Borrower Risk Monitoring with Ongoing Tax Transcript Access
In lending, risk doesn’t end once funding has been provided. Risk and its mitigation are ever evolving, and if you’re not watching closely, this could have severe effects on your reputation, financial stability, and profitability .
Let’s review a potential scenario that you might encounter.
You’re a lender who just closed a $250,000 loan to Joe’s Fresh Foods. You did your preliminary due diligence and Joe’s financials were in good standing. However, 1 year into the loan term, a new supermarket comes to town and Joe’s loses a lot of its customer base. Joe’s revenue decreases, and any free cash flow is directed toward keeping the lights on and the shelves stocked. This is when Joe’s begins missing loan payments.
As a lender, this could lead to a ton of work and the potential for loss.
Let’s review a potential scenario that you might encounter.
You’re a lender who just closed a $250,000 loan to Joe’s Fresh Foods. You did your preliminary due diligence and Joe’s financials were in good standing. However, 1 year into the loan term, a new supermarket comes to town and Joe’s loses a lot of its customer base. Joe’s revenue decreases, and any free cash flow is directed toward keeping the lights on and the shelves stocked. This is when Joe’s begins missing loan payments.
As a lender, this could lead to a ton of work and the potential for loss.
- Defaults could draw scrutiny from regulators and investors, making it more difficult to secure funding in the future and maintain favorable terms.
- Your reputation as a lender could decline, affecting your ability to attract new borrowers.
- You could lose money on loan notes or be forced to increase loan loss provisions, which can also inhibit profitability.
The Problem
Many lenders rely on a one-time pull of IRS tax transcripts to verify borrower income and assess financial health. But a one-and-done assessment assumes that nothing will change with the borrower’s revenue, standing debt, credit, etc. throughout the life of the loan.
That’s a dangerous assumption.
A borrower’s financial situation can change quickly. New tax liabilities, missed filings, or changes in income can all signal growing risk. However, if you’re not monitoring this data in real-time, you won’t see those red flags until it’s too late.
A decline in a borrower’s financial health may result in loan default, loss of collateral value, regulatory non-compliance, and more.
Additionally, lenders need to be granted access to the necessary IRS transcripts and could also lose access at any time. If access fails, lenders are not notified. This means potentially going months without access to important borrower information and being left in the dark when it comes to any new risk developments.
That’s a dangerous assumption.
A borrower’s financial situation can change quickly. New tax liabilities, missed filings, or changes in income can all signal growing risk. However, if you’re not monitoring this data in real-time, you won’t see those red flags until it’s too late.
A decline in a borrower’s financial health may result in loan default, loss of collateral value, regulatory non-compliance, and more.
Additionally, lenders need to be granted access to the necessary IRS transcripts and could also lose access at any time. If access fails, lenders are not notified. This means potentially going months without access to important borrower information and being left in the dark when it comes to any new risk developments.
TOD's Solution
TOD is transforming how lenders manage risk by providing continuous tax transcript access—not just during origination, but throughout the life of the loan.
Further, if transcript access were to be lost, TOD sends automated access failure alerts, so you can immediately address the problem.
Why This Matters For Risk Mitigation
With TOD’s ongoing monitoring, lenders can:
This isn’t just about convenience — it’s about protecting your portfolio and making smarter lending decisions.
- Detect new tax liabilities early — before they affect repayment
- Stay compliant with any external or internal servicing requirements
- Avoid surprises by maintaining uninterrupted access to borrower data
- Respond proactively to emerging risks
- Save time by eliminating manual transcript checks
This isn’t just about convenience — it’s about protecting your portfolio and making smarter lending decisions.
Smarter Monitoring, Stronger Portfolios
TOD’s platform is built for scale, security, and simplicity. Whether you manage 50 loans or 5,000, TOD helps you:
- Monitor borrower risk in real time
- Reduce manual work and human error
- Improve servicing accuracy
- Enhance the borrower experience by reducing document requests
Ready to Eliminate Blind Spots?
Risk doesn’t stop after origination. Neither should your monitoring.
Contact our Partnership team to learn more about how TOD is powering smarter lending.
Contact our Partnership team to learn more about how TOD is powering smarter lending.