Discussion:I swore I wouldn't - mortgage letters...
From TaxAlmanac
| Revision as of 10:01, 1 August 2009 Smokeytax (Talk | contribs) (Natalie - I did) ← Previous diff |
Revision as of 10:47, 2 August 2009 LJACPA (Talk | contribs) (So, is it actual) Next diff → |
||
| Line 144: | Line 144: | ||
| }} | }} | ||
| + | |||
| + | {{ForumReplyPost|UserID=LJACPA|Date=2 August 2009|Text=So, is it actually the CPA firm (nothing on their website that I saw) that's offering this great service or a separate business? I don't know that I've ever seen the word "creative" used in regards to the services offered by a CPA firm. That's interesting. I agree that they're really not doing anything for this and in all the requests I've received over the last several years, I don't remember one single one that dealt with a Schedule C. The self-employment issue was an issue but only in regards to an S corporation. I wish I could remember the story, but a while back I read an article about a CPA being sued for issuing a letter that was relied upon by the lender/borrower and a pretty hefty fine went along with it. Granted, it was only one case, but if there's one, there's no doubt more. Personally, I'd be embarrassed to have my name/firm associated with something like this. How cheesy and unprofessional.}} | ||
Revision as of 10:47, 2 August 2009
Discussion Forum Index --> Tax Questions --> I swore I wouldn't - mortgage letters...
| 18 December 2006 | |
| It keeps happening. I got three more phone calls last week about doing these 'simple' letters. One client I know I have lost. One, astoundingly, by chance ran into their former CPA (whom they had 'fired') who did the letter for them when I told them I couldn't. Have I lost that client??? Although I know that the prior discussions on this matter range from total acceptance with no problem at all in doing the letters to absolutely don't do them, I just don't know what to do. I've used the language that someone provided from CAMICO and it is totally unacceptable to these lenders. The lenders have become very aggressive, very rude and make me look like I'm the one who is causing their borrower, my client, to lose the loan. The more requests I get, the more concerned I get. One client, the one who got the letter from their fired CPA, told me that the lender was basing the loan approval on his credit score, which was very high, even though his income would not justify the loan being made. Now tell me there's nothing for me to worry about in this case. Since it seems this CAMICO letter/website questionnaire, etc. is the only source of being able to say no, does anyone else have anything substantial upon which to base denying the client these letters? I would appreciate anything at all. | |
Tfortaxes@msn.com (talk|edits) said: | 18 December 2006 |
| Ditto. Verbage that I used last year in not acceptable. I am tempted to tell the client to show the lender their Schedule C. I refuse to state things I know are false. I am bound by my license to do so. What I say now is: I have prepared jon doe's tax return for the last XX years. While I can verify my client is self employed I can not discuss the content of the return with out written permission from my client. This seems to be working, at least for now | |
| 18 December 2006 | |
| LJA, see my comments and article that were posted on Saturday on the previous thread on this topic.
http://www.taxalmanac.org/index.php/Discussion:Requests_from_lendors_for_proof_of_self_employment Also, see the article Larry Hess linked to following the article I linked to. | |
| 18 December 2006 | |
| Stick to your guns LJACPA; this too shall pass. It IS possible, after all, that this so-called "soft landing" for the outrageous real estate speculation that's been going on might not be so soft after all. And, if we have a "hard landing" in real estate, the foreclosures will explode, and the lawsuits will start flying. These "No-Doc" loans, and "Interest-Only" loans will come a cropper one day. People need to remember that the main reason you buy a house is to have a place to live..... not to speculate. | |
| December 18, 2006 | |
| LJA - Here is an exellent article at ASCPA that all CPAs and tax preparers should read: | |
| 18 December 2006 | |
| Good article Deback! In my opinion, those who get the rewards should bear the risks. In the loan situation, the broker gets the commission, the bank get's interest and outrageous up-front fees,the client gets the loan: and the CPA/preparer ends up holding the bag. No way. Again, good article. | |
| December 18, 2006 | |
| Yea, I was happy to find it when searching for "Camico letter" at Google. I just formatted their sample letter in Microsoft Word and will be using it in the future, instead of the short, basic letter I used to use when requested to fax these annoying letters to lenders. I never thought about possibly being sued for providing a short letter stating how many years I've prepared Sch Cs for so-and-so. But after reading this thread and the thread provided by jdugan (thanks, jdugan), I decided I'd better check it out. | |
Bottom Line (talk|edits) said: | 19 December 2006 |
| Fortunately I haven't had to deal with some of this pushy language. All mine have been "TP has been self-employed for X years. I have prepared tax returns for X years." Notice that there is no confirmation of any dollars or statement that the return was filed. Unfortunately I think these requests will continue until we all say "NO - We won't do them!" | |
| 19 December 2006 | |
| Over here in the UK we all use the standard letter drafted by whichever professional body (eg Chartered Accountants etc) we belong too. I wouldn't do more because of the insurance risk. | |
| 19 December 2006 | |
| I have been involved in discussion on this matter a great deal, and am on the line for millions of $$ in mortgages. I now write a letter, if I cant wiggle my way out of it, similar to the letter on pg 8 of the Lousiana CPA (see JDUGANCPA post above) Here it is...
This letter is not intended to confirm nor deny the creditworthiness of the above referenced individual. You have asked me to provide your lender with certain information on the above referenced client for your use in deciding whether to extend credit. My services to my client were and remain limited to the preparation of 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 my client. 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 him. Again, as the tax returns are based on information given to me by my client, I have not reviewed, audited, or otherwise attempted to verify any of this information. Consequently, I cannot affirm its accuracy or completeness. [Here I would put in that they are self-employed, or that they get many W-2's and are effectively self employed as an X in the Y business] If you intend to use this information, you should perform your own independent procedures and tests as you deem necessary for approval of credit. If you use this letter for any purpose, then by your use of this letter you agree that no liability for any reason will be imposed by you, your organization or any organization that you provide this letter to upon [me, CPA] | |
| 19 December 2006 | |
| Maybe we should all start offering a service to the lenders for a fee? Say for a $1000 fee, I'll be glad to do the work necessary to offer a credit opinion. We can verify assets for them, attest to some sort of income, confirm bank accounts, the whole nine yards. | |
| 20 December 2006 | |
| I have malpractice insurance. Some things I do not worry about. Thats why I bought insurance. If I want to keep the clent, I do the letter. If I want to lose the client, I do not do the letter. Your choice. If you do not want to do the letter, I might consider doing it for you and you will probably lose your client. | |
| 20 December 2006 | |
| This is obviously up to everyone in their professional judgment. However, every malpractice policy has limitations and exclusions from coverage that should be reviewed carefully. In addition, your application is usually a part of the policy, it is very wise to review what you put on that application regarding the scope of your practice; and keep in mind that insurers will change that app. page that you fill out from time to time. LJACPA said his client's income would not justify the loan, let this sink in. This is not uncommon today, it is, however, insanity for a banker to make loans like this. How does the banker mitigate the negative results of his insanity?: he tries to pawn off the risks to CPAs/preparers. Assuming I was going to respond to these lender requests at all, I would use the most accountant/preparer protective letter possible. | |
| 21 December 2006 | |
| It is hard to keep a client happy without doing these stupid letters. I had an interesting experience. These letters go from the loan broker to loan originators and on up the food chain. Well, somewhere along the line, somebody did some cut and paste to my original letter so that it made some assurances of income. Needless to say, the loan was axed once the forgery was discovered. If I had more time I would go after the fool that did that. I wonder how many CPA letters I have "written" for people I don't know - without my knowledge. It is a tough delima. I once had a dumb loan broker say "there is no risk to you.... pause.... unless the client defaults." No Duh.
I think I'll start charging $100 for the first letter and $50 for each revision. | |
| 21 December 2006 | |
| When I first started practicing law, civil RICO cases were first starting. You don't ever want to be a defendent in a civil RICO because the testimony of "Conspirators" comes in against you, and hearsay rules don't apply; the accusation was using the wire (Phone) and mail to defraud a lender (it's hard to do any business deal without phone or mail, good or bad, and use of these mediums is what gives jurisdiction). Anyway, lender goes to foreclose and finds out his collateral is not worth a whole lot, and goes to suing every one he had an address for. My client was an appraiser, now any type of an appraisal is basically an art more than a science, you are comparing apples to oranges and trying to determine value. Generally, you prefer the appraisal come in high when you wish to take a loan out against the property, so my guy did a favor, still within professional standards, but pushing the limits to get the appraisal up there. After 2 years of us fighting this lawsuit, worrying about it, all the dipositions, time he had taken off work, he was a changed man, and he finally won the "count" against him. What's been done already to appraisers is probably on the way for preparers and CPAs. Especially if you in anyway try to "pretty up" the client's situation. I am not saying that every accountant that has written one of these letters is going to be sued, but some will if real estate turns south....and even if they win they lose. | |
| 21 December 2006 | |
| Great discussion. Banks can always get the client to request the IRS send copies of tax returns directly to them under a power of attorney, which would be a very easy (if not quick) way to get verification that the tax returns the client has submitted have not been altered. But then they wouldn't have the CPA to hold responsible . . . | |
Death&Taxes (talk|edits) said: | 21 December 2006 |
| Banks don't even need to do that: I have seen them have borrowers sign 4506 forms with their address on it, but oddly they often still want a letter since the 4506 takes time. Client called me once from outside a bank, asked what the 4506 was and when I told her, she went back inside and told them another bank had a better deal and lost her application fee. I never had the guts to ask her just what tax returns she was submitting. | |
Bushmaster (talk|edits) said: | 21 December 2006 |
| Wow. Speaking of coincidences!! I stumbled on this thread earlier this week and behold yesterday, I got a request for one of these letters. I had already copied the suggested letters and put them in word format.
I called and asked the lender and he told me they don't even want the tax return! They are doing these loans based on "declared income", whatever the hell that is. These tax returns aren't even a part of the loan application!!! This is why I always asked the question to start with "Why can't you take the tax payers income tax return and deduct that they have filed a Schedule C for the last two years?" Well, the reason is the tax return isn't part of the loan application. | |
Bottom Line (talk|edits) said: | 23 December 2006 |
| We're already starting to see some press about foreclosures and past dues increasing. Regulators are blaming it on lax lending (surprise, surprise). This type of loan is what they're talking about! | |
| 30 July 2009 | |
| My what a difference two and a half years has made! As I'm once again going through this with a client, though Wells Fargo is only requesting a "verbal confirmation that I have prepared his returns and for how long", which I still really don't want to do - leave me out of it! The client I mentioned in my original post is still a client and within the last year humbly told me that "you tried to warn me" and I never, ever did a letter for them. They ended up acquiring 12 additional rental/investment properties and the overwhelming nightmare of trying to manage these and have only recently "given back" 5 more of them. Their excellent credit record is shot, they're still buried under more than they can handled and will no doubt lose more, if not all, of the remaining properties. They take full blame for allowing themselves to get into this situation and will no doubt pay for this for many, many years to come. My greatest fears of what was to come have more than surpassed what I could have ever imagined. Not really anything important other than how interesting when you look back at what was and know what is. | |
| 30 July 2009 | |
| The bubble burst, just like the great tulip bulb bubble of lore burst.
Who was the cheerleader: well, one of them was the Fed. Why? Greenspan knew better, but after he was blamed for George I losing in '92, he couldn't be seen as ruining George II's chance at four more years by raising rates, and he thereby missed his last chance to cool the real estate boom before it burst. Uh, so it burst. Now, some are adovcating that the Fed. be given even more responsiblity. Which, in my opinion, is a huge mistake. Brush up on your Japanese everyone, because we are in for the same multi-year stangnation that they have been through since 1990. P.S. if you like history, here's a blurb from Wiki on the Dutch Tulip Bulb Bubble.http://en.wikipedia.org/wiki/Tulip_mania | |
| 30 July 2009 | |
| Is there a significant difference between a CPA writing one of these comfort letters and some other tax practitioner writing it?
I ask because it is the very soul of the CPA's profession to express opinions as to the financial health of business entities. If my concern is valid, it seems to me that of all people, CPAs should refuse unless paid to do a proper audit. | |
| 30 July 2009 | |
| Are you implying that Arthur Anderson should have written mortgage letters instead of offering opinions about the financial status of Enron? | |
| 30 July 2009 | |
| I received a call the other day asking if I could create a P&L for a taxpayer who was applying for a mortage. Taxpayer already provided the Schedule C but the lender wanted a "Profit and Loss" statement. I did not have the time to do the work so I referred it to a bookkeeper who I work with. She did a great job -- entered all bank account transactions and reconciled the bank statements for 2007 through June 2009.
I told the broker that I would take a look at the bookkeeper's work to confirm that the work was done as I had asked. Just now, the broker copied me on an email asking the taxpayer to send me his contact information...letting him know that a condition of getting the morgage was that a CPA signed off on the AUDIT of his profit and loss statements prepared by the bookkeeper !!! What audit ????? I did not do an audit and I told her that I am not going to be signing off on any letter that states that I "audited" the profit and loss !! | |
| 30 July 2009 | |
| lol. But haven't you heard the news? Now's the time to buy a house!
Heck, I'd rather wait until they've dropped another 20%. I figure we are in for another wave of foreclosures due to the unemployment going on. And, by the way, they are cooking the books if they say unemployment is improving. The truth is that people have just stopped looking, and the stats. don't pick them up. | |
| 30 July 2009 | |
| Just spent some time on the phone explaining the difference between a bookkeeping engagement and an audit attestation engagement to the broker -- she was OK with it but unfortunately now she really does want an audit !! It ain't me, babe...it ain't me she's looking for :) | |
| 30 July 2009 | |
| Wow, you might want to get her card. I think you've actually run into an extremely rare find: a loan broker who wants to know the truth. She won't last long.
By the way, forget what I said above about the economy. The people on CNBC just said everything is A OK, and it should be straight up from here on out. | |
| 30 July 2009 | |
| I heard the same thing --- yay !! the recession is finally over !!! ........right! | |
| 30 July 2009 | |
| Wait a second....I thought Rahm said "we rescued the economy".....
| |
| 31 July 2009 | |
| So, it DOES make a difference if a CPA signs it?
If I were to advise a CPA about signing ANY sort of letter or other document attesting to the financial condition of a business or individual, I'd warn against doing it without a proper audit. But I don't know the audit and attest business very well so maybe I'm being too conservative? | |
| 31 July 2009 | |
| Wow.
I've been arguing with a client all week about Wells Fargo's request for "verbal confirmation", just like LJCPA is saying has happened. I may lose the client even though I sent a letter including the Comica boilerplate wording, which anyone in his right mind would have to say is ludicrous. But, going back to the brilliant CrowJD's DECEMBER 2006 post stating that the lawsuits will fly if the hard-landing crash occurs - my question is, where are the lawsuits? Has anyone heard of a CPA, or even a mortgage broker having the least bit of problem with having been involved in "liar" loans, in terms of lawsuits or lenders trying to place blame on someone for not being able to collect? | |
| 31 July 2009 | |
| I am sure there are some civil lawsuits against loan brokers-appraisers-tax people, but frankly, I have seen zero about them on TV or anywhere else. So, it's certainly not a landslide at this point.
This may be one of those times where the shady behavior was SO bad and SO widespread, that the bad players will get away with it. However, I am still not enthusiastic about signing such letters going forward. | |
| 1 August 2009 | |
| Check out this website - | |
Actionbsns (talk|edits) said: | 1 August 2009 |
| So for $300 out of pocket, they'll do what the lender could do and obtain a copy of the tax return, and sign a letter stating that's what they did. Such a deal.
I did have one disturbing phone call about a year and half ago, just as all the mortgage issues were beginning to shake out. A lawyer had found my letter in the files of a mortgage broker in town who was evidently being held to task on some of the loans she had written. Nothing ever came of it though, I think he just wanted to verify that I existed and the letter wasn't made up. I'm not even sure how it all ended up, never saw anything in the papers. | |
| August 1, 2009 | |
| Smokey, I think it's interesting to note that CPA may not mean what we commonly think: we will issue a letter from a Certified Public Account that the Borrower has been self-employed for the past two years. Of course, it could also just be a typo. | |
| 1 August 2009 | |
| Natalie - I did check out the CPA's website and they do look legit.
When you think about it, you could come to respect what they're doing - it is legal, ethical - no lies are being told, and puts bread on the table. I'll bet, however, that the partners have put all of their assets in their spouses names'. Actionbsns - that phone call must have been quite creepy! | |
| 2 August 2009 | |
| So, is it actually the CPA firm (nothing on their website that I saw) that's offering this great service or a separate business? I don't know that I've ever seen the word "creative" used in regards to the services offered by a CPA firm. That's interesting. I agree that they're really not doing anything for this and in all the requests I've received over the last several years, I don't remember one single one that dealt with a Schedule C. The self-employment issue was an issue but only in regards to an S corporation. I wish I could remember the story, but a while back I read an article about a CPA being sued for issuing a letter that was relied upon by the lender/borrower and a pretty hefty fine went along with it. Granted, it was only one case, but if there's one, there's no doubt more. Personally, I'd be embarrassed to have my name/firm associated with something like this. How cheesy and unprofessional. | |
