New Developments Emerge About E-Signing The 4506-T

*New Developments Emerge About E-Signing The 4506*
**By Tony Garritano**

***The deadline is just around the corner. Next week the I.R.S. will begin accepting electronically signed 4506-T forms. PROGRESS in Lending has been extensively covering this story since the news broke a few months ago. Today we have learned about a new development in this groundbreaking move that will once and for all enable all upfront disclosures to be e-signed. Here’s the news:

****To some lenders e-signing may still be a foreign concept. This news could quickly change that. National Credit-reporting System, Inc. (NCS), a full-service consumer reporting agency specializing in income, identity, and credit intelligence, has partnered with eSignSystems, a division of Wave Systems Corp., to provide a full suite of e-signing, e-delivery, and e-vaulting solutions.

****“It has been quite the journey,” stated NCS executive vice president, Curtis Knuth. “We have been pushing for this. We used to have to courier 4506-Ts by truck back and forth and store all the paper. Looking back, the California MBA piloted a small program that was really the start of the 4506-T form. We were the first to push the 4506-T out on a national basis. Now it’s come full circle with the I.R.S.’ acceptance of e-signatures.”

****The move by NCS anticipates the I.R.S.’ January 7 acceptance of electronic signatures on 4506-T forms, which are used by lenders, insurers, and healthcare firms to obtain tax transcripts for consumer and business income verification. In addition to allowing lending customers who use the company’s TRV Services to move the signing and management of their loan origination documents online, the solution will open the door for NCS to serve customers in other sectors, such as insurance and healthcare.

****“NCS was very focused on how they were going to produce audit trails and manage the 4506-T,” noted Kelly Purcell, eSignSystems’ Executive Vice President. “The management and storage of the 4506-T is critical given the new I.R.S. guidelines. NCS knew that they needed more then just an e-signature technology provider. You need to offer the full quality review dictated by the I.R.S.”

****“We wanted the audit trail to track how the document is transmitted at every step,” added Knuth. “Two of the three credit repositories are resellers of ours, so we have to make sure that we meet every possible rule. If you think about it, really it was the Wild, Wild West for a long time. You had lenders e-mailing the 4506-T and the I.R.S. did not want to police the process. So, we were happy to take on that function on behalf of the industry through this partnership with eSignSystems.”

****This final e-signing advancement will have immediate impact for NCS’ mortgage origination clients, where the I.R.S. acceptance of e-signed 4506-T forms completes the last technical milestone for e-signing acceptance on conventional loan origination. For the lender and investor it means a more compliant, auditable disclosure process, and offers an easy path to meet the new Consumer Financial Protection Bureau regulations for new mortgage disclosures.

****What does all of this mean for NCS users? The integration of eSignSystems’ SmartSAFE application will allow NCS clients to create their own branded SigningRooms within the NCS web portal, providing “one-stop shopping” for the NCS customer, from e-signing to submission of the 4506-T.

****“Remember, getting the 4506-T processed by the IRS isn’t always easy,” Knuth pointed out. “If the 4506-T is coming from a broker it may have gone through three faxes before it gets to us. So, there are clarity issues in a paper world. An e-document resolves that. Also, in an e-world you know that every field has been filled out completely and accurately. This improves overall data integrity. Secondly, the workflow improvements are important, as well. If you are getting rejected by the I.R.S. that costs time and money.”

****NCS’ Web portal will continue to provide the option to submit physically signed or “wet” signed 4506-T. This was an important requirement for NCS clients as they moved through obtaining consent from internal stakeholders on implementation of electronic signature in their workflow. Additionally, for NCS clients and prospective clients utilizing an existing e-signature solution, the eSignSystems solution provides for simplistic and secure integration to NCS for the processing of 4506-T forms.

****Why is that important? eSignSystems has dozens of prominent loan origination system clients and document preparation vendor clients that will also benefit from this partnership. “We wanted to consume any 4506-T that is e-signed by anyone in the eSignSystems network,” said Knuth. “We want to get everyone that e-signs disclosures to simplify their workflow by using the full spectrum of services. Essentially, you’ve got two best-in-class vendors joining up to offer a superior product to the entire mortgage industry. Most of the other vendors just provide a Web portal. We take the 4506-T, do all the QC work, and we don’t just provide a transcript back to the client, we do a cashflow analysis and all sorts of analytics. We’re not just pushing the transcript back and forth.”

****NCS is a leading IRS Income Verification Express System (IVES) participant, participating in the IVES program and previous program generations for almost 20 years, the longest of any nationwide provider of the solution. NCS has positioned itself as an advocate for the industries it serves and has historically sought to provide guidance to the governmental agencies the company works with. The IRS places specific obligations on IVES vendors handling e-signed 4506-Ts to warrant the validity of all e-signed documents, both in terms of the e-signing ceremony and document tamper detection, for a period of two years.

****eSignSystems’ SmartSAFE supports and complies with all recently published I.R.S. guidelines allowing electronic signatures on conventional mortgage origination documents as well as 4506-T and 4506-T-EZ, and supports FHA loans that still require some “wet” signed documents.

****The NCS and eSignSystems solution was built in tandem with the I.R.S. regulations, as both companies provided leadership in their position of advocacy to the I.R.S. on e-signature deployment. NCS SVP Cecil Bowman, a 35-year veteran of I.R.S. eServices development, served as Chair of the Mortgage Banking Association (MBA) 4506-T workgroup, while both NCS and eSignSystems were participants in the ResTech I.R.S. workgroup.

****“NCS will be able to accept e-signed 4506-T forms from other eSignSystems clients and thus provide them full services,” concluded Purcell. “This is a big step forward for e-signing and for our industry.”

****On a side note, we’ve heard lots of news about the fiscal cliff. I heard that President Obama e-signed the final bill. So, if both GSEs, the President himself and now the I.R.S. are using and accepting e-signatures, it makes me wonder why all lenders active in the market today aren’t e-signing, too.

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at