Maneuver to recover IRS employees to help the mortgage industry raise their eyebrows

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WASHINGTON – After an intense lobbying campaign by the mortgage industry, the Treasury Department has revived this week a program that had been set aside by the partial closure of the government, allowing hundreds of employees to take advantage of it. The Internal Revenue Service collected checks while they were processing forms essential for the lending industry. .

The hasty intervention aimed at restoring the IRS's income verification service by drawing revenue from fees – even though 800,000 federal employees across the country end up without pay – has stepped up the number of questions on the unorthodox efforts of the Trump administration aimed at putting back on line certain government functions the impacts of the shutdown.

Critics, including many former IRS officials, have described this initiative as favoritism aimed at easing the burden of a powerful industry.

"It seems crazy to me that a powerful bank or a powerful lobby is getting its employees to do their job," said Marvin Friedlander, a senior IRS executive in the mid-2000s. "That's is he a normal slut who can not even pay his rent? "

Officials said they were simply seeking to minimize the damage to the public by the budget stalemate, which will become Saturday's longest in US history.

Due to the closure, the IRS has not been able to process a key form used by lenders to confirm borrowers' income before they can grant home loans – an obstacle that threatened to end the mortgage sector.

The IRS said it was able to restart the program using the fees paid by the companies that provide the transcripts to the lenders.

"We have been informed by various parties that the closure of [the program] created significant problems for some borrowers, "the Treasury said in a statement. We are delighted to help taxpayers by ensuring that this service continues despite disqualifications. "

Craig Phillips, advisor 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 in the interest of the industry. consumers who have made loan applications ".

IRS clerks, who earn between $ 13 and $ 18 per hour, process 400,000 transcripts per week, helping potential buyers check their income and mortgage banking sector by 1. $ 300 billion generates millions of dollars in fees.

Efforts to revive the processing of these transcripts were initiated as a result of direct appeals from the professional association representing the credit reporting companies and key representatives of the mortgage industry. Lobbying was led by Robert Broeksmit, General Manager of the Mortgage Bankers Association, who brought the case to Phillips, Mnuchin's senior advisor.

"I said, look, this is starting to be a problem for the lending industry," Broeksmit said. Its group, one of Washington's most influential business associations, represents 2,300 mortgage companies, brokers, commercial banks and other financial institutions.

Broeksmit said that he had asked if IRS employees could come back to work saying, "Could you make these types 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.

After hearing concerns about the darkness of the program, senior Treasury officials have called senior officials of the White House office and the management and budget for consultations on a solution, according to people familiar with the discussions.

On Monday, 400 dismissed IRS employees in Fresno, California, Cincinnati, Kansas City, Missouri, and Ogden, Utah, were called back to work, according to employees and union officials.

"I'd like to take some credit," said Broeksmit, adding, "Our direct request has had fairly quick results."

Unlike the vast majority of the 420,000 federal employees who were forced to work during the closure because they are essential to national or public safety, including airport controllers, food inspectors and enforcement officers. border patrol, the IRS employees are paid surprise.

Their salaries – normally funded by Congressional appropriations – are funded by industry user fees, an unorthodox strategy used by the administration to reinstate some National Park Service employees.

Some legal experts have questioned the maneuver of the IRS.

"They are allowed to keep only the core business and the processing of mortgage applications is valuable and appreciated, but does not rank among the air traffic controllers," said Charles Tiefer, former Deputy General Counsel in the House of Representatives of the United States. United States. "The administration plays with the closure to prevent it from becoming unpopular with its own base."

Tiefer, a professor at the Law School of Baltimore University, said he thought the Trump administration would lose its lawsuit if anyone could be represented, he said. said that it was unlikely.

The Office of Management and Budget has approved the transfer of fees to the account of the IRS salaries, these funds being intended for various operations of the agency, said a senior official of the agency. administration.

In announcing the return of IRS employees who process tax transcripts, the IRS also indicated that it was restarting other paid services, including one that provides letters certifying the residency of the taxpayers. taxpayers in the United States.

"There is nothing unusual about this because the account has this flexibility," said the manager who requested anonymity to describe the internal discussions. "We are doing everything in our power, in accordance with the law, to keep government programs running as long as possible without success."

Some agreed that the IRS, unlike other federal agencies, had a lot of room for maneuver.

"It seems like the IRS has sufficient legal room for maneuver to use user fee revenues," said Timothy Westmoreland, a professor at Georgetown Law, who has studied the laws and regulations. federal budgets. "I can not say for sure, but there seems to be a legal basis for that."

Some former IRS officials have nonetheless referred to the circumnavigation of distributed document as a group of influential interest.

"How do you justify that?" said John Koskinen, who served as the commissioner of the IRS from 2013 to 2017. "There are a lot of things that are bothersome for people." It's a matter of law. not incur obligations or take action if you do not protect life or property. "

In recent days, the Trump administration has been looking for ways to maintain some government services during the shutdown period, forcing laid-off employees to extend food stamps, provide flood insurance, maintain parks and reinstate other services prohibited by the previous ones.

"Whenever you go the extra mile, they find another way to soothe their pressure points by finding these gadgets," said William Hoagland, director of republican staff of the Senate Committee on Budgets at a Closure. of the 90s.

Under federal law, the government is not allowed to spend money that has not been affected by Congress, and agencies are allowed to retain only those employees who fulfill essential functions for public health or national security.

This means that the IRS has been largely closed. The tax agency sent home about 90% of its workforce without pay. The call centers used by taxpayers across the country are closed. The audits were interrupted, in accordance with the emergency plan of the agency. Thousands of employees are not trained in the preparation of this year's tax return season, which should be particularly complicated as the new tax law comes into full force.

This week, the administration announced that it would bring back the laid-off employees who process the prepayments, but they are not paid.

The IRS's emergency plan, which was updated in December, requires staff members of the income verification program to be transferred in the event of a closure, as they were at the time. a similar budget impasse in 2013.

An employee who was told to come in, said the agency was complying with the rules.

"I do not think it's a national security issue or a rule of closure of the government," said the clerk, who requested the anonymity for fear of reprisal.

"It's just wrong," added the clerk. "If the American people knew that a small group of people was being paid only for the benefit of big business, I think it would be pretty crazy."

Shannon Ellis, president of Local 66 of the Union of National Treasury Employees, who represents 4,300 employees of the IRS in Kansas City, said she was "happy that our employees are getting paid" but said that "this little neighborhood is the only area of ​​the agency where it's going."

In the industry as a whole, he was relieved that the transcripts were being transferred again.

Leonard Ryan, founder and president of mortgage compliance firm QuestSoft, said his company should have fired employees without a solution.

"We had a big backlog – there are only two days left," said Ryan. "It's a little surprising what they did to get up … They came up with a workaround – but that's what the mortgage industry does."

Broeksmit stated that he was at the seaside during the Christmas holidays, when he was starting to receive emails from members of his group of mortgage bankers worried about the closure of the program. transcript of notes.

Returning to Washington, Broeksmit said, he approached the issue directly with a person he knows well in Treasury, who plays the role of senior advisor, Mnuchin. He declined to name the manager, but the Treasury Department confirmed that it was Phillips, the link with the banking sector.

Mr. Boeksmit said Treasury officials were unaware that closing the IRS was a problem for mortgage lenders, in part because transcripts are now required much more often than before the recession.

Members of the Mortgage Bankers Association are responsible for the vast majority of mortgages on the real estate financial market, valued at $ 1.6 trillion last year. The group spent $ 2.2 million on lobbying in 2018, according to lobbying files tabled in the Clerk of the House.

Broeksmit was not the only one in the industry to put pressure on the Trump administration for the program to be restarted. According to one of the members of the group, Treasury and IRS representatives also heard testimony from the Consumer Data Industry Association, which represents the credit assessment companies.

"We are contacting several federal agencies during the shutdown period to sensitize them to issues that have a negative impact on consumers and our customers," said Jacob Hawkins, spokesman for the agency's rating agency. Equifax credit, which buys transcripts to provide to lenders. an email.

Representative Gerald Connolly, a member of the House of Representatives' oversight committee, D-Va., Said he was about to request an investigation into why the IRS had re-launched the program. Statements of Tax Returns: "We Now Have the Government by The outs are apparently determined by your power and influence.