Taxpayer First Act FAQ

Obtaining the borrower consent form is not based on the Freddie Mac settlement date but on the requirements of the Act. If borrower consent is required under the Act, the signed consent form must be obtained in a timely manner and placed in the mortgage file.

Under our Single-Family Seller/Servicer Guide, Seller/Servicers are required to comply with all requirements of applicable federal, state and local laws, rules and regulations. However, we do not tell Seller/Servicers how to comply with these laws and regulations.

The IRS has issued the following guidance regarding the coverage of the new consent requirement:

Section 2202 of the Taxpayer First Act amended the provisions of IRC section 6103(c) by adding the following language: "Persons designated by the taxpayer under this subsection to receive return information shall not use the information for any purpose other than the express purpose for which consent was granted and shall not disclose return information to any other person without the express permission of, or request by, the taxpayer."

This provision limits the redisclosure and use of return information in the case of taxpayers who have consented to the disclosure of their return information by the Internal Revenue Service to a third party under IRC section 6103(c). Section 2202 of the Taxpayer First Act applies only to disclosures made by the Internal Revenue Service after December 28, 2019, and any subsequent redisclosures and uses of such information disclosed by the Internal Revenue Service after December 28, 2019.

We strongly recommend consulting with your legal counsel or compliance department regarding the interpretation and application of the Act.

The consent form does not need to be included in the loan file submitted for each mortgage selected for post funding quality control review.

If the tax returns were needed to qualify the borrower when originating the loan, and the loan is sampled for post funding QC, then the tax returns must be in the loan file submitted to Freddie Mac for QC. If more time is needed to send in the complete loan file, contact your QC representative and an extension may be granted.

Question: If Freddie Mac samples a loan that was chosen for a Seller’s in-house QC program, then the 4506-T is required to be executed. If Freddie Mac chooses that loan for a post funding QC, the tax returns from the IRS are required to be in the loan file. Do Sellers have to send the tax returns to Freddie Mac with the loan file?

Answer: The Act requires that you obtain the borrower’s consent if you are sharing tax information obtained from the IRS on or after December 28, 2019 with us. For loans selected for the Seller’s in-house QC program, and selected for Freddie Mac’s post fund QC, the consent should be obtained before sending a tax return or tax return information obtained from the IRS on or after December 28, 2019.

Please refer to the answer to Q2.

The IRS appears to be  interpreting Section 2202 of the Act to apply only to documents provided by the IRS and not to tax information provided directly by the borrower. (Please refer to the answer to Q2).

We strongly recommend you consult with your legal counsel or compliance department regarding the application of the Act.

The Act requires that requesters of tax information from the IRS inform the taxpayer of the "express purpose" for which tax return information will be used and that the taxpayer provide "express permission" to allow that use and the sharing of return information with other lending stakeholders.  A signed form 4506-T will no longer suffice to meet these new consent requirements.  

The IRS has expressed that they are not going to provide updated language to the 4506-T, and they are leaving it to the industry to ensure that proper taxpayer consent is obtained prior to the use and sharing of such information.  

The IRS has indicated that it has no plans at this time to provide a standard form to use when disclosing or sharing tax return information with other parties.

The Mortgage Industry Standards Maintenance Organization (MISMO^®) drafted model taxpayer consent language designed for Sellers/Servicers to use for this purpose. MISMO members can access this model language on the MISMO website. 

Sellers/Servicers may also prepare their own taxpayer consent form using their own language, as long as the form provides the Seller/Servicer with the taxpayer’s express permission to obtain tax return information, use the information for the purposes stated in the consent and to share it with Freddie Mac.

As announced in Bulletin 2020-1, effective March 1, 2020, for mortgages sold to Freddie Mac, the Seller must ensure that the form of consent obtained from the taxpayer permits the use and sharing of the tax return or tax return information with and by any actual or potential owners of the mortgage as well as their service providers, successors and assigns. Refer to Guide Section 5302.4 for more information

The Guide requires that the Seller maintain in the mortgage file a signed copy of the borrower’s consent to any disclosure of the taxpayer’s tax return or tax return information to a third party, when applicable. The Seller may choose to use the signed Uniform Residential Loan Application (URLA) as that consent if they determine it is sufficient and timely. We strongly recommend consulting with your legal counsel or compliance department regarding the interpretation and application of the Taxpayer First Act.

Yes, Servicers must obtain and retain signed consent forms when tax return information is obtained as part of their servicing activity for mortgages owned or securitized by Freddie Mac.