Recent IRS decision may speed up mortgage process

While we’ve seen plenty of measures put in place that effectively increase the amount of time it takes to close mortgages, the Internal Revenue Service announced one thing that will speed up the process at least a little bit.

At the end of October, IRS officials announced the agency will accept electronic signatures on forms requesting a copy of tax returns. That may seem like a small thing on the surface, but people applying for mortgages must supply a slew of financial information, and practically everyone must fill out requests for tax transcripts from the IRS.

“The current process for requesting a borrower’s tax-return transcript is labor-intensive and time-consuming,” said David H. Stevens, president and chief executive officer of the national Mortgage Bankers Association.

“With this announcement, the IRS is making this process much easier and more efficient,” he said. “As anyone who has purchased or refinanced a home can attest, the volume of paperwork involved can be quite burdensome. Allowing for electronic signatures will save time and reduce the likelihood of errors or loss of documents. This is a win for consumers and lenders alike.”

Why was Stevens applauding the announcement? Because taking out a mortgage has become a very time-intensive process. According to the Mortgage Bankers Association of Arkansas, mortgages typically closed within 30 days in the first part of 2012, but delays have become common.

The delays, of course, are due primarily to government regulations put in place in hopes of making sure banks are not issuing risky mortgages. Overly generous lending standards have been blamed for the rash of foreclosures and mortgage defaults that hit real estate markets in 2008 and are still causing problems.

Tightening those standards has resulted in requiring a lot of paperwork from borrowers — and more paperwork means more opportunities for delays. The decision of IRS officials to target one of the sources of those delays may seem like a minor move on the surface, but it’s a step in the right direction. Hopefully, we’ll see some more measures that will speed up the mortgage application process while still safeguarding against risky loans.

Speaking of mortgages, here’s a statistic worth following: For the week ended Oct. 19, 81 percent of mortgage applications were from people wanting to refinance their home loans. That’s right in line with what Arkansas mortgage bankers are reporting.

The high percentage of refinance applications makes sense. The average interest rate on a 30year mortgage was 3.57 percent in mid-October and that’s quite low. It’s no surprise that people who already have mortgages are looking to save some serious money by refinancing at low interest rates.

The “electronic signature” announcement from the IRS means that people refinancing mortgages and people taking out new mortgages will have an easier time of securing the necessary documents needed to take out home loans. Let’s hope that more efficiencies are built into the mortgage application process in the near future.