With implementation of a new IRS rule just weeks away, a group of seven financial trade groups, including Credit Union National Association (CUNA) and National Association of Federal Credit Unions (NAFCU), wrote a joint letter to the head of the IRS saying the rule could harm their members' mortgage lending activities.
In the letter, addressed to Commissioner John Koskinen, the trades said in late September 2016, the IRS notified tax professionals and tax transcript vendors that the agency would require them to use an updated Secure Access process, which includes identity-proofing, financial verification and mobile phone verification. The effective date for the changes is Oct. 24.
"The undersigned believe the new requirements have broad ramifications that could disrupt mortgage lending activity and adversely affect the ability of consumers to obtain financing to purchase, refinance or borrow against the equity in their homes," the group said in the letter. "The ability to directly affirm taxpayer income reported to the IRS serves a crucial function in the extension of credit to Americans seeking to purchase homes." The provisioning of tax transcript information from the IRS to the lender, without the possibility of alteration by prospective home buyers, the letter added, serves as a key fraud deterrent.
"Lenders rely upon this independent IRS function in the vast majority of residential mortgage loan originations," the group emphasized. "The undersigned recognizes the need for continuous improvement in cybersecurity practices. Our organizations have been supportive of increased cybersecurity practices, education, and training."
The undersigned asserted that while they support the IRS' efforts to keep taxpayer data safe, they are nonetheless concerned that "some components of the new IRS cybersecurity requirement, as well as the incredibly short implementation timeline, could create operational problems that might significantly impair consumer's ability to obtain credit to purchase a home."
Essentially the financial trades said they have two concerns with the IRS requirement: insufficient time to prepare (barely a month since the notification); and the fact that the IRS requirement is not a standard cybersecurity practice for business-to-business (or government) data exchanges.
"We ask the IRS to collaborate with the industry to develop solutions to ensure the protection of taxpayer information," the advocates requested. "Our industry strongly supports enhanced security standards. However, the IRS-proposed requirements are simply unworkable. The industry is committed to working with the IRS to develop workable alternative standards in an expedited manner that will avoid these market disruptions."
The other five signees of the letter comprised American Bankers Association; Consumer Mortgage Coalition; The Independent Community Bankers of America; Housing Policy Council of the Financial Services Roundtable; and Mortgage Bankers Association.