Mortgage Fraud?

[JohnH]

Assuming this actually happened, did the accountant in this article encourage the client to commit fraud in applying for his mortgage?

http://homes.yahoo.com/news/effects-of-tight-mortgage-rules-093540422.html

--->>One borrower, who preferred anonymity because he's a sound technician for various bands, recently discovered this the hard way. When he applied for a mortgage with his wife, they were told they wouldn't qualify because his income changed substantially over the previous year.
"I had made about $70,000 one year, then only around $30,000," he explains. He says he was expecting to make it up this year, which looked promising, but he still couldn't qualify. However, his accountant told him there was one way to possibly qualify.
"She told me I could claim and pay taxes on another $40,000, and then I might - might - qualify," he says. "In the end, I decided paying the government thousands of dollars in taxes on money I didn't even earn wasn't worth it." <<---

[taxxcpa]

I've had people who reported low incomes on their tax returns ask me to prepare one (not to be filed) so they could show more income to a mortgage company or for some other purpose.

They expect me to stick my neck out, risk losing my license, etc. so they can borrow money they can't repay.

I got rid of one such client by telling him that I just took on some new, very big clients that were taking all of my time, and I could no longer do his. I've dropped others of that type by telling them I'm retiring.

One flaw in using an unfiled return is that a mortgage company might try to verify it by getting a transcript of the return from the iRS. When I've had mortgage loans, the bank wanted me to authorize transcripts whether they used them or not. Joe SixPack might not realize that he had authorized a transcript and then both he and I would be in hot water if I'd agreed to do it.

[JohnH]

I agree with you. On the few rare occasions when someone has asked me to do this, I just told them straight up that they were asking me to participate in mortgage fraud. I explained that it was a Federal crime and that anyone who might actually do this is exposing themselves and the client to serious potential problems. If this article was correct (which may not be the case), then the accountant was actually suggesting that the client do this.

[Roberts]

One flaw in using an unfiled return is that a mortgage company might try to verify it by getting a transcript of the return from the iRS. When I've had mortgage loans, the bank wanted me to authorize transcripts whether they used them or not.

You'd hope that would be a given. It's not brain surgery to generate a fake W-2 and 1040.
Not verifying with the IRS would essentially be paramount to a no-documentation loan.

[Burke]

And that is something they don't do anymore. They might want the paper returns for initial approval, but the loan will not be granted until they have the actual transcripts where it has been filed at the IRS.

[JohnH]

I think that is a good thing, as I'm sure most of you do.
Those NINJA loans (No Income, No Job or Assets) helped set the stage for the problems back in 2008.