Freddie Mac: Taxpayer First Act and Use of Tax Return Information

Freddie Mac: Taxpayer First Act and Use of Tax Return Information

Investor Update
November 6, 2019

Source: Freddie Mac

This notice is being provided as a courtesy to our clients.

The Taxpayer First Act, signed into law on July 1, 2019, includes a provision that persons receiving tax return information must obtain the express permission of taxpayers prior to disclosing it to any other person. This component of the law goes into effect on December 28, 2019. “Tax return information” is defined under the IRS Code, 26 U.S.C. § 6103.

Sellers or Servicers obtaining tax return information after taxpayer consent during the origination or servicing of a mortgage also must obtain the consent of the taxpayer to be able to share this information with another party. Such permitted sharing should extend to actual or potential owners of the loan, such as Freddie Mac or any other loan participant.

The Internal Revenue Service has indicated that it has no plans at this time to provide a standard form to use when disclosing or sharing tax return information with other parties.

The Mortgage Industry Standards Maintenance Organization (MISMO®) drafted a sample Taxpayer Consent Form designed for Sellers/Servicers to use for this purpose. MISMO members can access this sample form on the MISMO website. Sellers/Servicers may also prepare their own taxpayer consent form, as long as the form provides the Seller/Servicer with express permission to obtain tax return information and to share it with potential loan purchasers in accordance with the terms of the Act.

The Freddie Mac Single-Family Seller/Servicer Guide (Guide) requires compliance with all federal, State and local laws. Once the law becomes effective on December 28, 2019, Sellers must obtain a signed taxpayer consent form from borrowers for all mortgages with Freddie Mac settlement dates on or after December 28, 2019.

Servicers must also obtain signed consent forms on or after this date when tax return information is obtained as part of the servicing function (for example, when processing a mortgage modification). We will update our Guide with a future Guide Bulletin to require that a signed copy of the consent form be maintained in the mortgage file.

Clients should consult their legal counsel or compliance department regarding compliance with the Taxpayer First Act.