Discussion:Requests from lendors for proof of self employment

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DZCPA (talk|edits) said:

4 January 2006
I prepared many letters this last year requesting proof of self employment by a CPA letter for clients obtaining real estate loans. Do you do this for free or charge? How much? Some of these lenders can be pushey "I need the letter in 1 hour"!

PGattoCPA (talk|edits) said:

4 January 2006
I would be careful of this as you may be opening yourself up to a law suit if a client defaults on the loan.

There were two pretty good discussions in the misc.taxes.moderated newsgroup a few years back. You can access them via Google Groups, but I have reduced the very long URLs at tinyurl.com:

The Tiny URLs are: http://tinyurl.com/98zbl and http://tinyurl.com/8sbyj

RLMCPA (talk|edits) said:

4 January 2006
With all the new CPA porfessional standards out and the recent public probelms, does providing these letters rise to an assurance service, such as limited scope opinion? After all, you are kind of providing an attestation function to a third party. I've provided copies of prior year tax returns, but I haven't been ask to prepare a formal letter yet, just curious...

DZCPA (talk|edits) said:

4 January 2006
Actually, letters state I have prepared their income tax returns for the last 2 years and during this time they were self employed and filed a schedule C. I do not think CPA professional standards apply to me stating what I did on a tax return. These letters pertain to clients that are obtaining stated income loans where they are not showing actual returns to the lendors.

WesR (talk|edits) said:

4 January 2006
I charge the client for my time say $100 to state in a letter that the client represents he has made a certain amount during the current year and a tax reported schedule c for prior years.I do not represent anything personally. These mortgage people dont seem to care that you tell them only what your client has told you. It is a little ridiculous.

Anuenue (talk|edits) said:

4 January 2006
Why would the lender need a letter from the tax preparer? All the lenders I know of ask for the last two tax returns. The Sch C on the return makes the self-employment obvious...If my clients ask, I tell them to provide copies of the Sch C.

anuenue

DZCPA (talk|edits) said:

5 January 2006
Anuenue, Must be a California thing. People here can get loans without showing their tax returns and just stating their incime on a loan appication. No proof needed. This has become very popular in the last 2 years.

Danw (talk|edits) said:

5 January 2006
Lenders here in Delaware infrequently require a "letter from your CPA" saying that you have been self-employed. Given the new IRS rules requring authorization to disclose (want to talk about stupid - requiring 12 CPI type, etc.), and, given the potential liability, I always recommend the client provide copies of the tax return and copies of the business license to the lenders instead. In 26 years of business, this has always sufficed. Dan

Anuenue (talk|edits) said:

5 January 2006
DZCPA

It's a Hawaii thing too...I'm not in CA although when I was it was. Anyhow I would still recommend to the client that they use the Sch C as proof. aloha, anuenue

LJACPA (talk|edits) said:

6 January 2006
I am learning so much being a part of these discussions. I am very, very grateful to have read about this topic. I have only been on my own for the last 19 mos. so I just started getting these requests recently (oddly - or not- from the same financing company, which I had previously never heard of). What a shock to find out this is common and what others have done to deal with it. All I have been asked so far is to state how long I've been preparing returns, ownership %, so nothing that I have to state an opinion or make assumptions. I will be more aware and cautious now that I know that this might be an ongoing thing. Thank you for this incredibly timely information.LJACPA 10:42, 6 January 2006 (CST)

DZCPA (talk|edits) said:

6 January 2006
Your Welcome.

Lsr (talk|edits) said:

6 January 2006
I have prepared at least 100 letters for my self-employed clients over the past few years. Recently I received the following sample from my professional liability insurance co. (CAMICO). I now use this verbage in all the letters I sent out in response to my clients mortgage brokers.

Sample Response Letter - Creditworthiness of a Client

Dear [Bank1]:

You have asked me to provide your bank with certain information on [Client Name] for your use in deciding whether to extend credit to [Client Name]. My services to [Client Name] were and remain limited to the preparation of [year] federal and state income tax returns from information provided to me by my client. As such, I have not performed any procedures or been given any information that would allow me to assist your institution in its decision on whether to extend credit to [Client Name]. Specifically, the tax returns were prepared for my client’s tax needs, and your request does not fall within the scope of the engagement that I performed for [Client Name]. Again, as the tax returns are based on information given to me by [Client Name], I have not reviewed, audited, or otherwise attempted to verify any of this information. Consequently, I cannot affirm its accuracy or completeness.

However, if [Client Name] authorizes me to do so, I can send you a copy of [Client Name]‘s [year] federal [and state] [personal, corporate, etc.] income tax returns so that you may compare your records with those in my office. If you wish me to do this, please send my firm the enclosed form signed by [Client Name] authorizing me to release this information to your bank. However, by providing these returns to you, I am not confirming or in any way verifying the accuracy of the information contained in the tax returns.

If you intend to use or rely on the tax returns I send you, you should perform your own independent procedures and tests as you deem necessary for approval of credit.

Please call me at [phone number] if you have any questions.

Sincerely,


[CPA]

1This letter can be modified as appropriate and sent to your client.


L. SUE's Menu Display Registration Information Logout

DZCPA (talk|edits) said:

7 January 2006
Thanks. That is a grest letter. I'm going to use it.

Sandysea (talk|edits) said:

7 January 2006
I have also received requests this year in Florida from two lenders who wished to know about credit worthiness as it pertains to a client's income. I also sent letters to the lenders to explain that I prepare financial statements based on information provided to me from the client (GAAP) and have prepared tax returns based on this information. I did not charge for these two letters but if it continues to become more often, then I would charge my fee of $75.00 an hour for this type of response.

MFaheyCPA (talk|edits) said:

9 January 2006
Just this last Saturday, I attended a seminar that talked about responding to lenders in the context of disclosing client information. The IRS has just issued proposed regs about the disclose of client information. Go to http://www.irs.gov/newsroom/article/0,,id=151368,00.html

Arielynn (talk|edits) said:

10 March 2006
I got a request today for this type of letter and thanks to this question and all the answers provided and they are very helpful. P.S. I am in California.

Warren (talk|edits) said:

10 March 2006
I have been using CAMICO letters for a while now and it is obvious it isn't what the lenders prefer. But with these lenders doing "no documentation" loans and loaning close to 100% (or more) of value on an interest only loan to a client that I certainly wouldn't lend to and then requesting a letter from the CPA.....guess who will get sued. I've have many lenders call me after they received the letter to change certain wording, or to add or delete something but I'm certainly not going to do that.

Tilt53 (talk|edits) said:

10 March 2006
I keep the letter short & sweet.

"To Whom it May Concern:

I am currently, and have been since 19XX, the tax preparer for John Doe. During that time he has been self-employed as a XXXXX."

I never change the wording and don't have lenders call me. I've provided the information they requested in the briefest possible way. Since the client has to provide them with a copy of the tax return, it's not up to me to give income or projections of what might come.

Warren (talk|edits) said:

10 March 2006
I can see why the lenders don't call, you've given them exactly what they've requested. I would definitely recommend expanding the language a little to give yourself a little protection. The lenders can look at a 1040 and see a schedule C, they aren't getting the letter to see if the person is self employed.

Albundy (talk|edits) said:

10 March 2006
I like the short & brief letter of Tilt53. If the banks want more, make them explain what they want. If necessary, expand your scope and your reply using some of the suggestions. Always charge for the letter, even if a 1/4 hour. Anytime you put your name on something, you take a chance.

LJACPA (talk|edits) said:

21 August 2006
I went back to find this discussion because I got another request from a mortgage company for a SE letter. After re-reading the above, I have a couple of new questions. Warren, what is a CAMICO letter? The request I'm getting is for an s corporation shareholder, do mortgage lenders consider this self-employed? I'm dumb, I've never charged for these letters and find it difficult to charge on this one since I did it for them before without charge.

Jdugancpa (talk|edits) said:

21 August 2006
CAMICO is an insurance carrier (Calif Mutual Ins Co, I think). It is the letter they recommend using to respond to the request. As to whether mortgage lenders consider S corp shareholders self-employed, who knows? Technically, they are not. From a practical point of view, some are and some are not. If I practice within an S corp and have no employees other than myself, it sure feels like I am self-employed, even though I report wages on the W-2. However, if I own 10% of an S corp with 9 other co-owners and a 50 person firm, am I still self-employed? Probably not.

Mtmckeecpa (talk|edits) said:

21 August 2006
LJ,

Yes, recently the letters I've issued deal with S corp owners as self employed.

I've adopted a letter that shifts the burden of proof of what the lender is asking for from relying on my letter to stating that they must perform their own due diligence when making their credit decision.

I have started to charge for this as well, not in the past. But I do now. It takes my professional time.

Don't known what the CAMICO letter is??? Maybe his E&O carrier?

Death&Taxes (talk|edits) said:

21 August 2006
I must get 5-10 requests like this, and use a statement very similar to Tilt53, but I usually use the phrase 'reported income from self-employment.' This is relevant because many clients are free lance musicians who receive both 1099 and W-2 forms for their work. I will only send such letter on written request of the client. Several years ago a bank called and asked for such letter for two clients who were retired. He mumbled something about a business. I had no knowledge of Schedule C income, but rightfully told the bank I had not received permission to talk with him. I then called my clients, who told me they would take care of the matter. When I tried to press, they more or less got off the phone. I dropped them from my mailing list and have not seen them since!

Jdugancpa (talk|edits) said:

17 December 2006
Some topics just never die. Please see page 8, "CPA Letters for Loan Brokers and Lenders", from the May/June edition of Lagniappe, published by the Society of Louisiana Certified Public Accountants.

Lagniappe, A Publication for Louisiana CPAs, v 32, No. 1

According to Walt Haig, my all-time favorite CPE instructor for accounting and auditing issues, loan brokers are attempting to establish privity to allow them to sue the CPA in the event that a high risk mortgage goes south. The aticle and letter included therein is an attempt to defeat that effort while at the same time being responsive to the client's request. Walt's only suggested modification to the letter is to add a second sentence to the first paragraph stating "The information contained in this letter is based on the advice of counsel." That will (hopefully) prevent the lender from coming back to you to pressure you to change the letter.

Additionally, confirmation of information requested by a lender could make a CPA subject to the AICPA Statements on Standards for Attestation Engagements. In the State of Washington, the WA State Board of Accountancy has adopted wholesale all of the professional standards promulgated by the AICPA and violation of any of those standards can be like stepping into deep doodoo. I personally don't like that stuff on my shoes.

Lhhesscpa (talk|edits) said:

17 December 2006
Jim: Thanks for this excellent info. Even though I am insured by CNA I hadn't seen the article. On Nov. 7 there was an interesting article in the Chicago Tribune that discussed why the IRS might want to investigate Low- or No-doc loans. --Larry Hess, CPA | Albuquerque, NM - Talk to me

Birdman (talk|edits) said:

26 April 2007
I put the disclaimers mentioned here and on the other threads on a letter recently. The client said that because of the disclaimer the letter "didn't work". He's not too happy and I will probably loose him as a client. I don't mind though. Not my fault.

LJACPA (talk|edits) said:

26 April 2007
I take every chance I get to comment on this reprehensible practice. When the lenders started referring to these as "CPA letters" I knew I'd never do another one. I personally have lost several clients and had others who informed me that they lost the loan because of me. I'm sorry, but you're right, it's not my fault. Just look at the number of loan defaults recently and I'm so glad I learned when I did and got out while I was still (hopefully) safe. There always was something very uncomfortable about these requests and especially how aggressive the lenders were in requesting the letters. No one can tell me that there are not a bunch of lenders looking for someone to blame and collect from now.

Birdman (talk|edits) said:

26 April 2007
Weird, I just had a non-client call for a letter. No way Jose.

I hope a good client doesn't ask for one. that will be a difficult situation.

JR1 (talk|edits) said:

April 26, 2007
We had a guy ask for one on here the other day. Started out innocently enough, asking questions, etc. and then got to whether I'd do it. For someone I don't know, no way Juan. Jose's brother. For my clients, I have no problem with this. I'm attesting to nothing but the factual information at Tilt mentions: I've been the preparer of x and he's self employed for x years. Nothing more. How that helps is beyond me. It says nothing. Intentionally!

CPA Plus (talk|edits) said:

26 April 2007
I charge $200 letter. Have only had 1 person ask the fee - everyone else is happy for the letter. I've had non clients ask and my letter specifically states that I did not prepare the return(s) yet on the returns they did reflect being self-employeed. I go so far as to include in the letter the company that did prepare each return.

Bottom Line (talk|edits) said:

27 April 2007
Really interesting (and hoping that I'm not jinxing myself) but haven't had any requests for these in about 6 months.

LJACPA (talk|edits) said:

28 April 2007
I'm piping in again because I can't believe that there still are those of you who are willing to do this under the current housing market (or any other circumstances). Especially a CPA. JR, by the time I post this you'll probably be long gone on vacation, but to the rest of you, please continue to beware. CPA Plus, you don't have a profile so I don't know what state you're in, but I would highly recommend that you check with your prof liability insurance carrier (mine is AON). Doing a letter for an existing client is one thing, I would never, never, never do one for a non client, not for even a million dollars (honestly!). Our state board (NC)finally is standing behind us and strongly recommending, if we do a letter, to be certain to check with the insurance carrier for specific language. One thing that I was told regarding 'simply stating that they are self-employed' and a return that allegedly confirms that, is opening up a potential Pandora's box that I'm not going to open. Yes, I am paranoid about this, especially in today's housing market. What I was told was that by stating (the obvious??) that someone is self-employed that you've confirmed that what they are doing and reporting to you as tax preparer is correct and have something to prove that. Also, that you've confirmed that they are licensed/registered, etc. to do the business that they are in. I'm not going to do all that so I'm simply not going to do the letters. PERIOD. Good luck.

Vbcpa (talk|edits) said:

28 April 2007
I did the letters for clients - only with minimal information such as JR stated; until I got the bank call (another thread "mortgage letter fraud") and found out that a mortgage broker had made up a letter for me and sent it in with some unknown's person mortgage application. Thank goodness the bank called to verify whether I had written the letter. I will not (even for clients at this point) do any self employed letters for bank loans. I explain to the clients why I won't - and tell them the letters are ridiculous anyway because they don't say anything - Be careful - like LJ said you are leaving yourself wide open for a potential lawsuit.

ClarityPortland (talk|edits) said:

6 June 2007
Thank you all so much for this information. I got one of these calls from a broker this morning and was hoping this site would have some help. He was also very pushy as the first poster noted. It's obvious the risks far outweigh the small revenues that could be gained from such work.

Sandysea (talk|edits) said:

6 June 2007
But my two cents. I sent my "letter" via email or pdf if you want to physically sign it. Client then took my file and changed the mortgagor's name and used the same letter to give to additional lendors. Something is wrong with this picture!! I don't "attest" to anything; give them the facts as I know them and provide information but I have not audited or reviewed the financial statements and therefore do not express an opinion on them.....still if you have a client that can use technology, you can get screwed in the outcome. Guess I agree with LH here. I won't do one again; once bitten/twice shy

Death&Taxes (talk|edits) said:

6 June 2007
We forgot about this issue when we listed the Fast Elephants.

Lhhesscpa (talk|edits) said:

6 June 2007
The subprime mortgage market is in incredible upheaval right now as a result of loan defaults. Several major lenders have filed bankruptcy. Others have stopped making no-doc loans. There has been much publicity in the Wall Street Journal and elsewhere about the trials and tribulations of people who have ARMs that become unaffordable when the rates adjust. I sure don't want to be a target of any of these people because I have given the reassurances the mortgage brokers demand. -- Larry Hess, CPA | Albuquerque, NM | Talk to me

S3 (talk|edits) said:

9 June 2007
I received a request today from a lender stating that my client is self-employed when in fact he is a landlord/real estate investor,just files a Schedule E. These guys are telling me to go ahead and state that the client is self-employed because they are within their meaning??? Am I being to hard nosed about this??? I told them no...

Thoughts please...

Lhhesscpa (talk|edits) said:

9 June 2007
I wouldn't do it. -- Larry Hess, CPA | Albuquerque, NM | Talk to me

Vbcpa (talk|edits) said:

9 June 2007
I also would not do it.....if enough of us keep saying no - maybe the lenders will wise up...

Lhhesscpa (talk|edits) said:

9 June 2007
On the contrary. As the losses mount from bad underwriting practices lenders will increasingly be looking for others to be made responsible. Only when the practices themselves cease will we stop being harrased. -- Larry Hess, CPA | Albuquerque, NM | Talk to me

Bottom Line (talk|edits) said:

9 June 2007
I haven't done one of these for over 9 months (interesting but haven't been asked for one in over 6 months). I don't like the possibility (however remote) of being the target of a lawsuit by a stupid mortgage company. Clients don't like it but I explain that the letter doesn't mean anything in the underwriting of the loan (I used to be a commercial banker so that carries some weight with the clients). I suggest that if the lender needs this type of thing, the lender is unprofessional and doesn't know what they're doing. I can then recommend some professional/knowledgable mortgage lenders. I wonder if they're making fewer requests because they're getting fewer letters from us?

Lhhesscpa (talk|edits) said:

9 June 2007
If there has been a drop in requests (demands?) my guess it's because fewer no documentation and stated income loans are being made. I doubt that lenders care much about our position on the matter. I'm not aware that the AICPA or the IRS have taken a position one way or another. -- Larry Hess, CPA | Albuquerque, NM | Talk to me

Bottom Line (talk|edits) said:

9 June 2007
Don't think the IRS cares since it doesn't effect them. Agree with Mr. Hess that request/demand is due to fewer sub-prime loans.

Lhhesscpa (talk|edits) said:

9 June 2007
IRS ought to care about the fraudulent info. on loan apps. such as stating the applicant's correct income while not having to show proof which would disclose that the income tax return was understated. That was one point made in the Chicago Tribune article I referred to in December. -- Larry Hess, CPA | Albuquerque, NM | Talk to me

Bottom Line (talk|edits) said:

9 June 2007
Lots of these subprime lenders seem to care more about "cash flow" instead of true income.

Dwlacroix (talk|edits) said:

9 June 2007
I'm not aware that the AICPA or the IRS have taken a position one way or another.

In the February 2007 issue of "The CPA Letter" the AICPA did address this issue. The short article did not say to not respond to the request but to be careful not to violate professional standard. It did say not to provide assurance on the impact to a client's business if cash is withdrawn.

Last year I had to refuse to write a letter that a client had been self employed for more than two years - I had only prepared a return for one year.

Bottom Line (talk|edits) said:

10 June 2007
Define "self employed". If a sole-P, I understand that. I am the only employee of the Sub-S that I am the 100% owner of. Sometimes I consider myself "self-employed"; sometimes I don't. Depends upon who's asking and why.

Sandysea (talk|edits) said:

10 June 2007
I agree BL; but for my client who was a sole prop in 03 and 04 then in 05 incorporated and in 06 he wanted yet another refinance, I tried to explain that he got a w-2 when the lender wanted a letter to state his income was reported essentially the same as it was in 03 and 04....NADA!! So...they kinda fiddled with my letter, stating instead that he was self employed in 03 and 04 and his income is still from the same business in 05 and 06. They didn't want a w-2 as this was lower than his SE earnings in 03 and 04....but they want to write these non stated loans and want us to be the heavy when we report it correctly....aarrgghh!!!

Bottom Line (talk|edits) said:

10 June 2007
This is why I HATE mortgage lenders. They don't have a clue about how to read a tax return or analyze a financial statement.

S3 (talk|edits) said:

10 June 2007
Thanks to all for the input...This was my first time using this forum and have found it very helpful...Look forward to chatting in the future...

LP (talk|edits) said:

20 June 2007
Banks have been asking for the letter in WA too. Check with your professional liability insurance provider -- Camico has a sample letter for it's insured to use which is supposed to help cover our liability risk when responding to the bank's request, while making the client happy that we've assisted them with their needs. It includes a disclaimer that you're not attesting to the information which is the client's responsibility, just that the person is self-employed. As to responding that a real estate landlord/investor is SE, I'd decline saying he was self employed but may consider being more specific in such a letter that he owns, manages and develops real estate properties (or such that he actually does). If he is a real estate professional, it may be that he really is a self-employed. Very fine line but I think that the letter that the bank requests can be modified to suit the needs -- again check with your liability insurance provider for their suggested wording which would include appropriate legal disclaimers.

Peterren (talk|edits) said:

26 July 2007
In regards to the mortgage letter, I would not use the Camico letter. I do not like the idea of offering to send the tax returns. Remember, the idea of this letter is to put you on the hook if the mortgage goes south. I am also against stating the ownership of a company. Ownership is a complex legal issue and is very difficult to determine in some states. For example, in many states partnership between family members do not require a 1065 but can be filed on two separate sched C. BE VERY CAREFUL HERE AS YOU MAY BE STATING SOMETHING BASED ON A TAX RETURN THAT IS NOT LEGALLY TRUE.

I hate these letters and avoid them as best as possible. I only do them for client that I know extremely well and that is with disclaimers all over the place. I had my letter written by my attorney. It cost a fortune but it helps keep some valuable customers.

If the customer is only a 1040 at year end and no other fees, I will not do the letter. The risk is too high for the return. Let me tell you, they go crazy when I tell them - NO WAY.

Michaelstar (talk|edits) said:

26 July 2007
Peterren - While I use the CAMICO letter - I have taken out the section of offering to send t/r's to anyone. I use "if you intend to use the tax returns provided to you by xxx, you should perform...."

Also see the post I started about a week ago on this subject.

http://www.taxalmanac.org/index.php/Discussion:Mortgage_lender_letters_/_Clients_lost

Actionbsns (talk|edits) said:

13 September 2007
I'm out of town right now and checked messages last night and the only one there was from some guy from United Guaranteed Mortgage indicating a letter I had written for a client had "surfaced" and he now wants to talk to me about it. I'm biting my nails to a nub right now. Spoke to the client, they purchased a second house prior to selling the first one (which is the one I wrote the letter for) and now the first house is in foreclosure. He said he heard from the same person yesterday and they are investigating the mortgage broker involved for unethical practices. Not sure what to believe here.

My letter was written in April 2005 and states that I had reviewed three years tax returns provided to me and determined from them that the client was self employed (scheduel C) for those years in Florida and was also a member of a medical partnership at the same time. He currently has a practice in Kona. A mortgage would not be injurious to his business. I'm wishing I wouldn't have used the word "reviewed", because I mean it in the sense of I looked at them and saw that the client was self employed. Since they were paying themselves, the mortgage realy wasn't an issue for the business either. I wrote this letter to Capital 1 Financial, the loan ended up written throuh Countrywide and now this person from somewhere else is calling.

All the facts stated were true at the time, since then the client has had to move his practice and the biggy is that they bought a second home without selling the first one and that is what is causing the foreclosure. Any suggestions? I'm really worried, but I need to see what this guy has on his mind I think before I freak out any more. BTW - I don't write these letters anymore and haven't for some time. This client was supposed to be a tax client but nothing ever happened in that area - I trained them on QB, so I had access to their data file, but they just kind of faded off and never got me balance sheet information I needed to complete the QB set up, so I just let them slide and it didn't seem to bother them.

CrowJD (talk|edits) said:

13 September 2007
First, keep this quote in mind: "I have known a great many troubles, but most of them never happened." Mark Twain, on Worry. 1) Tell them to put the questions in writing, and you will review them (note, you will review the questions, don't commit to answering anything). 2) You may know a lawyer, or a friend of yours may know one that you can sit down with for 30 minutes. Bottom Line: Find a lawyer that does civil trial work. The lawyer will explain to you IF you should answer anything now. United Guaranteed Mtg. could just be on a fishing expedition. 3) If you have E&O insurance/professional liability insurance, discuss with lawyer when you may have a duty to notify your carrier.

JR1 (talk|edits) said:

September 13, 2007
Yep, totally agree with Crow. First off relax. It's likely nothing. Tho' I don't like some of the wording you used...they can't hold you responsible for this. I wouldn't stonewall them or be difficult, but I would be frank in asserting that you didn't attest to a darned thing, the due diligence was on them, you merely stated facts that aren't disputable. That should make them go away and find someone else to hang. Check your insurance policy if it covers this stuff, and see what the dates are for reporting. Mine only covers tax, but I must notify them within 30 days, I think, of any possible incident that could lead to a claim. I had to call once, knowing that I'd probably win, but that it would take 90-120 days to win. Indeed, I was correct, and notified them needlessly. BUT, if a penalty had prevailed for several thousand dollars and I hadn't notified them, ugh. To say the least.

Jdugancpa (talk|edits) said:

13 September 2007
Your insurance carrier may well have a claims advisor. I know that CAMICO offers better coverage (waiver of deductible, or something like that) if you contact them about a potential claim prior to it becoming an actual claim. Check your policy and your carrier's website.

Natalie (talk|edits) said:

September 14, 2007
I, too, agree that Crow has given you good advice. UGM may just be looking for additional information on how the broker contacted you, what he/she said to you, etc. There's no need to worry at this point. You may be getting all frazzled for nothing.

BethAZ (talk|edits) said:

14 September 2007
Agree with all. Please don't fret over this. If the company is going after one of their bad brokers, it's probably nothing more than to verify with you that you actually wrote the letter and he didn't forge it. It will be okay. There sure isn't anything in that letter that could possibly hang you. Forget the word 'review', that's not going to hold water in any court - and you aren't going to be involved in anything like that anyway. I promise ;)

Actionbsns (talk|edits) said:

17 September 2007
Thanks everyone. It's been quite a week - I was in Orange County for the IRS tax seminar and to spend time with my dad who was just diagnosed with untreatable lung cancer, so things have been a little edgey. Then to get this call at a time when I couldn't review my files or anything, it really made me nervous. Anyway, I called him back out of courtesy, thought that if he had any serious line of questioning I would be able to follow Crow's suggestion and ask them to FAX a list so I could review it when I return to my office. Seems what he was after was to ensure that I exist and actually wrote the letter. That's really the only question he asked - the answer was obvious. Then he commented on the fact that the letter was nothing more than the standard self employment letter required by lenders and agreeing with information they already had access to anyway. I did ask who he is exactly, since the phone was answered as "something something Consulting". They have been engaged by United Guaranteed Mortgage evidently to review some loans that have been made over the last several years. His comment didn't implicate either the loan broker or my client, so he was probably protecting his own privacey rules as well. So I think I'll pull out my liability policy tomorrow and become a bit more familiar with it, but I don't see any reason to do much more about this incident unless there is another call. He didn't call me on my cell phone for any other reason the rest of the week.

BethAZ (talk|edits) said:

17 September 2007
So sorry to hear about your Dad and relieved that this call was just nothing. I like to keep my promises :)

JR1 (talk|edits) said:

September 17, 2007
I pray that you and your dad can find peace. And like Beth, am glad that this indeed was nothing. You're right, it's over, lay it aside and focus on the important stuff now.

Hmoy (talk|edits) said:

4 August 2011
Do you also prepare an engagement letter before the comfort letter is drafted? I HAD a client whom I prepared the letter, then when I asked for the fee, they never paid and never since came back for tax return preparation after I did their tax returns for three years. I know it was my fault (lesson learned) for not letting them know ahead of time about the fees of $100.

Hmoy (talk|edits) said:

4 August 2011
BTW, that was of course years ago in 2006.

ZL28 (talk|edits) said:

19 November 2012
client need a letter verifying they are self employed. I have the language to use from the insurance carrier for my response. wondering would group recommend that i get letter from lendor asking them to put their request in writing?

Kevinh5 (talk|edits) said:

19 November 2012
no, but get the 7216 disclosure signed by the client first, not the one they signed for the lendor

Evlcpa (talk|edits) said:

10 October 2013
Here is my response to a mortgage broker that can't grasp simple facts or spell very well.....Generally the sample letters I've seen cite: "This is not a substitute for your own due diligence."

Dear Ms. Mortgage:

I requested a sample letter from you on September 12th to ensure that we can respond in a fashion that meets your needs. I received no sample letter. So I was forced to consult AICPA guidance on this matter and that guidance is cited as follows:

In 2012, Freddie Mac revised the Guide by deleting the practice of obtaining a comfort letter from an accountant as a method of determining the impact of a withdrawal on a self-employed borrower’s business. Section 37.13(b) of the Guide, which is related to stable monthly income and asset qualification sources, now states that when business assets are used for down payment and closing costs, financing costs, prepaids/escrows and reserves: the assets must be verified in accordance with the documentation requirements in Sections 37.20 through 37.23; the assets must be related to the business that the borrower owns that is documented in the mortgage file; the seller of the mortgage is required to document a cash flow analysis for the borrower's business using the individual and/or business tax returns, as applicable; and the mortgage file must contain the seller's written cash flow analysis and conclusions.

While lenders and brokers have always been responsible for conducting their own due diligence prior to making a credit decision, the revision to the Guide places the burden of determining the impact on the ability of the business to continue operating as a result of the withdrawal solely on the lender or broker.

If a self-employed borrower is informed that he/she will not qualify for a mortgage unless his/her accountant provides a comfort letter, accountants should challenge this assertion by referencing the fact that such guidance does not exist in either the Fannie Mae or Freddie Mac seller guides for residential mortgages.

Your request for a CPA letter included the following: “Satisfactory evidence that <<Client>> has been closed AND Letter(sic) from CPA to state whether any looses(sic) will be reposted on next return” To respond to your request above: Yes, the business of <<Client>> has ceased operations. It should not incur additional significant cash requirements. However, the corporation is still active with the State of California and it may incur additional tax losses as we write-off previously recorded assets that have gone unrealized.

We cannot provide any assurance that a future event will not happen and, of course, this letter or any other correspondence from our firm is not a substitute for your own due diligence.

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