The IRS is on furlough and this means banks cannot order what is called a 4506 tax transcript from the IRS. So how does the Government Shutdown impact Real Estate? Banks selling loans in the secondary market (IE most loans) require a 4506. This is a fraud prevention method used to verify directly with the IRS that the tax returns provided by the client match what was provided to the IRS. The 4506 will also confirm all taxes are paid in full.
Banks typically order a 4506 within a few business days of closing as a final quality assurance initiative. With that being said loans whose 4506 have not come back will not close until the government opens its doors for business. This could have a huge impact on the real estate market as agents, lenders and most importantly potential homeowners sit on the sideline waiting for the government to fund.
Banks do “portfolio” some loans. Meaning the bank does not sell the loan and in fact holds onto it. In this case the bank can choose to forgo a 4506 and close the loan however this is very rare and highly unlikely due to the risk associated with fraud.
Banks and lenders are still open for business in the we are taking loan applications, processing and underwriting loans, and getting loans approved. Once all of the above is done we will wait on the IRS to get back to work and at that point and time close the loan. We anticipate a rush on 4506’s once the IRS is open which could delay receipt for a few days due to the back log or orders. Typically a 4506 takes 1-2 business days.
As always call your lender with any questions.
And as a political side note I think everyone can agree on…lets vote to cancel the pay of the congress and senate if the government ever shuts down again!
Max A Kallos
Recognized in ‘Atlanta’ Magazine as a Five Star Mortgage Professional and endorsed by Emmy winning consumer advocate Dale Cardwell!