Why Haven’t Loan Officers Been Told These Facts?
Tax Filing Time = Stale Dated Tax Return Artifacts

When using tax returns, be mindful of credit policy regarding application and disbursement/note dates. In particular, ensure your processing satisfies the stated requirements for borrowers closing after July 1, 2024. The GSEs have similar but also different requirements related to tax return artifacts.


Bulletin 2024-1

Age of tax returns

We have updated the age of tax return requirements as follows:

  • Updated the requirements to reflect dates specific to the 2023 tax year
  • Expanded our requirements to permit alternative documentation in lieu of the Internal Revenue Service (IRS) confirmation that tax transcript(s) are not yet available for the business tax return(s), as follows:
    • Confirmation business tax returns were filed after IRS filing due date for the prior year(s) (e.g., 2022 business tax return in file was signed later in the year (e.g., October)) or documentation from third-party tax return preparer confirming 2023 business return has not yet been filed; and
    • Documented evidence of continued income stability using at least one of the examples listed in Section 5304.1(d) in the row labeled “Business and/or individual tax return(s) – most recent calendar year not yet available”

Section 5304.1(d)

Business and/or individual tax return(s) – most recent calendar year not yet available

If the Borrower’s federal individual and/or business income tax returns for the most recent calendar year, or fiscal year as applicable, are not available (e.g., Borrower and/or Borrower’s business filed an IRS extension, tax returns are not yet filed with the IRS), examples of factors and documentation to consider when using older tax returns to determine continued income stability include, but are not limited to, the following:

  • Business review and analysis of current business activity through a review of the most recent financial statement(s) that cover the period since the last tax return filing(s)
  • Business review and analysis of current business activity through a review of at least the most recent three months of business bank statements
  • Signed IRS Form 941, Employer’s Quarterly Federal Tax Return, for the prior calendar year and current calendar year quarter(s) that supports wages and other compensation documented on the most recent business tax return
  • Review of tax liability reported with IRS tax filing extension(s) (e.g., IRS Form 4868, IRS Form 7004) to determine consistency with tax liability reported on prior year(s) tax return(s)
  • Review of W-2s, 1099s and/or K-1s from the most recent calendar year, if available

All Mortgages with Note Dates on or after November 1, 2024, the most recent tax return(s) must be no older than 2023, regardless of other factors such as tax filing extension status or IRS tax filing deadline relief status.


Application Dates: October 15, 2023, to April 14, 2024
Disbursement Dates: October 15, 2023, to April 14, 2024

  • The 2022 tax return is required. A tax Extension (IRS Form 4868) is not permitted.

Application Dates: October 15, 2023, to April 14, 2024
Disbursement Dates April 15, 2024, to June 30, 2024

  • The 2023 tax return is recommended; however, the 2022 is also acceptable.
  • If the 2023 tax return is not obtained, the loan file must include a completed and signed IRS Form 4506-C for transcripts of tax returns provided by the borrower to the lender.

Application Dates: October 15, 2023, to April 14, 2024
Disbursement Dates July 1, 2024, to October 14, 2024

Application Dates: April 15, 2024, to October 14, 2024
Disbursement Dates April 15, 2024, to December 31, 2024

In the event the 2023 tax return is not obtained, the lender must perform all of the following:

Obtain one of the following documents from the borrower:

  • Copy of IRS Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) filed with the IRS.
  • Proof of the e-filing of Form 4868.


  • Confirmation of electronic payment(s), including the confirmation number, of all or part of the estimated income taxes.

Review the total tax liability either reported on IRS Form 4868 or paid by the borrower and compare it with the borrower’s tax liability from the most recent year obtained as a measure of income source stability and continuance. An estimated tax liability that is inconsistent with previous years may make it necessary for the lender to require the current returns in order to proceed.

Obtain IRS response from the filing of IRS Form 4506–C confirming that no transcripts are available for the applicable tax year. (Alternatively, lenders may, at their own discretion, rely on borrower-provided evidence that no transcripts are available for applicable tax years when that evidence is obtained directly from the IRS website).

Note: Any documents provided by the borrower must clearly identify the source of information including identifying information in the Internet banner on the document.


  • For business tax returns, if the borrower’s business uses a fiscal year (a year ending on the last day of any month except December), the lender may adjust the dates in the above chart to determine what year(s) of business tax returns are required in relation to the application date/disbursement date of the new mortgage loan.
  • For loans with income validated by DU, lenders may rely on the age of tax transcript methodology provided by the service. See B3-2-02, DU Validation Service

Application Dates On or After October 15, 2024 = 2023 Returns Required

B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns (05/03/2023)


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BEHIND THE SCENES – FHFA Announces Key Updates for Implementation of Enterprise Credit Score and Credit Report Requirements

A few weeks ago, the FHFA announced a surprise delay in the planned VantageScore 4 / FICO 10 T implementation. The same goes for the migration to bi-merge credit reports. Additionally, the FHFA announced, in the interest of doing us all a great favor, that the transition execution now involves a parallel implementation of the bi-merge and new credit score models, which will “reduce complexity.”

Change management experts will tell you that from a complexity and adoption perspective, such coupling makes no sense, as testing and validating the implementation is less complicated with linear implementations. Do the score first, then the bi-merge, or vice versa.

To be fair, “synchronizing bi-merge credit reporting with the implementation of the new credit score model requirements” does not necessarily equate to a parallel implementation. Perhaps she means “coordinated” rather than synchronized. We shall see.

The real issue is just as likely that the FHFA and the GSEs bit off more of a project than they could chew. Perhaps Director Thompson wisely figured it was time to mollify apprehensive stakeholders and avoid another slipping on a banana peel (ala DTI pricing hit) incident.

In addition to dealing with the kids in the basement, one of the FHFA’s primary concerns must be how the bi-merge/credit score/average score changes will affect GSE risk management and pricing. Oh yes, moving to bi-merge will lower credit scores absent average scoring. The new credit score models and bi-merge impacts look promising. Yet, who knows for sure how this will pan out? Consequently, what immediate effect should the transition have on pricing and risk policy? If this is all new to you, see the LOSJ V4 I9 link below for an overview of the credit migration.

From Director Thompson

“Synchronizing bi-merge credit reporting with the implementation of the new credit score model requirements will reduce complexity for market participants, which is a key objective of our transition efforts,” said FHFA Director Sandra L. Thompson. “The release of historical data on tens of millions of Enterprise loan acquisitions affirms the commitment of FHFA and the Enterprises to a robust, transparent implementation process.”

Following extensive stakeholder engagement and input, FHFA is aligning the implementation date of the bi-merge credit reporting requirement with the transition from the Classic FICO credit score model. This aligned transition is expected to occur in the fourth quarter of 2025.

Translation: Director Thompson got another earful of apocalyptic whining from key stakeholders. With everyone feeling pinched these days, she must be losing her mind babysitting the GSEs while fending off grumpy old lenders. It’s time to kill two birds with one stone, punt. Oh, well, who needs more qualified homebuyers in a seller’s market anyway?

FHFA Announces Key Updates for Implementation of Enterprise Credit Score Requirements



Tip of the Week – Use Your Senses Wisely

Two ears, two eyes, one mouth. Do you have an eye or hearing problem? Are ears merely adornments, and eyes for watching TV?

Listen and observe more than you speak. Hearing and seeing are the learning senses. Before putting the mouth in gear, ensure the wheel is turned in the right direction.

Proverbs 20:12 The hearing ear and the seeing eye, the Lord has made them both.

Proverbs 14:3 By the mouth of a fool comes a rod for his back, but the lips of the wise will preserve them.