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Form 4506…Red flag if they won’t sign?

I was just recording a teleseminar with Karen Deis of about red flags in tax returns. The regulators are coming down hard on mortgage lenders (what a surprise) and this is a great time to review signs of fraud.

One of Karen’s customers got caught for fraud by a random FNMA audit. The 4506 was the key, ‘Request for Transcript of Tax Return.’ Many lenders routinely require a signature on the 4506 at closing.

SBA and some other business lenders have enough time to follow up and request the tax returns. If it is a personal loan, you may just put it in the file and your internal audit team or the investors auditors may or may not pull that one to check.

But if they don’t want to sign, that’s a red flag, right?
Red flag
Not necessarily!

I was once asked to sign one in closing and refused. Why? It was BLANK! Well, not totally blank. It had my name on it. But not the actual forms they were requesting, the years of those forms, or who could request it.

I said no, and rightly so.

Next time your borrower refuses to sign, find out why. If they need the form completed before they sign, if it is a blank page on the application and they need you to write in “this page is blank” go ahead and do it.

And praise the borrower for actually reading those docs!

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.