Discussion:I swore I wouldn't - mortgage letters...
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| Revision as of 23:36, 23 December 2006 Bottom Line (Talk | contribs) (We're already st) ← Previous diff |
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| {{ForumReplyPost|UserID=Bottom Line|Date=23 December 2006|Text=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!}} | {{ForumReplyPost|UserID=Bottom Line|Date=23 December 2006|Text=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!}} | ||
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| + | {{ForumReplyPost|UserID=LJACPA|Date=30 July 2009|Text=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.}} | ||
Revision as of 16:59, 30 July 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. | |
