Why does the lender want a copy of my tax returns from the IRS?

I gave my lender a copy of tax returns for the last two years and now they're telling me they are waiting on a copy of the tax returns from the IRS.  What's up with that?

A requirement on all loans is the receipt of the actual tax transcripts from the IRS.  They are ordered using a form 4506T.  Often the lenders will just say "the 4506T isn't in yet".  That means they've ordered a copy of the transcripts from the IRS but haven't received them yet.

The requirement for IRS copies of the tax returns is to verify the returns submitted to the lender.  In unraveling the mortgage melt down many loans that defaulted were found to have inaccurate tax returns.  Some had schedules missing.

Information from the tax returns is used for calculating self employment income, history of bonuses and overtime, dividend income, capital gains and unreimbursed expenses... etc.

When the lender is calculating income off the tax returns for qualifying it's very important accurate information is available. This requirement assures the lender is using accurate information reported to the IRS.