even happened to us for a borrower who was a CPA.

Quicksilver

4630 Posts

Posted - 07/23/2008 : 9:48:58 PM

quote:
Originally posted by AndrewSoss

A better question would be why do they pull it on stated files.

Put somebody claiming 300K a year in income, and actual filings show 100K....gonna have problems lol, sorta like a reason-ability test.

KSCOTTMIDACAP

101 Posts

Posted - 07/23/2008 : 9:56:22 PM

quote:
--------------------------------------------------------------------------------
Originally posted by AndrewSoss

A better question would be why do they pull it on stated files.

--------------------------------------------------------------------------------

Andrew, they do not pull them on stated files, otherwise they would be full doc if the UW's had IRS transcripts....

ubud

34 Posts

Posted - 07/23/2008 : 10:28:03 PM

Ummm... Actually they often do pull 4506T on stated..... But I think they look at gross income before deductions...

rtrefflich

3414 Posts

Posted - 07/23/2008 : 10:38:20 PM

So does the gross have to match what they state?

Someone at CW told me when they pull a 4506 on a stated file they just want to make sure they file as SE

quote:
Originally posted by ubud

Ummm... Actually they often do pull 4506T on stated..... But I think they look at gross income before deductions...

KSCOTTMIDACAP

101 Posts

Posted - 07/23/2008 : 10:39:49 PM

originally posted by UBUD..."Ummm... Actually they often do pull 4506T on stated..... But I think they look at gross income before deductions..."

UBUD,

I don't know who you work with or where, but that is absolutley incorrect. Not saying that getting stated loans done is not very difficult today, or that borrowers dont have to sign a 4506, but they are not executed on stated deals. Again, because with this informstion, they would be full doc, or dead.....

KSCOTTMIDACAP

101 Posts

Posted - 07/23/2008 : 10:51:09 PM

response to:

rtrefflich Posted - 07/23/2008 : 10:38 PM
--------------------------------------------------------------------------------
So does the gross have to match what they state?

Someone at CW told me when they pull a 4506 on a stated file they just want to make sure they file as SE

SORRY, THEY DO SOMETIMES EXECUTE A 4506 ON STATED DEALS, BUT THE VERIFICATION THEY PULL DOES NOT VERIFY THE INCOME REPORTED(AS I EARLIER STATED A FEW TIMES, THIS WOULD MAKE IT NOT STATED), but they can pull a filing verification, that simply verifies they file taxes, and what schedules, but no income is reported....

Ken

slants

4274 Posts

Posted - 07/23/2008 : 11:10:29 PM

quote:
Originally posted by KSCOTTMIDACAP

originally posted by UBUD..."Ummm... Actually they often do pull 4506T on stated..... But I think they look at gross income before deductions..."

UBUD,

I don't know who you work with or where, but that is absolutley incorrect. Not saying that getting stated loans done is not very difficult today, or that borrowers dont have to sign a 4506, but they are not executed on stated deals. Again, because with this informstion, they would be full doc, or dead.....

4506's are executed on stated deals regularly these days and it is a line by line transcript. Lenders will allow about a 15% variance on the actual income. Many who got into the business in recent years came to see 'stated" doc type as a free pass to put down whatever income is necessary to qualify which in actuality constitutes fraud. Stated doc type was designed to be a way to provide document relief for the well qualified borrower, but not permission to state inaccurate inflated income. Stated income does not mean false income, just that one does not have to provide actual verification.

KSCOTTMIDACAP

101 Posts

Posted - 07/23/2008 : 11:25:12 PM

slants,

I agree with your reasoning/opinion about stated deals, but have never had an actual 4506(with income) pulled on a stated deal. Again, it is always a deal killer, otherwise, you could go full doc. They do use other resources to come up with the "reasonability" of what is stated, but if they were to pull the actual transcripts, they would not give you a variance from what was filed. If it was not what was stated, that would represent fraud, would it not??

slants

4274 Posts

Posted - 07/23/2008 : 11:55:31 PM

quote:
Originally posted by KSCOTTMIDACAP

slants,

I agree with your reasoning/opinion about stated deals, but have never had an actual 4506(with income) pulled on a stated deal. Again, it is always a deal killer, otherwise, you could go full doc. They do use other resources to come up with the "reasonability" of what is stated, but if they were to pull the actual transcripts, they would not give you a variance from what was filed. If it was not what was stated, that would represent fraud, would it not??

With all due respect, your personal individual experience does not provide a cross section of the lending environment as a whole. Many lenders today as a policy will pull a 4506 at submission even on stated files and many posters have had 4506's pulled on stated docs. More than one lender have indicated that they have about a 15%+ tolerance on variance - if a 4506T post closing shows a small variance, they won't call the loan due or force a buy back. Count yourself lucky that YOU have never had one pulled but that does not mean others haven't.

Lenders have the option of requesting that the 4506 processing service withhold the transcript and instead generate a Tax Filing Verification Form which only shows the years and schedules filed (introduced in 2000 when stated doc type gained popularity), but not many lenders are still using this report in 2008 and not on all files:

http://www.veri-tax.com/TFV-Report.aspx

TFV Report™ – Tax Filing Verification

Introduced to the lending community in 2000, Veri-tax’s unique TFV Report™ was designed for the stated income loan program also known as the no income verification (NIV) loan.

benjamin

2278 Posts

Posted - 07/24/2008 : 03:25:21 AM

I have had many ,if not most of my recent stated files require a 4506 or 4506 t.

5/3 bank killed a stated deal quickly as numbers did not match.

genealle

1073 Posts

Posted - 07/24/2008 : 04:30:29 AM

quote:
Originally posted by ubud

Stupid newbie question.... Why does a lender pull a 4506T on a full doc loan?

Because no one claims more on their 1040 than they do on their app.

dmgstuff

8 Posts

Posted - 07/24/2008 : 06:14:47 AM

More and more lenders are pulling the 4506T in my experience also, I am hearing more and more about a service called www.e-taxrecords.com that pulls the 4506T through the IRS in less than 24 hours.... Welcome to our new world!

velecico

3991 Posts

Posted - 07/24/2008 : 06:20:46 AM

better question would be , why did lenders not do this all the time ? you sell an investment on the secondary market , myself if I was an institutional investor I would want the assurance that the lender verified the income stated with a third party source , such as the IRS , to think we take a piece of paper ( W2 ) call the employer , and call it a day , thats a full doc ? I would not be surprised if more lawsuits come down the pike from pensions funds and the like that got burned on suppousedly Full doc files when it was nothing more than a stated loan with no verification

TransNet

522 Posts

Posted - 07/24/2008 : 07:26:15 AM

quote:
Originally posted by KSCOTTMIDACAP

I...have never had an actual 4506(with income) pulled on a stated deal. Again, it is always a deal killer, otherwise, you could go full doc. They do use other resources to come up with the "reasonability" of what is stated, but if they were to pull the actual transcripts, they would not give you a variance from what was filed. If it was not what was stated, that would represent fraud, would it not??

Ken,
You may not know that a 4506t was ordered. A 4506t can be used after closing for quality control. If there is a problem it might not show up until then. And at that point you could be looking at a buy-back. That you are doing the quality control before you process/originate a loan is a good idea.

slants

4274 Posts

Posted - 07/24/2008 : 07:44:36 AM

quote:
Originally posted by velecico

better question would be , why did lenders not do this all the time ? you sell an investment on the secondary market , myself if I was an institutional investor I would want the assurance that the lender verified the income stated with a third party source , such as the IRS , to think we take a piece of paper ( W2 ) call the employer , and call it a day , thats a full doc ? I would not be surprised if more lawsuits come down the pike from pensions funds and the like that got burned on suppousedly Full doc files when it was nothing more than a stated loan with no verification

You are aware that the IRS's 4506 transcript is generated from tax returned filed based on a W2 issued by an employer as cross referenced by the amount the employer reported to the IRS as having been issued on the W2? A W2 IS the actual basis of any wage earner's full doc income. It is only subject to question when it is not the original W2 issued by the employer and has been altered or falsified.

sheriephillips

408 Posts

Posted - 07/24/2008 : 07:44:49 AM

We pulled 4506's on a majority of stated income loans. We'd tell the broker it was to "verify the borrower was self-employed", but in reality, we also wanted to verify the actual income and other questionable areas of the app. You'd be amazed what you find on those transcripts, such as their true address, their marital status, how many children they were claiming - none of which were disclosed on the 1003! Another common error we'd find is the person who actually filed the tax returns was hardly EVER the tax preparer who provided the signed letter stating they did the returns for the borrower. I can't tell you how many fake "CPA" letters we found!

If we indicated to the broker we had to pull the 4506, they'd freak out, scream, yell, say they were going to pull the file! They'd feel it was a slap in the face to them! If we said it was only to verify self-employment, they'd calm down. Broker's actually bought that story! Then of course, nearly 100% of the time we'd find the obvious fraud and kill the file anyway.

I'm glad lenders are pulling these upfront, it tells brokers right away that lenders are not going to accept any more fraud on the wholesale side. If these were pulled ALL ALONG, we wouldn't be in this mess right now with borrowers buying homes they couldn't afford!!!!!

velecico

3991 Posts

Posted - 07/26/2008 : 1:11:24 PM

Yes I am aware , I dont undertand your point

odiop

3 Posts

Posted - 07/26/2008 : 1:14:39 PM

there is an add on craigslist, offering income documentation and reserves manufacturing. That explains it.

KipW

256 Posts

Posted - 07/26/2008 : 1:22:30 PM

Could be random or there could be a red flag. Take a real good look at the file you sent in. Check for typos(SS number off). Look at the income docs again. Go to salary.com and see in the income fits the job title for your area.

slants

4274 Posts

Posted - 07/26/2008 : 4:13:35 PM

quote:
Originally posted by velecico

Yes I am aware , I dont undertand your point

In response to your contention that it is incredulous to rely on a W2 as full doc: "to think we take a piece of paper ( W2 ) call the employer , and call it a day , thats a full doc ?", my point is that of course a W2 from the employer can be relied on as full doc since it is the basis of the income reported to the IRS by both the employer and employee. A W2 would not be reliable as full doc only if it had been altered or if it was falsified, but that is not the unreliability of a W2 but plain mortgage fraud.

bestbet123

1577 Posts

Posted - 07/26/2008 : 4:14:10 PM

Rates are going up and IQ's are going down.Newbie,how old are you 12 working with your dad in the basement?I think Helen in her infinate wisdom has answered all possible questions regarding this topic.

ubud

34 Posts

Posted - 07/26/2008 : 10:54:09 PM

quote:
Originally posted by bestbet123

Rates are going up and IQ's are going down.Newbie,how old are you 12 working with your dad in the basement?I think Helen in her infinate wisdom has answered all possible questions regarding this topic.

No I am 8 working in my grandmothers attic...

johnnyboy38109

3057 Posts

Posted - 07/27/2008 : 07:31:51 AM

quote:
Originally posted by KSCOTTMIDACAP

originally posted by UBUD..."Ummm... Actually they often do pull 4506T on stated..... But I think they look at gross income before deductions..."

UBUD,

I don't know who you work with or where, but that is absolutley incorrect. Not saying that getting stated loans done is not very difficult today, or that borrowers dont have to sign a 4506, but they are not executed on stated deals. Again, because with this informstion, they would be full doc, or dead.....

Where in the world do you come up with this? Its done routinely on stated deals...........routinely.

johnnyboy38109

3057 Posts

Posted - 07/27/2008 : 07:50:54 AM

quote:
Originally posted by bestbet123

Rates are going up and IQ's are going down.Newbie,how old are you 12 working with your dad in the basement?I think Helen in her infinate wisdom has answered all possible questions regarding this topic.

If I were you I would think carefully before questioning someone's intellect, on any subject.

Recently you posted you needed an appraiser for Lancaster, PA.......you live in PA and...............you say.................you have 20 years in..........so why would someone with so much experience, that would almost certainly have so many contacts, that feels so comfortable denigrating newbies have to ask such an elementary question......?

Which, by the way, I'll answer for you because you obviously dont have the experience to know or the energy to go do it yourself.......

http://www.appraisers.com/usa/pennsylvania/lancaster/

johnnyboy38109

3057 Posts

Posted - 07/27/2008 : 07:52:36 AM

quote:
Originally posted by bestbet123

Rates are going up and IQ's are going down.Newbie,how old are you 12 working with your dad in the basement?I think Helen in her infinate wisdom has answered all possible questions regarding this topic.

and by the way cannot even spell your insults properly........the word is "infinite"........not "infinate"..........

velecico

3991 Posts

Posted - 07/27/2008 : 5:14:38 PM

quote:
Originally posted by slants

quote:
Originally posted by velecico

Yes I am aware , I dont undertand your point
In response to your contention that it is incredulous to rely on a W2 as full doc: "to think we take a piece of paper ( W2 ) call the employer , and call it a day , thats a full doc ?", my point is that of course a W2 from the employer can be relied on as full doc since it is the basis of the income reported to the IRS by both the employer and employee. A W2 would not be reliable as full doc only if it had been altered or if it was falsified, but that is not the unreliability of a W2 but plain mortgage fraud.

That was my point , that the w2 could be altered and that a 4506 should be standard MO
on a full doc file , taking a W2 , doing a VOE is not enough , you need to verify that the w2 is legit

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