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Apart from Tuesday (CPI day), today is this week’s next biggest deal in terms of scheduled economic data.  The trifecta included Jobless Claims, PPI, and Retail Sales.  Of these, Retail Sales has been the bigger market mover on average, but by a smaller margin in recent months.  Today’s example missed the consensus, but not by much.  It was also more than offset by unfriendly results in the other two reports.  Core PPI fell to 0.3 from 0.5, but that was higher than expected.  Jobless Claims didn’t help with continued claims moving well under the 1.9m ceiling and with a big downward revision to last week’s 1.906m reading (now 1.794m).  With that, we find ourselves at the end of a CPI/PPI week with yields pushing up toward 4.30% yet again.

Source: mortgagenewsdaily.com

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Mortgage rates initially ticked up a little bit following the release of Tuesday’s slightly hotter-than-expected Consumer Price Index data. But they’ve since trended back down and remain well below last month’s levels. Rates are still expected to go down this year.

Last month, average 30-year mortgage rates rose to 6.52%. So far this month, they’ve been trending a bit lower, and they could drop below 6% by the end of the year, according to Fannie Mae’s latest forecast.

But mortgage rates probably won’t drop substantially until we get more data showing that inflation is continuing to slow.

In February, prices rose 3.2% year over year, according to the Bureau of Labor Statistics. This is a slight uptick from the previous month, which showed prices rising 3.1% on an annual basis.

Federal Reserve officials want to see more data that inflation is coming down before they start lowering the federal funds rate. Once we get closer to a likely Fed cut, mortgage rates should start to fall.

Right now, investors still believe the Fed could start cutting rates as soon as June, according to the CME FedWatch Tool. So we could see mortgage rates go down in just a few months. 

Mortgage Rates Today

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Mortgage Calculator

Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.

Mortgage Rate Projection for 2024

Mortgage rates increased dramatically for most of 2023, though they started trending back down in the final months of the year. As the economy continues to normalize this year, rates should come down even further.

In the last 12 months, the Consumer Price Index rose by 3.2%, a significant slowdown compared to when it peaked at 9.1% in 2022. This is good news for mortgage rates — as inflation slows and the Federal Reserve is able to start cutting the federal funds rate, mortgage rates are expected to trend down as well.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of the best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

When Will House Prices Come Down?

We aren’t likely to see home prices drop anytime soon thanks to extremely limited supply. In fact, they’ll likely rise this year as mortgage rates drop.

Fannie Mae researchers expect prices to increase 3.2% in 2024, while the Mortgage Bankers Association expects a 4.1% increase in 2024.

Lower mortgage rates will bring more buyers onto the market, putting upward pressure on prices. But prices aren’t currently expected to increase as much as they have in recent years. 

Fixed-Rate vs. Adjustable-Rate Mortgage Pros and Cons

Fixed-rate mortgages lock in your rate for the entire life of your loan. Adjustable-rate mortgages lock in your rate for the first few years, then your rate goes up or down periodically.

So how do you choose between a fixed-rate vs. adjustable-rate mortgage?

ARMs typically start with lower rates than fixed-rate mortgages, but ARM rates can go up once your initial introductory period is over. If you plan on moving or refinancing before the rate adjusts, an ARM could be a good deal. But keep in mind that a change in circumstances could prevent you from doing these things, so it’s a good idea to think about whether your budget could handle a higher monthly payment.

Fixed-rate mortgage are a good choice for borrowers who want stability, since your monthly principal and interest payments won’t change throughout the life of the loan (though your mortgage payment could increase if your taxes or insurance go up).

But in exchange for this stability, you’ll take on a higher rate. This might seem like a bad deal right now, but if rates increase further down the road, you might be glad to have a rate locked in. And if rates trend down, you may be able to refinance to snag a lower rate 

How Does an Adjustable-Rate Mortgage Work?

Adjustable-rate mortgages start with an introductory period where your rate will remain fixed for a certain period of time. Once that period is up, it will begin to adjust periodically — typically once per year or once every six months.

How much your rate will change depends on the index that the ARM uses and the margin set by the lender. Lenders choose the index that their ARMs use, and this rate can trend up or down depending on current market conditions.

The margin is the amount of interest a lender charges on top of the index. You should shop around with multiple lenders to see which one offers the lowest margin.

ARMs also come with limits on how much they can change and how high they can go. For example, an ARM might be limited to a 2% increase or decrease every time it adjusts, with a maximum rate of 8%.

Molly Grace

Mortgage Reporter

Source: businessinsider.com

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The Department of Housing and Urban Development is accused of failing to issue mortgage insurance premium refunds to borrowers who opted to terminate their FHA-insured mortgages early. As of 2020, almost $400 million is owed to homeowners. 

A proposed class action lawsuit, filed by borrower Tricia Sarmiento in Florida, blames the department for slow-walking the disbursement of monies owed and for making it bureaucratically complicated to get the process going in the first place.

Almost 60,000 borrowers in Florida are owed refunds, totaling $22 million, according to 2020 data from HUD’s Office of Inspector General, which was cited in the suit. Meanwhile, nationwide, 754,730 homeowners had unclaimed funds totaling $384.7 million. Of that sum, 200,576 borrowers terminated their mortgage more than 20 years ago.

HUD watchdog’s audits in 2020 and 2022 rang the alarm on such practices, outlining the department’s lack of protocols and adequate procedures relating to reimbursing MIP to borrowers. 

Sarmiento in her suit is demanding for HUD to pay back overdue refunds to borrowers and is pushing the department to reform “a system which has been plagued by failure.” Law360 first reported the story.

“It is a fight for transparency, accountability and fairness,” the suit said. “The federal agency’s failure to uphold its duties has deprived thousands of homeowners of substantial refunds. “

The Department of Housing and Urban Development declined to comment on pending litigation.

Joshua H. Eggnatz, the attorney representing Sarmiento, said this is an important case for all borrowers who have an FHA-backed mortgage.

“We are seeking return of our client’s and class members’ unused premiums that should have been refunded to them long ago, and a change at HUD so future buyers are protected,” Eggnatz wrote in a statement Wednesday.

Per HUD regulations, a termination of an FHA mortgage within seven years of purchase or refinancing triggers an overpayment of the MIP and the department is required to automatically refund the unearned sum.

Despite the protocol, the federal agency systematically fails to identify eligible borrowers who qualify and imposes unnecessary bureaucratic hurdles as a means of withholding “hundreds of millions of dollars from homeowners,” the suit alleges.

The plaintiff terminated her FHA loan in 2001 and was not informed at the time of doing so that she was owed a refund. Furthermore, Sarmiento did not know she had to request a refund application to recover her money. 

Upon learning that was the case, the plaintiff requested the document on Jan. 31,  2022. Two years later, the plaintiff claims she has not been provided with the refund application. HUD owes her a refund of over $1,000, the suit purports. 

According to the legal action, for numerous applicants “HUD took a significant, unreasonable, and unjustified length of time, often two to three years, before a refund application was received by the borrower.” 

Instead of automatically issuing a refund, as is promised by law, HUD requires borrowers to affirmatively request a refund application and sends these applications to old addresses despite knowing “the borrower no longer lives at the FHA-insured property address,” the proposed class action outlines. 

Additionally, the agency often fails to provide notice to qualifying borrowers that are owed a refund.

“Plaintiff seeks to enforce HUD’s nondiscretionary, plainly defined, and purely ministerial duties – indeed, there is no dispute that plaintiff and class members are owed MIP refunds,” the suit asserts.

Source: nationalmortgagenews.com

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Bonds are off to a weaker start today, but not in a major way and not due to any interesting developments.  In general, there was some optimism heading into yesterday’s CPI and while it briefly seemed to have been justified (in the first few minutes after the data), traders concluded that the Fed would only be more “on hold” when we heard from them next week.  Fed Funds Futures agreed:

This week’s Treasury auction cycle also helped explain some of yesterday morning’s weakness as traders positioned for the 10yr auction.  Today’s only relevant calendar item is the 30yr bond auction at 1pm.  It doesn’t have quite the pedigree of the 10yr auction, but being the last auction of the cycle, it could give way to a shift in tone after 1pm.  In general though, bonds have rejected the move toward 4% 10yr yields and are now waiting for Thursday’s econ data as well as next week’s Fed announcement. 

Source: mortgagenewsdaily.com

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To paraphrase Julie Andrews and the Muppets: The springtime cometh for the housing market. This is traditionally the time when home sales bloom. But 2023’s deep freeze begs the question of whether the warming will emerge from under an ice cube or an iceberg. This season, the economists say, will be no picnic. 

Take the typical home value of $349,216, which is more than 40% higher than before the pandemic. Home prices increased on a monthly basis in 45 of the 50 largest metropolitan areas in February, and they’re up in 47 of the 50 largest metropolitan areas on an annual basis, per Zillow. (By Redfin’s count, prices increased in all 50 of the most populous metropolitan areas, which is the first time that’s occurred since the summer of 2022.) 

The typical mortgage payment more than doubled during the pandemic, rising by roughly 106%, and is still up 9% from last year, according to Zillow. Mortgage rates have fallen from their recent peak at slightly above 8%, but they’re still high compared to previous historic lows. While the average 30-year fixed mortgage rate is sitting at 7.02%, as of the latest reading, the expectation is that it’ll come down further if the Federal Reserve cuts interest rates this year.

So it’s not an easy market by any means, as Wells Fargo’s economics team recently concluded: “The housing market continues to navigate tumultuous waters.” But more inventory is coming on the market, with the easing of the so-called lock-in effect, which refers to homeowners holding onto their homes for fear of losing their low mortgage rates. The lock-in effect was a major factor last year in pushing existing home sales to their lowest point in almost 30 years. 

“A substantial infusion of new inventory to the market is welcome news for buyers on the hunt for their next home this spring—and more evidence that the effects of ‘rate lock’ are starting to weaken,” Zillow’s chief economist wrote recently in a market report.

New listings of existing homes on Zillow are up 21% in February compared to last year and 20% from the prior month; on a local level, more sellers are coming back to the market in Dallas, Minneapolis, and Austin, where new listings are the highest. And according to Redfin, new listings are up 13%, which is the biggest annual increase in almost three years. The total number of homes for sale is up 3%, and that’s the biggest increase in nine months, Redfin’s data journalist, Dana Anderson, recently wrote in a market update. (Zillow’s analysis shows there are 12% more total active listings than last year.)

So maybe this year’s crucial spring selling season is shaping up more like a shopping window, if not a mini-spring season. 

Pending sales are down 6% from the prior year, according to Redfin, which means high housing costs are continuing to price out some would-be homebuyers. There’s also competition even as the market has cooled down, particularly among “attractively-priced and well-marketed homes,” as Zillow put it. That doesn’t seem like it’ll ever completely change given the housing market is missing anywhere between 2 million and 7 million homes, despite an increase in listings. 

So what’ll happen to existing home sales this year? They rose 3.1% in January from the previous month, but declined 1.7% from a year earlier. Better economic conditions, and a more stabilized housing market, might not solve all.

“Although lower financing costs, rising supply and brightening economic growth prospects may help home sales turn around from the sharp contraction experienced over the past two years, the recovery will likely be limited by adverse affordability conditions stemming from home price appreciation far outpacing income growth over the past several years,” Wells Fargo senior economist Charlie Dougherty and economic analyst Patrick Barley wrote in a newly shared note titled: “Housing Market 2024: An Early Spring or Longer Winter.”

We know lower mortgage rates will not only somewhat improve affordability, and therefore help bring back demand, but also bring more sellers onto the market and increase supply. It’s why Dougherty and Barley said existing home sales started off on a “positive note,” and expect them to improve modestly this year.

But it really comes down to the fact that “home price appreciation has far outpaced household income growth in recent years,” as the Wells Fargo economics team put it. “Home values are now roughly five times higher than median household incomes, a stark change from the 3.5 ratio averaged historically,” they wrote. 

Not to mention, the Wells Fargo team expects home prices to increase another 3.1% in 2024 and 4.3% the year after. “If these forecasts come to fruition, then affordability is not likely to meaningfully improve,” Dougherty and Barley wrote. 

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Source: fortune.com

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Today brought the release of one of the most consequential economic reports that comes out on any given month: the Consumer Price Index (CPI).  CPI measures inflation and inflation is a big deal for interest rates.  Higher inflation means higher rates and vice versa.  That correlation held true today with CPI coming in higher than expected and mortgage rates moving higher, but the details are more nuanced.

The last time CPI came out (February 13), the most important line item (core month over month CPI) was at the same level as today’s report.  The impact on 30yr mortgage rates at the time was a big jump of 0.17% for the average lender.  Today’s increase was only 0.05%, and it didn’t even bring rates up to levels seen BEFORE last month’s big jump.

That all adds up to a very nice silver lining for an otherwise downbeat day.  It suggests the market is starting to see more convincing signs that inflation and the economy stand a better chance deliver rate-friendly news in the near future as opposed to news that would cause a big resurgence.

But why was today’s outcome so much better?  There were some mitigating factors in today’s CPI that weren’t present last time.  Most importantly, the largest and most stubborn component of that core month over month number managed to drop back into its prevailing range (last month’s reading represented a spike to the highest level in nearly a year–something that caused investors to worry about new upward momentum in inflation).

All that having been said, to whatever extent the data was “less bad” than it might have been, it also wasn’t great news for those hoping for lower rates.  It basically means we’ll have to keep waiting for additional data to provide more confidence that inflation has turned a corner.

Source: mortgagenewsdaily.com

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National mortgage rates fell on all loan terms compared to a week ago, according to rate data collected by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans all receded.

While it’s expected that rates will gradually come down this year, there may be some fluctuations.

At its Jan. 31 meeting, the Federal Reserve announced it would hold off changing rates, but could cut rates in the future. At their March 20th meeting, the Fed will update their outlook on rates. Rate fluctuations affect many areas of the economy, including the 10-year Treasury, a key benchmark for fixed-rate mortgages.

“Where the 10-Year Treasury yield goes, mortgage rates will follow,” says Ken Johnson of Florida Atlantic University. “In roughly the last two months, the 10-year Treasury yield is up 50 basis points. Depending on the source, the 30-year mortgage rate is up 48 basis points. Treasurys’ path remains a coin toss at this point.”

Rates last updated March 13, 2024.

The rates listed here are averages based on the assumptions shown here. Actual rates displayed within the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, March 13th, 2024 at 7:30 a.m.

30-year mortgage rate retreats, -0.21%

Today’s average 30-year fixed-mortgage rate is 6.90 percent, a decrease of 21 basis points from a week ago. A month ago, the average rate on a 30-year fixed mortgage was higher, at 7.30 percent.

At the current average rate, you’ll pay $658.60 per month in principal and interest for every $100,000 you borrow. That represents a decline of $14.11 over what it would have been last week.

Most mortgage lenders defer to the 30-year, fixed-rate mortgage as the go-to for most borrowers because it allows the borrower to disperse payments out over 30 years, keeping their monthly payment lower.

15-year mortgage rate moves lower, -0.16%

The average rate for a 15-year fixed mortgage is 6.49 percent, down 16 basis points over the last week.

Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $871 per $100,000 borrowed. That may put more pressure on your monthly budget than a 30-year mortgage would, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.

5/1 ARM dips, -0.23%

The average rate on a 5/1 adjustable rate mortgage is 6.46 percent, ticking down 23 basis points since the same time last week.

Adjustable-rate mortgages, or ARMs, are mortgage loans that come with a floating interest rate. In other words, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These loan types are best for people who expect to refinance or sell before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.

While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.

Monthly payments on a 5/1 ARM at 6.46 percent would cost about $629 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.

Jumbo mortgage moves lower, -0.17%

The average jumbo mortgage rate is 7.04 percent, down 17 basis points since the same time last week. This time a month ago, the average rate for jumbo mortgages was higher at 7.37 percent.

At the current average rate, you’ll pay $667.99 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $11.48 lower.

Refinance rates

30-year fixed-rate refinance eases, -0.21%

The average 30-year fixed-refinance rate is 6.84 percent, down 21 basis points over the last seven days. A month ago, the average rate on a 30-year fixed refinance was higher at 7.31 percent.

At the current average rate, you’ll pay $654.59 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $14.07 lower.

Where are mortgage rates going?

With inflation still above the Fed’s 2 percent goal and the job market holding strong, the Fed isn’t likely to cut rates at its March meeting.

“The Federal Reserve will not cut interest rates in the first half of this year, in my view,” says Lawrence Yun, chief economist of the National Association of Realtors, “but rate cuts of three, four or even five rounds will be possible in the second half of the year as rent measures will be much more well-behaved.”

The rates on 30-year mortgages mostly follow the 10-year Treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves.

These broader factors influence overall rate movement. As a borrower, you could be quoted a higher or lower rate compared to the trend.

What today’s rates mean for your mortgage

While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent anytime soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.

Keep in mind: You could save thousands over the life of your mortgage by getting at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.

“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”

More on current mortgage rates

Methodology

Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).

The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.

Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.

Source: bankrate.com

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Mortgage rates hit their best levels in more than a month by the end of last week after moving lower for 4 straight days.  If you could only know one thing about today, it’s that although rates didn’t extend their winning streak, they are still very close to Friday’s levels–close enough that the typical borrower wouldn’t care or notice.    

Today is old news, however.  Tomorrow is where all the excitement is.  

Tomorrow (Tuesday) brings the regular monthly installment of the Consumer Price Index (CPI) data.  There are more than 50 scheduled economic reports on any given month that might have an impact on rates, but only two that are on another level of market movement potential.  CPI is both of them.

Well, CPI is at least one of them, but the other one (the big jobs report that came out last Friday) didn’t exercise its right to cause big drama for rates.  Thus, all eyes are on CPI tomorrow.  If it comes in much higher or lower than expected, rates will likely react in a major way.

How major?  That really depends on the data.  Using the range of outcomes in the past few years, a bad result could push rates higher by a quarter point while a good result could have an equally large benefit.  All that having been said, reality tends to fall somewhere in between, but there’s no doubt the POTENTIAL is there for something bigger.

Source: mortgagenewsdaily.com

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By purchasing mortgage points, homebuyers can reduce their interest rate by half a percentage point or more.

Getty Images/iStockphoto


Homebuyers waiting for mortgage rates to be reduced may have to wait a few more months. 

That seemed to be the message this week after the latest inflation report from the Bureau of Labor Statistics showed inflation higher in January than expected. Although that 3.1% rate was lower than December’s 3.4%, it was still more than a full percentage point above the Federal Reserve’s target 2% goal. That means today’s interest rates are likely to stay high and an expected rate cut may not now come until late spring or early summer.

It also means that today’s mortgage rates — already hovering near the highest point since 2000 — will remain elevated as well. While that’s disappointing news for many homebuyers ready to act now, it doesn’t necessarily mean that they’re out of options. There is one way that homebuyers can reduce their mortgage rate by half a percentage point and it doesn’t involve an unpredictable adjustable-rate mortgage to do so.

Not sure what mortgage rate you’d qualify for today? Find out here now.

How homebuyers can reduce their mortgage rate by half a percentage point

If you’re a homebuyer looking to reduce the mortgage rate you’ve been offered consider buying “points” to do so. Specifically, many lenders will allow applicants to purchase mortgage points to reduce their rate. This involves paying a fee to the lender either during the mortgage closing process or by rolling it into the overall mortgage loan. This fee, then, will reduce the initial rate you were offered. 

So, if you purchase 0.750 points, you can reduce your mortgage from 7% to 6.625%. If you buy 0.50 points, you can reduce your mortgage from 7% to 6.50% and so on. A full point is generally worth 1% of your total loan amount. 

This is worth considering for many homebuyers right now, especially now that the hope for a rate cut has been dimmed a bit. That said, it does have some drawbacks. An additional fee — no matter how it is paid — can be difficult for buyers to manage. It also may not be worth it if the new, lower rate is something that can be obtained by waiting out the market or by refinancing in the future. And you’ll be limited on how many points you can buy (you won’t be able to buy a rate down to zero, for example). 

On the other hand, every dollar helps, and if you can potentially save hundreds of dollars in a mortgage loan each month, it may be worth it for you.

Crunch the numbers here to learn more.

Other ways to get a below-average mortgage rate

Mortgage points aren’t the only way to get a below-average mortgage rate. 

As mentioned above, adjustable-rate mortgages may also be advantageous. These types of loans generally start with a lower rate but adjust, over time, to a higher one. But once that increase comes into play, the rate environment may have stabilized, allowing buyers to refinance into a lower, fixed rate instead. 

It’s also smart to improve your credit score and profile as much as possible (remember that the advertised rates are only for those with the best credit) and you should shop around for lenders to secure the best deal. Even a mortgage rate a few basis points lower than another one can add up to major savings over the lifespan of the mortgage loan.

The bottom line

Today’s mortgage rate environment isn’t ideal, especially compared to the lows from 2020 and 2021. But, historically speaking, it’s about average. To get a below-average rate by half a percentage point or more, borrowers should consider buying mortgage points from their lender. While points may not always be advantageous, they can make a major difference in your interest rate and can be especially helpful now when the forecast for rate cuts looks less clear. But options like an adjustable-rate mortgage may also be worth it for some buyers, all of whom should improve their credit score and shop for lenders before finally committing to a specific rate and lender.

Matt Richardson

Matt Richardson is the managing editor for the Managing Your Money section for CBSNews.com. He writes and edits content about personal finance ranging from savings to investing to insurance.

Source: cbsnews.com

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The IRS says it heard the objections raised by small-business lenders to its plan to block access to loan applicants’ income and other tax-related data. “We … are assessing our ability to provide return information when necessary while keeping taxpayer information confidential and protected from disclosure,” the agency says.

Al Drago/Bloomberg

For banks, credit unions and other small-business lenders, this is an IRS-related story with a happy ending — kind of.

Responding to a determined lobbying campaign by a broad consortium of financial services trade groups, the U.S. tax-collection agency has agreed to suspend a policy change that would have blocked small-business lenders from accessing borrowers’ income data through its Income Verification Express Service.

“We acknowledge the concerns raised and are assessing our ability to provide return information when necessary while keeping taxpayer information confidential and protected from disclosure,” the IRS wrote in a March 6 policy update statement. “Although IRS announced the policy change on January 2, 2024, we are suspending that change as we seek input from you and other stakeholders on possible changes and impacts to the program.”

Scott Stewart, CEO of the Innovative Lending Platform Association, acknowledged that the IRS could revert to its original policy stance after its review. At the same time, even a temporary respite represents a major achievement, Stewart said. 

“Federal agencies don’t do this,” Stewart said in an interview. “To get a federal agency of any kind, let alone the IRS, [to acknowledge  a misstep] is really exceptionally rare. I don’t know if I’ve ever seen a reversal like this. The IRS deserves credit for realizing this policy requires further review.”

The Innovative Lending Platform Association was one of 11 financial services industry trade groups, including the Independent Community Bankers of America, American Bankers Association, America’s Credit Unions and the Mortgage Bankers Association, that endorsed a Jan. 24 comment letter opposing the IVES policy change. IVES is the platform that lets taxpayers give third parties — like lenders — permission to see tax return or wage information.

Under the IRS’ original concept, it would have delivered tax data only to lenders making mortgages. In all other instances, the agency would have delivered the data directly to individual taxpayers to protect their privacy. 

Lenders value the ability to obtain tax returns from the IRS as a critical tool in underwriting and preventing fraud. They were concerned the policy change would add complexity, time and cost to applications while at the same time making it easier for bad actors to game the system.  

“You could see how fraudsters might just digitally alter their tax returns and they could send it off to the lender,” Stewart said. “I hope they’re going to move toward [opening] the system in an [application programming interface] fashion so that everyone can get access and overall lower the cost of credit and capital for small businesses, consumers, people looking for insurance — everybody.”

An application programming interface, or API, is software code that allows a website, application or program to more easily share information with other websites, applications or programs. 

In their announcement last week, IRS officials “said they were suspending the decision indefinitely,” Ryan Metcalf, head of public affairs for Funding Circle US, said in an interview. “I’m not concerned it’s coming back. It seems like the IRS has backed off. … This is a huge win for American consumers and small businesses.”

It’s far from game over, though. 

“It’s good news [the IRS] has returned to the status quo,” Metcalf said. “We still have issues to resolve. We still have to work out how we resolve the authentication issue, can we have private API access to log in, can we expand the data in the transcript — all of those things we’re still seeking are outstanding.”

Beyond access to tax data, lenders and borrowers want the IRS to make it easier to use IVES. Currently, borrowers have to create IRS accounts and verify their identities with the agency before they can request that a transcript be delivered to a lender. That route is time-consuming and redundant, since the lenders themselves are required to verify identity under know-your-customer requirements, Metcalf said.

“The [optimal] outcome is we want a borrower to be able to submit a [transcript request] to the lender, the lender hands that to the IRS and we get the tax return in real time,” Metcalf said. “Or, if the lender has an account with the IRS already, they should just be able to log in to that account in our application. That’s the API access. … That’s what we want. We want that optionality of either/or.”

Bipartisan legislation introduced in the House of Representatives in May 2023 would address the authentication issue by enabling taxpayers to designate a financial institution or other service provider to receive tax data. The bill, introduced by North Carolina Republican Patrick McHenry, chairman of the House Financial Services Committee; California Democratic Rep. Jimmy Panetta; and Colorado Democratic Rep. Brittany Petterson, is currently under consideration by the Ways and Means Committee. 

Funding Circle backs the legislation as it is currently written and is hoping to strengthen its language in the wake of the IRS’ action. “We’re getting ready to update that bill to address additional issues. … We would probably add on to it to make sure the IRS doesn’t revisit this policy decision,” Metcalf said.  

The IRS didn’t respond to a request for comment at deadline. 

Stewart attributed the IRS’ initial policy restricting IVES access to a desire to protect taxpayer information. “Their duty is paramount,” Stewart said, but he was quick to add that allowing API interface with IVES could be accomplished without compromising data integrity. “We don’t think creating this API is going to do anything to endanger the taxpayer, as long as you have them making the request directly through the lender or the insurance company or the bank.”

Source: nationalmortgagenews.com