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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121150  
Subject: Re: Self-employed mortgages Date: 8/3/2011 9:00 PM
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(Peter:)I have one self-employed client that recently asked me for what amounts to a compiled financial statement. I did that, but it wasn't good enough for the underwriters. They want me to say that what is on the financial statement matches what is reported on the tax return. Can't they look at the two and compare the numbers for themselves?

I had that happen a while back, and it wasn't self-employed either; they wanted an interim financial statement for a wholly-owned S-Corp. They DID accept the personal and corp. tax returns for the 2 prior full years. (We don't do financial statements for the corp. as a general thing for this client.) Part of the problem, in their mind, was that this guy's income items (Sub-S income, distributions, C-Corp dividends, and salary - all from the same corp. - had fluctuated quite a bit in the previous years) Well, that wasn't accidental, either; we had him pay out his accumulated E&P one year, thinking it might be the last chance to do it at a 15% rate. That was a one-time thing.

In this case, I refused, as all I see is potential liability for me.
Didn't feel I had that luxury; and it wasn't really a challenge or a problem. Just an extra piece of work, and the client knew it was required by the lender, so he didn't mind paying (at least he didn't protest to us!)

And from what I hear, there will be more of this, as the problem of "liar loans" was especially notorious among self-employed and other small business owners. If you can show a W-2 and current pay stub, you're a lot more believable these days. Even one of the partners in our firm did a refinancing lately, and had to come up with the firm's financial statements. They wouldn't take just his tax return and K-1.

Bill
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