The form authorizes a loan officer or mortgage investor to acquire electronic transcripts from the Internal Revenue Service doormat multiple years of your federal income tax filings. The IRS has supplied private tax return facts to lenders for years, however the data typically were requested only at the close of escrow, and mainly for self-employed applicants or those with unusual earnings patterns.

But Fannie Mae recently aimed lenders to obtain two sets of electronic transcripts for all borrowers, regardless of earnings sources — a 4506-T upfront at application and another at closing. Fannie told lenders the move was part of its efforts to spot fraudulent earnings claims and delimit loan losses.

During the height of the housing boom, many lenders went soft on borrowers, allowing millions of them to “state” their incomes rather than supply copies of tax returns filed with the IRS. These so-called no-documentation loans often later turned out to be “liar loans,” with puffed-up incomes enabling borrowers to obtain larger mortgages than they could justify — or afford — based on their actual incomes.

When lenders didn’t verify stated earnings claims, liar loans often turned into foreclosure bombs. Their remains are discernible in neighborhoods across the country, where foreclosures have soared to history levels.

Now, not only Fannie Mae however also most major lenders are tightening standards and double checking everything. When it comes to what you say is your annual income, they want to check it twice — even if you submitted stacks of IRS returns.

The IRS is helping out as well by lowering the price of those multiple verifications. As a result of higher-than-expected revenues generated by skyrocketing demands for 4506-Ts, the IRS — which is not permitted to make a profit on services such as earnings verification checks — has cut the price of transcripts from $4.50 to $2.25, according to industry sources.

“The timing of the cost reduction couldn’t be better for lenders looking to return to more frugal underwriting,” said Curtis Knuth, vice president of New Jersey-based NCS Inc., one of the largest vendors of Form 4506-Ts to the mortgage industry. Most lenders, he said, do not charge loan applicants separately for earnings verifications but roll the costs into their origination or processing fees.

The much more intensive use of Form 4506-T also is focusing new light on what consumers should — and shouldn’t — do when confronted with a lender’s or settlement agent’s request that they fill one out.

Here’s a quick overview: