The current environment is full documentation required; meaning every penny of income, assets and existing outstanding debt is verified. If a borrower wishes to refinance their existing mortgage or apply for a 1st time mortgage, be prepared for the overwhelming documentation requested by your lender.

As for privacy concerns, every bank employee must sign a document, with penalty of termination; to state that we will safeguard all customer and prospective customer “sensitive” information. Bank’s are under Federal Regulations to ensure that their employees comply with those regulations, with fear of substantial penalties and damages for loss of sensitive information. As a long time bank employee, I am not familiar with any such regulations governing mortgage brokers; so I can’t speak to the safety measures used by brokers.

The bottom line is, if you want a new loan in this current environment; be prepared to provide documentation.

If I understand the question properly, the broker/bank isn’t asking these questions directly. Instead, they are asking for complete tax returns, which happen to include such information.

Your bank has some strict regulations regarding your financial information. If you’re going through your current bank, the information you give them probably falls under those protections.

If you’re going with a new bank, however, you may have less protections.

Things get even worse when you’re dealing with a broker. I’m not sure if they have any regulation that dictates how they handle financial information.

Even if they do, the current sentiment is that brokers’/banks’ violation of regulations is part of the reason behind the subprime fiasco. How much can you really trust them? After the Great Depression, people didn’t trust bankers for a generation. Perhaps we’ll see something similar this time.

Unfortunately, I’m not sure there’s anything you can do. Ultimately, the banks/brokers have a lot more power in the negotiation than you do. And, the individual you are dealing with likely doesn’t have the authority to waive documentation requirements, especially in the current climate.

Perhaps you can work with a broker and tell them that you’re not willing to give these kinds of information. Ask them to shop around for a bank that doesn’t require it. You may be forced to pay a premium in terms of your interest rate, though.

Maybe the lender is just trying to hit on you?!

it’s a Chron (local) article from october 11th (recent).
And it also raises abuse risks .. altho it doesn’t provide any detail, nor solutions beside reading twice before signing anything.

Regarding the requirement you include all your tax return schedules, the bank is trying to assess the likelihood that you will be able to pay back your loan. This is more than income/assets/debts. Expenses are also material to the evaluation. They’d be irresponsible not to try to ascertain the cost of your day-to-day life: childcare, education, medical or anything else. If any of these elements comprises a larger-than-standard portion of your income, they need to evaluate your application and your ability to pay in that light.

If I make $200,000 and regularly have medical costs of $40K annually, I am a very different borrower than if I have only non-deductible medical expenses (less than 7% of income), and the difference in the amount of mortgage I could afford would be nearly $100,000.

As for how much the information is worth, that’s a totally personal decision. It clearly comes through in your post that this really bothers you, so my advice would be to think about whether you are 25 basis points of uncomfortable (or 50bp, or whatever you believe you can save). If your employer offered you an annual raise of this amount, in exchange for your providing this information, would you take it?

and i don’t get the “not blacking out” thing…. what does it prove, or what does it not prove?
I think I need to read my own tax return with those questions in mind – page by page, line by line.

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on the 4506 T form. What is that form?
I find this:
http://wiki.answers.com/Q/What_is_form_4506-T_and_when_is_it_used
anybody has seen one before? what is different between the IRS printout and the 1040?

Why shouldn’t the borrower be allowed to blank out those areas on the 1040 tax form? just because that info is on the tax return does not mean the bank needs to see it to qualify the person for a loan or re-fi.