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What Lenders Need to Know About the New IRS 4506-C Form Process

On Oct. 1, the Internal Revenue Service implemented an automated process for accepting 4506-C transcript request forms. The expected result is a significantly faster income verification process.

That’s good news for lenders, but the new process does come with a bit of a learning curve. Because the forms will now be scanned and read digitally, they have to be filled out more precisely and uniformly. Some practices, like using cell phone photographs of the form, will no longer be acceptable.

With the new process becoming mandatory on Jan. 1, 2022, it’s important for lenders to start overcoming this learning curve sooner rather than later. Now is the time to begin adapting to the new requirements to avoid any confusion or delays when they become final in just a few weeks.

The New Requirements

The changes to the requirements are not complicated, but they may require you to update your internal process for collecting 4506-C forms from borrowers. Here’s an overview of the requirements for the new, automated process:

  • The form needs to be completely typed and clean – with no handwriting other than a date and signature (e-signing is also acceptable). Any other handwriting on the form will lead to its rejection.
  • Only one person can be included per form, even if it is a joint filing, and their name must be included on Line 1.
  • Only one product per form per person can be checked off in Section 6 of the 4506-C form. Any additional requests will require the completion of separate 4506-C forms.
  • No cell phone pictures of the document or reduced size images will be accepted.
  • The years requested must be entered on Line 8. No additional years outside of the order should be included.

How the New Requirements Will Impact Your Procedures

The changes to the requirements mean that you will have to get multiple forms filled out and signed by borrowers and submit more forms than you have in the past to order multiple products. But you will only have to obtain one signature per form – another potential time saver.

For a deeper dive into these new requirements and how they might impact your internal procedures, you can watch our on-demand webinar where MetaSource Director of Client Services Tonya Martinez sits down with Bethany Futrell, a customer success manager with our vendor, Partners Credit & Verification Solutions, to break down the process line by line. The question-and-answer session at the end of the webinar also provides valuable information.

You can reach out to one of our team members at MetaSource with any additional questions as well. Our mortgage industry professionals are always happy to help and are committed to providing our clients with the solutions they need to drive efficiency and achieve their goals.

Our solutions combine state-of-the-art technology with expert services. They are designed to help improve processes and overcome obstacles, so you can focus on what really matters.

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