Self employed refinancing home

[MN dhawk]

A self employed client wants to refinance home mortgage and gets this from her banker:

I am trying to verify your employment

I need a copy of your buisness license if you have one or

a Letter from your CPA on (letterhead), dated and signed by the CPA

The confimation from the CPA must include the name, type of business, and length of time the buisness has been in operation.

also the cpa must indicate that he/she has prepared the business's tax returns for the two most recent years.

Are you seeing this stuff and how are you reacting??

[mcb39]

Generally they just ask to see that last two years of the business return. In a few instances the bank will call me with the permission of the client. I suppose with all the short sales and reposessions, they are clamping down on their methods.

[Kea]

I brought up this issue last year and got some good responses. Be careful with what info you supply because you don't want to be liable for your client's mortgage.

[jainen]

>>length of time the buisness has been in operation<<

The only honest response is that you do not know whether the client has EVER been in business. You can't even guarantee that the IRS would agree he is self-employed, and you sure don't know what the bank's underwriting standards are, so why would you allow them to base lending decisions on YOUR signature? Simply say that you have prepared and e-filed tax returns which include Schedule C, the form normally used to report self-employment income. Period.

[Tax Prep by Deb]

I appreciate Jainen's suggestion. It is brief and to the point. I have never understood why the bank want this letter. They have already asked the one wanting the loan for permission to pull their IRS transcript, they already have asked for two years of tax returns, how in the blazes is this letter going to accomplish more than that!

Jainen's suggestion is very simple, yet it does not give reason for the lender to later come back and say you said........!

Just my 2 cents worth.

Deb!

[Medlin Software, Dennis]

I get requests, often, to ask how to add company information to a pay stub. It is invariably for loan documentation, usually by someone self employed, who is trying to create/recreate something they don't have. If a loan company thinks a pay stub is actual documentation, they are nuts, or at best, shady. Anyone can print something similar to a pay stub, and there is no way to verify it.

As I remember my mortgage process, I had to provide bank statements and tax returns. I had to sign a form allowing the loan company to get tax returns (signed by me under penalty of perjury) directly from the IRS. I doubt they got the tax forms before closing, but if the copies I gave did not match, I am sure the loan could have been voided as fraud.

[MN dhawk]

Thanks for all your comments. They lead me to this AICPA article:

http://www.aicpa.org/InterestAreas/PrivateCompaniesPracticeSection/Resources/CPAComfortLettersToLenders/Pages/AON%20Comfort%20Letters.aspx?action=print

I used it as my guide. I'll let you know what happens.

[joanmcq]

Well, the OP said a copy of their business license OR the CPA letter. Have 'em copy their biz license!