4506-T electronic signatures begin | HousingWire

On Jan. 2, President Obama used an autopen to sign the fiscal cliff bill, while vacationing in Hawaii. This may be a sign as to the trend for the 2013 mortgage market: electronic.

Five days after President Obama signed the bill, the Internal Revenue Service will begin accepting electronic signatures on the common mortgage origination document, Form 4506-T.

The tax return transcript is a requirement for the majority of all mortgage originations and loan modifications. Lenders use the form to verify the income of borrowers.

4506-T forms were the last remaining documents in the loan origination process that required a handwritten paper signature.

“The actual e-signing of the 4506-T is minimal. This has been the hold out document so to speak. The excitement is that ‘now I can do my total origination up front electronically,’” said Kelly Purcell, executive vice president of eSignSystems

Income Verification Express Service vendors play a large part in the loan underwriting process, including income verification with the IRS. The IVES vendor is the last submitting party to the IRS that is responsible for sending the 4506 Form to the IRS, getting it back and pushing the information back to the lender.

Because of the credit crisis, virtually every loan or loan modification being processed today requires a 4506-T, Purcell told HousingWire. In 2006, there were only approximately one million 4506-T forms processed, while today there are more than 20 million.

“They needed a cost effective method to handle the volume of these requests,” said DocMagic eServices director Tim Anderson.

This is the beginning of an electronic trend, as the benefits behind this become more evident, according to Anderson.

There are a number of electronic signature requirements that will ensure security for those using the newest technology, he added. And, it is important to also keep in mind that these electronic signatures will save significant time and money. For Anderson, that time is now.

“I’m excited. 2013 is the year for adoption,” added Anderson.


Another step toward totally electronic closings.

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Mortgage industry fares well in fiscal cliff deal, debt forgiveness law survives | HousingWire

The mortgage industry can breath a sigh of relief with the final fiscal cliff deal bringing back a popular tax break on mortgage insurance premiums and debt forgiveness for borrowers who go through a short-sale or some other type of debt reduction.

A topic that is still up for discussion and likely to surface later in the year is whether the popular mortgage interest tax deduction will be part of a long-term deficit reduction plan.

Still, the deal passed by the Senate and House on Jan. 1 is one that leaves room for hope in the housing market.

The American Taxpayer Relief Act of 2012 apparently extends a law that expired at the end of 2011, which allowed for the deductibility of mortgage insurance premiums, according to a research report from Isaac Boltansky with Compass Point Research & Trading. The law now applies to fiscal years 2012 and 2013.

“The law dictates that eligible borrowers who itemize their federal tax returns and have an adjusted gross income (AGI) of less than $100,000 per year can deduct 100% of their annual mortgage insurance premiums,” Compass Point said.

“Certain borrowers with AGIs above $100,000 may benefit from the deductibility as well but are subject to a sliding scale. The tax break covers private mortgage insurance as well as mortgage insurance provided by the FHA, the VA, and the Rural Housing Service. In 2009, about 3.6 million taxpayers claimed the mortgage insurance deduction,” the research firm added.

One of the more watched provisions of the fiscal cliff was the Mortgage Forgiveness Debt Relief Act of 2007, which was set to expire on Dec. 31.

The fiscal cliff deal extends it for another year, meaning homeowners who experience a debt reduction through mortgage principal forgiveness or a short sale are exempt from being taxed on the forgiven amount.

“The amount extends up to $2 million of debt forgiven on the homeowner’s principal residence,” Compass Point Research & Trading said. “For homeowner’s to qualify, their debt must have been used to ‘buy, build, or substantially improve’ their principal residence and be secured by that residence. The law, which was passed in 2007 with a 5-year sunset provision, will now be in effect until Jan. 1, 2014.”

Another minor win for housing is a provision tied to the government’s plan to increase the capital gains tax rate from 15% to 20% for individuals who earn more than $400,000. While in theory, this is harder on higher-income homeowners, Compass Point sees a silver lining through an exclusion.

Compass Point notes the law “states that only gains of more than $250,000 for individuals ($500k for households) are subject to taxes on the excess portion of capital gains. Point being, in order for an individual homeowner to be impacted by the increased capital gains tax rate they would need to have an adjusted gross income above $400,000 and gain more than $250,000 from the sale of the property. Since this exclusion threshold remained intact, the impact of the capital gains tax increase is limited.”


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