Taxpayer First Act
The Taxpayer First Act, signed into law on July 1, 2019, contains a provision stating that persons receiving tax return information must obtain express permission from taxpayers before disclosing that information to a third party. This provision of the Act is effective as of December 28, 2019.
The provision applies to both lenders and servicers obtaining tax return information from borrowers during the origination or servicing of a mortgage loan. Lenders and servicers will now be required to obtain express consent from taxpayers prior to sharing tax information with third parties, including any actual or potential owners of the loan, such as Fannie Mae.
The IRS has no plans at this time to provide a standard form regarding disclosing or sharing tax return information with other parties. Servicers and sellers are free to prepare their own taxpayer disclosure as long as the disclosure provides express permission to share tax return information in accordance with the Act. However, lenders are strongly encouraged to use the Taxpayer Consent Language drafted by the Mortgage Industry Standards Maintenance Organization (MISMO), which appears as follows:
“I understand, acknowledge, and agree that the Lender and Other Loan Participants can obtain, use and share tax return information for purposes of (i) providing an offer; (ii) originating, maintaining, managing, monitoring, servicing, selling, insuring, and securitizing a loan; (iii) marketing; or (iv) as otherwise permitted by applicable laws, including state and federal privacy and data security laws. The Lender includes the Lender’s affiliates, agents, service providers and any of aforementioned parties’ successors and assigns. The Other Loan Participants includes any actual or potential owners of a loan resulting from your loan application, or acquirers of any beneficial or other interest in the loan, any mortgage insurer, guarantor, any servicers or service providers for these parties and any of aforementioned parties’ successors and assigns.”
Express consent for how the tax return information will be used must be obtained prior to ordering the tax transcript. Consent to share tax return information must be obtained prior to sharing the information with any third parties. The statement put forth by the MISMO covers both consents.
For more information on the Act, please refer to the following sources:
https://www.fanniemae.com/content/announcement/ntce110619.pdf
Elizabeth Dailey, JD, is a Regulatory Compliance Director with CLA. She is a graduate of the University of New Hampshire and earned her juris doctor at New England Law. She is admitted to the Massachusetts Bar.
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