US moves to paperless mortgages

One obstacle to paperless mortgage applications in the US has been removed with the  US Internal Revenue Service introducing the ability for crucial paperwork to be electronically signed and submitted.

The IRS 4506-T form, which is required for income verification in the mortgage application process through the release of tax return information, previously had to be wet-signed, mailed to a processing vendor, submitted to the IRS, processed and returned to the mortgage lender to then be attached, filed and stored with the consumer application. 

With electronic signing of the 4506-T coming into effect, mortgage providers in the US will be able to keep the entire process electronic. 

“It’s like the Holy Grail,” said Bob Catlin, President of Signature Mortgage. “The 4506-T was the only document missing in the mortgage document set and now we’ll be able to get through an application 100 percent electronically without the added challenge and inconvenience of processing this one piece of the application manually.

Many banks and mortgage originators have resisted adding electronic signature capabilities to their mortgage process due to the 4506-T form having to be manually processed. 

“The requirement of a manual signature on the IRS 4506-T was the last significant impediment to a truly all-electronic mortgage application process,” said David Whitaker, legal counsel for BuckleySandler LLP. 

“With its new guidance, the IRS has made it possible for the 4506-T to be electronically originated, signed and transmitted, while providing controls to assure that the signer has been properly authenticated and the electronic signature can be reliably attributed to the signer,” continued Whitaker. This new ability to sign the 4506-T electronically leaves financial organizations without reason to delay the adoption of a secure, compliant and convenient process and technology that is e-signatures.

Michael Laurie, vice-president of e-signature solutions provider Silanis, believes the impact on the electronic signature industry will be substantial. 

“The fact that the IRS is now accepting electronic signatures demonstrates how an increasing number of government and standards organisations are executing paperless processing initiatives. 

“This initiative shows that e-signatures have become mainstream,” continued Laurie.