OT: CPA Letter for Mortgage

[erchess]

Pulled in two directions

On one hand one hates to lose a good client because one does not feel able to comply with a request the client is getting from what the client views as a friendly and ethical loan officer. On the other hand, one hates the idea of being sued by a loan company after a loan becomes a loss. The client is probably gone or at the very least has a less expensive return and less ability to pay for it and the court case will cost time and energy even if the E & O insurer picks up the lawyer's fees and all of the judgment except one's deductible. All in all I am making changes in my behavior. I will attest that I prepared the return but I will stop pointing out that by signing it I asserted to the government that it was complete and accurate to the best of my knowledge and belief and I will stop asserting that I continue to hold that belief. (I've never had that belief change based on new information so I've never had to think about what to do if such a changed client asked for a letter.) I will start pointing out that I am not an auditor and I based the return on information from the client which I did not audit. I will advise the lender to do an examination of the credit worthiness of the client because I am not in a position to comment on that.

[JG EA]

When the client really wants one of these (after the third party thing has been signed) I write what kiind of tax return they had and so on and then take the advice of someone on this board and add a bit. I'm at home now so don't remember the exact wording, but something like

I have prepared this return from the information provided by my clients. I have not audited any information on the tax return and can not make assurances that they qualify for a mortgage.

It's better than that but you get the idea.

[joanmcq]

Do a search for 'comfort letters' or 'mortgage letters' and see what people have said in the past. You are being asked to attest to something you cannot know. Check with your E&O company; I'm going to bet they either have a generic letter that attests to nothing or will advise you to not agree to any type of letter.

I won't do one, can't under CPA rules, and a lot of other people don't want to be a deep pocket that the lenders can put blame on if the loan goes south.

[erchess]

I don't normally sign the copy for the client's records that I give out. Should I?

[jimmcg]

Just say no to the banker. They are simply trying to find someone else to share the responsibility for the determination of the creditworthiness of the borrower. This is their responsibility as lender and theirs alone. As to a statement that you prepared the client's tax return tell them to look at page two of the Form 1040 where you signed as preparer. Make them do their job!

[Jesse]

I think more and more of the credit/mortgage companies are trying to shift the responsibility to someone else - accountants have deep pockets after all!

I wouldn't write the letter and I make it very clear in any letter I do write that:

"You should perform your own independent procedures and tests as you deem necessary for approval of credit".

[geekgirldany]

Thanks so much for posting.

I have no problems doing a letter that I prepared the returns. But geez a letter like they are wanting.... my gut also tells me not to do it. I have E&O Insurance but I just feel like I should not write this letter. Not comfortable doing it.

Dany

[erchess]

Gut Reaction

My gut reaction is to say no on the grounds that you don't know how much she can afford to take out of the business or whether she can comfortably afford a second home. I would be comfortable stating that she is the owner of the corp and if true that you prepare the financial statements and tax returns of the corp and you believe them to be substantially correct as to their statements of income assets and expenses.

If you have E & O coverage you could consult with the lawyers from your insurer about this and if you don't I definitely would not write this letter.

[geekgirldany]

Client is trying to get a second house. She is wanting me to send a letter to the mortgage company that states:

"My client, owns Their Company, Inc. and therefore her business asset accounts are available to be used at her discretion, and since she is operating the business responsibly, use of those assets would not negatively impact her business."

Client said that mortgage company wants it in case she uses money from the business account on the down payment.

I've never wrote a letter such as this and not sure I should. It seems like I am giving permission for them to use the business account for personal reasons.... which they can not. They can take distributions.

Would appreciate any input on this.
thank you
Dany