WASHINGTON — After an intense lobbying campaign by the mortgage industry, the Treasury Department this week restarted a program that had been sidelined by the partial government shutdown, allowing hundreds of Internal Revenue Service clerks to collect paychecks as they process forms vital to the lending industry.
The hasty intervention to restore the IRS’ income verification service by drawing on revenue from fees – even as 800,000 federal employees across the country are going without their salaries – has intensified questions about the Trump administration’s unorthodox efforts to bring certain government functions back on line to contain the shutdown’s impacts.
Critics, including many former IRS officials, described the move as an act of favoritism to ease the burden on a powerful industry.
“It seems crazy to me that a powerful bank or lobby gets to bring their people back to do their work,” said Marvin Friedlander, who served as a senior IRS official in the mid-2000s. “How about the normal slob who can’t even pay his rent?”
Administration officials said they are simply seeking to minimize the harm caused to the public by the budget standoff, which on Saturday will become the longest in modern U.S. history.
Because of the shutdown, the IRS was unable to process a key form that lenders use to confirm borrowers’ incomes before they can grant home loans – a roadblock that threatened to bring the mortgage industry to a halt.
The IRS said it was able to restart the program by using fees paid by companies that provide the transcripts to lenders.
“We were advised by various parties that the shutdown of (the program) was creating significant issues for certain borrowers,” the Treasury Department said in a statement. “We are pleased to help taxpayers by ensuring this service continues despite the lapse.”
Craig Phillips, a counselor to Treasury Secretary Steven Mnuchin, was among the officials who heard the concerns of the mortgage industry directly, but he said in an email to The Washington Post: “This action was not taken to benefit the industry. It benefits the consumers that have made loan applications.”
The IRS clerks, who are paid $13-$18 an hour, process 400,000 tax transcripts a week – helping potential home buyers verify their incomes and the $1.3 trillion mortgage banking industry earn millions of dollars in fees.
The effort to restart the processing of those transcripts came after direct appeals by the trade association that represents credit reporting companies and top mortgage industry officials. The lobbying was led by Robert Broeksmit, chief executive of the Mortgage Bankers Association, who took the matter to Phillips, Mnuchin’s senior adviser.
“I said, ‘Look, this is starting to be a problem for the lending industry,’ ” Broeksmit said. His group, one of the most influential trade associations in Washington, represents 2,300 mortgage companies, brokers, commercial banks and other financial institutions.
Broeksmit said he asked whether the IRS clerks could come back to work, saying: “Could you make these guys essential?”
Phillips declined to comment on their exchange.
The answer came the next day, Broeksmit said: The IRS employees would be called back to work.
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