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peter
4543 Posts |
 Posted - 09/06/2008 : 10:19:29 PM
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There are lenders out there from A paper to hard money who
do not require borrower to sign the form IRS 4506T and will
not even put the form into the loan documents.
Do you know them? Please help in constructing this list.
I will start with one lender I know"
ING Bank Wholesale (www.ingloans.com)
Your contribution will be appreciated.
Peter |
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dlenderguy
398 Posts |
Posted - 09/06/2008 : 10:22:09 PM
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| hmmm sounds kindda funny ?? Why would you wanna know who doesn't pull a 4506T ??? No disrespect... |
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peter
4543 Posts |
Posted - 09/06/2008 : 10:34:23 PM
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Rob, I think that although we L/Os exercise due diligence
in examining the tax returns, W-2s/paystubs, 1099's, etc.,
we don't really know if our borrowers are working in cahoots
with their CPAs or tax preparers. Also, many borrowers who
are on W-2s do have Schedule C whereby they own partnerhsips
or businesses that write off their W-2 incomes. I recently
had a borrower who is employed by a well established Fortune
500 company with perfect W-2s/paystubs and 401(K). His
loan was approved and docs signed. It went into funding and
the lender pulled the 4506T and found out that he writes off
his wage earner's incomes for 2006 and 2007 substantially
from losses in his Schedule C and therefore funding was
denied. I am glad that the lender denied funding before
funding it and sending it to their investor because the
loan could come back to haunt me as a buyback claim since
Line No. 5 of the 4506T allows any third party to execute it
postclosing.
So, especially in real estate purchase transactions whereby
the buyer's deposit could be forefeited once the loan
contingency -- usually 14 to 21 days -- is signed off and
the 4506T aborted funding in the fina hour. We do have one
purchase transaction in trouble right now because of this.
Therefore, while we do our utmost to exercise our due
diligence, it might be practical to send critial purchase
or refi loans to lenders who do not require 4506T at all,
like most banks used to du (incuding World Savings) before
the current upheaval.
Peter
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dlenderguy
398 Posts |
Posted - 09/06/2008 : 10:42:29 PM
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| ahhh I could see where this could be an issue......probably knot to often however most all lenders from what I hear are requiring the form signed and sent in at the closing :) Thank you for the detailed response to my question sir.. |
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SoCalRay
2698 Posts |
Posted - 09/06/2008 : 10:44:02 PM
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Peter
A Paper is going to pretty much require it if it being sold to Fannie, Freddie or Ginne Mae
FHA loans are going to require it for the same reason
VA loans are requiring it now also |
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peter
4543 Posts |
Posted - 09/06/2008 : 10:53:47 PM
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Paul, but how come ING Bank (www.ingloans.com) does not
do it. They must have good business reasoning behind it.
I know that ING loans are all portfolio loans. I used to
be informed by an A/E from Home Savings of America in
Torrance, CA that they don't require 4506T to be signed
by borrower either on 1 particular program which is an
in-house portfolio loan. But I have yet to update this info
with the current A/E.
I have done some hard money loans and I did not see
any 4506T form among the loan docs that my customers had
to sign. Still, I think hard money lenders do not require
the 4506T because it is a straight equity-based loan.
Peter |
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peter
4543 Posts |
Posted - 09/06/2008 : 10:59:25 PM
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And what would be wrong to offer to your 4506-averse borrower
that "Sir, if you do not wish to sign the 4506, you can only
go with 1-2 lenders that do not require it at the rates
that I will quote you as follows....."
"And if you can't meet the rates, the only last option is
to take a 12% home equity credit line with 6 months prepay
to get the cash you need, and you can have it as a 2nd loan
or the new first refi loan at your choice."
Those who are averse to 4506 will just have to pay the
price.
Peter |
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velecico
3935 Posts |
Posted - 09/06/2008 : 11:39:35 PM
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If your borrower was W2 the 4506 would show his gross earnings stated on the app , I dont think whoever is looking at the 4506 is getting into the taxable income of your borrower and if they had carry over losses from 3 years ago , something else must have been wrong with the income stated , 95% of consumers that are self employed , if you ask them " Whats your gross monthly income " they will tell you exactly that , they dont know and should not be expected to know that if tax returns are required the UW will go off taxable income .
Lets say you made 1 M last year , but through a good CPA , you paid taxes on 100,000 K , so you state you make around 80K per month , if a 4506 was pulled after closing , would you have a problem if the returms show 1M gross income ? |
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peter
4543 Posts |
Posted - 09/06/2008 : 11:47:59 PM
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Nicholas wrote:
"if they had carry over losses from 3 years ago , something else must have been wrong with the income stated"
It was not a carryover loss. It was a $19K loss on
her schedule C in 2006 and $9K loss in 2007 that made
the lender aborted the funding.
Borrower did not disclose to me that she also owns
a partnership to write off losses on her wage earner
incomes. I should have asked but seeing her as a
perfect salaried borrower I concluded wrongly that
her loan was not sweat and I was wrong.
Peter |
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peter
4543 Posts |
Posted - 09/07/2008 : 12:03:15 AM
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Nick, my borrower was primarily a salaried wage earner
and I took the app. from her as a wage earner, full doc,
giving the W-2s and paystubs with my submission. The
underwriter who first approved the loan based on her
qualified wage earner income explained to me that borrower;s
W-2 incomes, after the Schedule C tax losses, were not
what were stated and what were on the W-2s for 2006 and
2007.
Did she have any basis for denying the funding, or she
was just afraid that she might not be able to sell the loan?
Peter |
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GVDenny
329 Posts |
Posted - 09/07/2008 : 12:09:38 AM
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quote:
Originally posted by peter
There are lenders out there from A paper to hard money who
do not require borrower to sign the form IRS 4506T and will
not even put the form into the loan documents.
Do you know them? Please help in constructing this list.
I will start with one lender I know"
ING Bank Wholesale (www.ingloans.com)
Your contribution will be appreciated.
Peter
Let me compile a list of federal prisons where you won't get violated in the toilet at night. I suspect, you are going to need it! |
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SoCalRay
2698 Posts |
Posted - 09/07/2008 : 12:18:58 AM
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Peter
You answered your own question on ING and Hard Money but left out one important item.
They are not selling the loan on the secondary market. A portfolio lender or hard money lender is the one writing the check and write their own rules.
And your item about giving your borrower a choice after you review the income sounds like a good idea.
It is a good idea to get tax returns on W2 individual that list their employment as a sales type or account executive.
quote:
Originally posted by peter
And what would be wrong to offer to your 4506-averse borrower
that "Sir, if you do not wish to sign the 4506, you can only
go with 1-2 lenders that do not require it at the rates
that I will quote you as follows....."
"And if you can't meet the rates, the only last option is
to take a 12% home equity credit line with 6 months prepay
to get the cash you need, and you can have it as a 2nd loan
or the new first refi loan at your choice."
Those who are averse to 4506 will just have to pay the
price.
Peter
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shoe
148 Posts |
Posted - 09/07/2008 : 03:47:12 AM
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| Ray's right, Peter. Very few prime lenders are doing any porfolio now because their primary in some cases sole investor is Fannie or Freddie who requires the 4506T be executed. I ran into the same problem you did and found out on the day of settlement what shenanigans my client was really up to with regards to the IRS. Like you said, even though the hard work was put in so you could get paid, this may have been the difference between a small commission and a large buy-back. |
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Keeysturn
317 Posts |
Posted - 09/07/2008 : 06:15:33 AM
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| I heard Suntrust and Chase does execute the 4506. |
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dealmaker
1 Posts |
Posted - 09/07/2008 : 07:22:58 AM
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Nice topic. Let's compile a list of ways to commit Mtg. Fraud.
Please Exit this Industry!! |
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peter
4543 Posts |
Posted - 09/07/2008 : 10:00:21 AM
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Even if your lender executed the 4506T and funded the
loan, it does not mean that you will be out of trouble.
This is because your lender may have a tolerance level
(like Wells which has a 19% deviation allowed for discrepancies
in incomes verified from the 4506T and the incomes on the
W-2s or tax returns) but the investor they will have sold
the loan to may not allow that same tolerance level. Let's
say Wells sells the loan to Countrywide Bank and as an
investor CW use the privilege of Line No. 5 to pull 4506T
one more time (Line No. 5 allows any third party to execute
the 4506 one more time) and since CW does not allow any
tolerance leve, the loan could come back to Wells and then
come back to your broker and you as the originator.
Also, the first lender who approved your loan and funded
it might have just looked at whether the borrower filed
her tax as self employed or wage earner and did not really
scrutinize the details of AGI as to where they come from or
the lines of Schedule C's and the Schedule E's, resulting in
authorized funding the loan that should have been stopped.
And when the loan comes back to you from the investor who
discovered that the loan should not have been funded or
the loan could not be pooled into REITs, then your broker
and finally yourself will get the hit.
There is no need to be "unprofessinal" by being angry
with a legitimate post. If I had a dishonest intention,
I could have kept it to myself without discussing this
important issue and its ramifications fully among us,
who are supposed to be "civilized" enough to discuss the
topic in an unemotional and professional manner.
Those who cannot be professional and deliver unfair
conclusions and personal attacks on the legitimate poster
should have no place on the Broker Outpost.
Peter |
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darkstar
18092 Posts |
Posted - 09/07/2008 : 10:16:01 AM
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>>>>$9K loss in 2007 that made the lender aborted the funding.
Was DTI tight for the $750/mth loss to kill deal or something else? |
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ppulatie
2257 Posts |
Posted - 09/07/2008 : 10:49:43 AM
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| No 4506T is an invitation to commit fraud. Suppose someone doctors the w-2 and paystubs. |
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just in kase
474 Posts |
Posted - 09/07/2008 : 10:50:01 AM
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you can me to the list of Lenders that execute the 4506t.
i am glad we do, we just caught one fraud file. it works, i bet your broker is glad we are excuting it. i heard this story a few days ago, a file was reject after 4506t came back differnet than returns in the submission file. when borrower was questioned they said they have two sets of returns one for loans the other for the IRS. broker funded 4 loans in the last 4 yrs on fraud 1040s.
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peter
4543 Posts |
Posted - 09/07/2008 : 11:35:09 AM
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Stephen, it was both the 19K loss in 06 Sch. C and
9K loss in 07 Sch. C that killed the deal.
Peter |
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peter
4543 Posts |
Posted - 09/07/2008 : 11:42:12 AM
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ppluatie wrote:
"No 4506T is an invitation to commit fraud. Suppose someone doctors the w-2 and paystubs."
That is true, but it is a two-way mirror. For those who
want to protect themselves against loan buybacks they can be
absolutely certain that no loan buyback will result. To
prevent fraud, the broker should use Verifax or wait for
few days to pull the result of the 4506 if theamounts of tax returns/
paystubs are truly reported on the 1040's transcripts.
And the upfront costs should be paid by the borrower after
explaining to her that this is to protect her from future
troubles with the law.
If it is too much to ask the borrower to pay for the
veritax, there is another option -- send the file to the
chosen lender whose practice is to pull the 4506 T for
result prior to approval. This will work. Lenders like
Provident Bank do this all the time with all files, wheether
full doc or stated income and this saves the broker and the
L/O from troubles.
With the takeover of Fannie and Freddie, there will be
a new team of outside auditors for sure and the loan buyback
claims from Fannie and Freddie will further increase as they
are going to clean the ship and tighten the sail.
Peter |
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shoe
148 Posts |
Posted - 09/07/2008 : 11:59:26 AM
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| If you notice dum-dum deal makers first post on B/O was negative and uninformative. Why do they let these folks on the blog anyway? It didn't used to be this way. Final note: If you can't help someone with their deal then keep your comments to yourself and find something else to do. This is a site for PROFESSIONALS!!! |
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