IRS 4506T and mortgage fraud

[bettyb2007]

What is the name of your state?
MASSACHUSETTS
Thank you for allowing me to ask you a question.

A friend of mine is in the process of purchasing a house. She has a low income. She is a first time homebuyer and was approved for a MassHousing mortgage (preferential rate for low income first time home buyers in Massachusetts ).She gave to the lender her most recent 3 years tax returns to support income as stated. One of the closing condition is for her to sign and date IRS 4506T at closing. This form is for the mortgage lender to use to pull a copy of her tax returns.

She was told that it is rare that this form is used unless an underwriter suspects fraud, and it is more rare that it might be used in a random audit after closing, but it can happen. How can she know if her lender is going to use this form ? What if the lender finds discrepancies between the different sources of information ? what are the consequences ? What is mortgage fraud ? What are the risks ? please advise.

Thank you in advance for your time and help.
Best regards,

[moburkes]

Originally Posted by bettyb2007

What is the name of your state?
MASSACHUSETTS
Thank you for allowing me to ask you a question.

A friend of mine is in the process of purchasing a house. She has a low income. She is a first time homebuyer and was approved for a MassHousing mortgage (preferential rate for low income first time home buyers in Massachusetts ).She gave to the lender her most recent 3 years tax returns to support income as stated. One of the closing condition is for her to sign and date IRS 4506T at closing. This form is for the mortgage lender to use to pull a copy of her tax returns.

She was told that it is rare that this form is used unless an underwriter suspects fraud, and it is more rare that it might be used in a random audit after closing, but it can happen. How can she know if her lender is going to use this form ? What if the lender finds discrepancies between the different sources of information ? what are the consequences ? What is mortgage fraud ? What are the risks ? please advise.

Thank you in advance for your time and help.
Best regards,

It IS rare. However, as long as she is being honest, which is the whole point of the audit, there is no problem. If a discrepancy is found, they will ask for the entire loan to be paid in full.

[lcannister]

Originally Posted by bettyb2007

She was told that it is rare that this form is used unless an underwriter suspects fraud, and it is more rare that it might be used in a random audit after closing, but it can happen. How can she know if her lender is going to use this form ? ,

Frankly, I can see no reason on earth for you to ask this question if she has not committed fraud and rewritten her tax returns to reflect low or little income in order to get this loan.

If she is providing copies of the tax returns why would the copy differ from the original?

IF I am incorrect then what is there to even be concerned for a second?

[moburkes]

Originally Posted by lcannister

Frankly, I can see no reason on earth for you to ask this question if she has not committed fraud and rewritten her tax returns to reflect low or little income in order to get this loan.

If she is providing copies of the tax returns why would the copy differ from the original?

IF I am incorrect then what is there to even be concerned for a second?

This is outright fraud, what her "friend" did in order to get a home. Look at how carefully worded this sentence is:

She gave to the lender her most recent 3 years tax returns to support income as stated.

She gave tax returns which would SUPPORT the income AS STATED?? Come on. The "friend" probably can't make the house payments, and is being audited.

[lcannister]

which would SUPPORT the income AS STATED??

I didn't even catch the total admission! LOL!

You don't suppose her is our OP do you? Nah!

[ice5146]

The 4506T is what the Lender uses to confirm what was actually Filed with the IRS. Why do Lenders have it signed by borrowers? 1) Borrowers can provide a copy of their 1040's or 1120's to a Lender that was prepared by a CPA or any tax prep company and never even File that return. That return may appear to show the Borrower claims more or less deductions, etc. The REAL tax return that is Filed is what the 4506T will confirm.

Most Lenders don't initiate 4506T, period. The Lenders that do back their butts up in case of default by the Borrower. They have another "resource" to turn to to show their Investors that the Borrower in default dotted their T's and crossed their I's to ethically obtain financing with a government loan application.

There should be absolutely no reason to be concerned with the 4506T coming in with figures not comparable to a return UNLESS the 1099'd reported earnings on the return were less due to that contractor not reporting earnings and the company they worked for sends in their reported wages paid. I hope you get my drift??

The mortgage industry has taken a 180 and every Lender in this county is being affected by it, good and blemished credit Lenders. Expect the loan processing to be more than highly scrutinized. I know paying my own mortgage interest rates sucks let alone paying higher taxes to pay back bad debt from fraudulent Borrowers.

[lcannister]

There should be absolutely no reason to be concerned with the 4506T coming in with figures not comparable to a return UNLESS the 1099'd reported earnings on the return were less due to that contractor not reporting earnings and the company they worked for sends in their reported wages paid. I hope you get my drift??

I do not get your drift! Why should a tax return you provide a lender and the one filed with he IRS not be identical? What does a 1099 have to do with the price of beans in what you filed and what you kept as a copy??

This OP used fraudulent information to obtain a loan plain and simple!

[ice5146]

There are thousands of cases per year where individuals have their returns prepared from Company A and never file that return. They then go to another preparer and file that one. Why they do it is for a myriad of reasons. Figures from the return that actually is filed is what the 4506T will show.

If I wanted to show myself in poverty on paper to to a Court or Gov't office in order to obtain Gov't Assistance, I can do that and never even file that return. I can then turn right around and file the "true" return with IRS afterwards. The real return I will keep from the Court or whoever I don't want to see it. People do this ALL THE TIME!

If I receive 1099'd earnings from several different companies and I want to appear like I didn't earn much in order to receive Gov't Assistance, I can simply omit some earnings off the 1st return I have prepared that I never intend to file. Who knows, maybe OP's friend hit a few grand on the slot machines and failed to report any 1099-G earnings and the 4506T will show it. It could take forever to list all the reasons. Maybe OP will tell her friend what she read here and advise her that if she happened to have done the above, it could be confirmed very, very easily.

[lcannister]

I did not even read the entire post and know what you describe is pure and simple FRAUD!!