I have a listing that went under contract in May. Buyer was very motivated and things moved quickly. Closing was early June.

A day before closing, buyers agent informed me that we would have to push back closing.

Apparently buyer is self employed, had not been making quarterly tax payments, had not paid 2019 taxes yet, and despite the tax deadline being moved, lender / FHA was requiring them to either pay taxes in full prior to closing or set up a payment plan (why they only informed buyer of this a day before closing is ridiculous in its own right). The buyer apparently set it up that day and sent confirmation email from the IRS to the lender. The lender said their policy was that the only thing they would accept was a letter from the IRS confirming setup of payment plan and details of plan, and that IRS is behind due to COVID and it would take 2-4 weeks.

Fast forward to now, we are closing in on the deadline of the third extension of closing date we made with the buyers. Still no letter from IRS. Buyer even sent lender proof of bank account showing first payment to IRS was made. They hold that only a letter from the IRS will suffice.

Mortgage people - Is this a specific lender issue or FHA issue? There is no evidence that IRS is going to deliver this confirmation letter this week, and seller is getting fed up. I'm trying to find out who I need to put pressure on.

I would wager the buyer needed his 2019 tax returns to count his self employment income to qualify for the loan. When doing this you have to make sure the borrower sent in the same tax returns to the IRS that they are sending the underwriter as tax returns are self prepared. The usual mechanism for this is a for called a 4506-T. IRS is not doing these right now, so the underwriter is requiring proof that the payment was made to prove the income is legit.

So what the lender is waiting for is not even being done right now?

He's got payment confirmation with her bank account record and confirmation email from IRS.

A letter and 4506 are not the same. 4506 are computer produced. A letter is from a human

SteveBott said:

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A letter and 4506 are not the same. 4506 are computer produced. A letter is from a human

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So why are some lenders ok with email confirmation and some not?

Is this a lender issue or an FHA issue?

Thank y'all for responding by the way.

I'm not an FHA guy. I do them but know the grizzly details of their underwriting. I'm conventional. This is likely an investor driven issue who buys the loan. That could be fha but could be some other entity. No way to know.

I suspect lender driven. But now I'm guessing. How long has he been self employed?

SteveBott said:

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I'm not an FHA guy. I do them but know the grizzly details of their underwriting. I'm conventional. This is likely an investor driven issue who buys the loan. That could be fha but could be some other entity. No way to know.

I suspect lender driven. But now I'm guessing. How long has he been self employed?

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That I don't know. But he's a plumber, so likely a while.

While buyer is at fault for not having taxes done while trying to buy, lender is also at fault for not being proactive about it until the day before closing. Now all parties are ready but stuck twiddling their thumbs, and I'm about out of ammo trying to keep seller from moving on. We've got hard additional earnest, we've reduced cash from seller toward buyers costs. Buyer is in a month to month lease with their current landlord. All the while, I've got two lender contacts that said they would have closed it by now.

Don't make the assumption how long he was self employed. He could of just started the business less then two years ago. At this point I'd tell him find a new lender or the for sale sign goes up.

Friend works for IRS and says their office is a cluster.

And yes he should of took care of his taxes. Yes the lender should of wanted the docs much sooner. Yes it's a pain.

But your paid to fix problems like me.

Thanks for answering the questions, but the lecture is unneeded. I've been attempting to fix this for a month. I rarely if ever discuss my deals on Texags. In this case, I've been told repeatedly that this has been an IRS problem yet I've recently had two lender friends say it's a lender problem. I was trying to get as many lender opinions as possible before I call the loan officer back.

It was not a lecture. It was advise. You asked for

SteveBott said:

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It was not a lecture. It was advise. You asked for

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And it was very appreciated.