NECPA in NEBRASKA Posted August 31, 2007 Report Share Posted August 31, 2007 A client called and his mortgage lender wants a letter from me stating that he has owned investment property for more than two years. This is the first time that I have had this request. I told him that the mortgage broker could verify that he owned it by checking with the county. Should I have given him the letter? It just looks like another way for the lender to try to hang something on me. They have the tax returns. Am I being too picky? This guy has more mortgages than he knows what to do with and I know that he's upside down. Thanks! Bonnie Quote Link to comment Share on other sites More sharing options...
JohnH Posted August 31, 2007 Report Share Posted August 31, 2007 You're not being too picky. I wouldn't provide any information to a lender that can be obtained from a primary source, especially since he already knows where to go to get the info anyhow. I agree that the lender is just packing his file so he can somehow try to drag you into it if the loan goes south. This is nothing but amateurish CYA on his part, or else the client is desperate and is trying anything he can think of to persuade the lender to give him more money.. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted August 31, 2007 Report Share Posted August 31, 2007 A client called and his mortgage lender wants a letter from me stating that he has owned investment property for more than two years. This is the first time that I have had this request. I told him that the mortgage broker could verify that he owned it by checking with the county. Should I have given him the letter? It just looks like another way for the lender to try to hang something on me. They have the tax returns. Am I being too picky? This guy has more mortgages than he knows what to do with and I know that he's upside down. Thanks! Bonnie I feel for you. I have a client that I went down this road with. My advice is DON'T DO IT. You will get request after request to rewrite the letter to the broker's standards. I may now have lost my client because the last time the broker called and asked for a letter, I would not change the wording and she hung up on me. They will try to tell you that it is just a formality that the lender is asking for verification that the return was processed by you. Then they will try to get you to make statements about items in the return, especially income, assets, and confirmation of business ownership. They will try to dictate the letter for you. BTW, the letter I have given this client's broker says 2 things very clearly: 1. I make no representations about the information in the return(s), as it is the taxpayers representation to me and I do not have any knowledge of the accuracy of the information the client gives me. 2. The letter is not intended to be used as a factor in denying or granting of credit, and I expressly forbid it use in that manner. These two items usually get the second call from the broker, trying to get them changed. It is hard when you need clients, but they put you in this position to help them out. I have resigned myself to losing this client (he has not called after the broker hung up), but I am not going to get sucked into his problems with his mortgages. It ain't my risk, and I ain't taking it on. Good Luck Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
NECPA in NEBRASKA Posted August 31, 2007 Author Report Share Posted August 31, 2007 Tom, I really like what you put in your letters. I feel bad for the client, but I'm not putting my neck out because he is in financial trouble. I put a lot of the blame on my liability insurance company and told him that they don't want us to write letters for the lenders. I'm just sick of seeing so many of clients in over their heads with these stupid mortgages that they couldn't afford in the first place. I'm sorry that you probably lost a client because of greed. Bonnie Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted August 31, 2007 Report Share Posted August 31, 2007 Tom, I really like what you put in your letters. I feel bad for the client, but I'm not putting my neck out because he is in financial trouble. I put a lot of the blame on my liability insurance company and told him that they don't want us to write letters for the lenders. I'm just sick of seeing so many of clients in over their heads with these stupid mortgages that they couldn't afford in the first place. I'm sorry that you probably lost a client because of greed. Bonnie Bonnie, Good for you. Nobody likes insurance companies, so laying the blame at their feet is a good move. I too am sick of the government bailing out people who make stupid mistakes. And then you see the President going out and proposing to bail these people out at taxpayer expense. 2 years ago, I could have "qualified" for and gotten a loan on a 600,000 home. I could have put no money down and made teaser interest only payments for 2 years. If I had known the government was going to bail me out when the rates reset and I was over my head, I would have done it. Instead, stupid me, I bought what I could afford with 20% down and a traditional mortgage. Now the guy down the street in the better home with a reckless streak is going to get ahead. Makes you want to just take all the cash from all the credit card offers you get in the mail every day and head to Mexico for a margarita. Responsibility is not paying off in America today. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
JohnH Posted August 31, 2007 Report Share Posted August 31, 2007 I agree with both of you. Until people are held accountable for their dumb decisions, they will just go right on making them. Unless they are made to feel some pain, there's no incentive to change their behavior. Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted August 31, 2007 Report Share Posted August 31, 2007 I agree that people are not being held responsible, and I know that my lack of debt will hurt when my son gets ready for college in a couple of years and we are trying to get financial aid. Nevertheless, I sleep soundly at night not worrying about someone coming to repossess my house or my car. If they want to repossess my son, we can work that out - anyone ever read "The Ransom of Red Chief" by O. Henry? Quote Link to comment Share on other sites More sharing options...
jainen Posted August 31, 2007 Report Share Posted August 31, 2007 >>Nobody likes insurance companies, so laying the blame at their feet is a good move.... Responsibility is not paying off in America today.<< Isn't this a tad inconsistent? If you have some objection to the letter, why not take responsibility for it and express your opinion directly instead of hiding behind your insurance company? It doesn't bother me to write a lender letter, but I can only say what I know. What I know is only what the client has claimed for a non-audited tax return. The fact that he files Schedule E no more means he actually owns rental property than filing Schedule C means he is actually self-employed. I would simply state that for the years in question the taxpayer has listed the subject property on Schedule E, the form normally used to report rental income. Quote Link to comment Share on other sites More sharing options...
GeneInAlabama Posted August 31, 2007 Report Share Posted August 31, 2007 It doesn't bother me to write a lender letter, but I can only say what I know. What I know is only what the client has claimed for a non-audited tax return. The fact that he files Schedule E no more means he actually owns rental property than filing Schedule C means he is actually self-employed. I would simply state that for the years in question the taxpayer has listed the subject property on Schedule E, the form normally used to report rental income. Those are exactly my thoughts. I guess I am a little reluctant to express an opinion different from the rest of the pack. I know that is not the qualities of a leader. Gene Quote Link to comment Share on other sites More sharing options...
NECPA in NEBRASKA Posted August 31, 2007 Author Report Share Posted August 31, 2007 Actually, he isn't reporting any income on schedule E. I don't know why he told the lender that it is investment property. Maybe the lender wanted it to be investment property. He is only deducting the interest and real estate taxes on schedule A. It's actually his old residence that he is letting his ex-fiancee and her kids live in and she's not paying rent. I blamed the insurance company so that I didn't have to preach to him about how he needs to use better judgment and not date again. This is wife or fiance #6 in the last 10-12 years and they have all taken him to the cleaners. I did call him back and tell him that he needed to tell the broker that it was not investment property for the last two years anyway. I'm his CPA, not his mommy. That's where he is living now, since he let himself be moved out of his own house. Quote Link to comment Share on other sites More sharing options...
jainen Posted August 31, 2007 Report Share Posted August 31, 2007 >>I did call him back and tell him that he needed to tell the broker that it was not investment property for the last two years anyway<< That's exactly what a tax preparer shouldn't say. You don't know what the lender's definition is. Even for purposes of the annual tax return that you prepare, there is little difference between investment and personal-use real estate. Therefore it would be perfectly appropriate to serve your client's interests by writing that he declares ownership expenses such as property taxes on Schedule A, the form normally used to report investment property. Some of your language suggests that you don't approve of his financial choices. Apparently this has interferred with your professional relationship, so you might ask him to find another advisor. Quote Link to comment Share on other sites More sharing options...
JohnH Posted September 1, 2007 Report Share Posted September 1, 2007 Sounds like your client took to heart something that humorist Lewis Grizzard said years ago after several failed marriages. "The next time I get the urge to get married, I'll just find a woman I hate & give her my house." BTW, here's an article that offers some perspective on the overall issue we are discussing (aside from the initial question about the letter itself) http://biz.yahoo.com/cnnm/070830/083007_fl...2&.pf=loans Quote Link to comment Share on other sites More sharing options...
TAXBILLY Posted September 1, 2007 Report Share Posted September 1, 2007 Agree with the majority. taxbilly Quote Link to comment Share on other sites More sharing options...
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