SlipperyPencil wrote:That sounds like an unallowed client disclosure.CaptCook wrote:my response on the phone was: "Yes, that is my client. I can't provide any other information until they provide me authorization to speak with you."
It's not.
SlipperyPencil wrote:That sounds like an unallowed client disclosure.CaptCook wrote:my response on the phone was: "Yes, that is my client. I can't provide any other information until they provide me authorization to speak with you."
MikeH wrote:In California, it is an unallowed client disclosure.
Dear Lender:
I hope all is well. As discussed per conversation with Client on XX/XX/XX22, in accordance with guidance issued by the American Institute of Certified Public Accountants (AICPA) and per consultation with our professional liability insurance provider, XXX CPA Firm does not currently, as a matter of policy, issue comfort letters (also referred to as "CPA letters") or provide written or verbal confirmation and/or verification of financial or other information.
Per the position paper issued by the AICPA on 5/30/2014, please note the following:
“Bank lenders and brokers often seek to assess a borrower’s creditworthiness and verify the accuracy of information provided to them by requesting that the borrower’s CPA corroborate certain financial information presented on a tax return. In most cases, the CPA is asked to corroborate tax return information by providing:
- a confirmation letter containing specific language;
- a verification statement certifying certain information presented on the tax return; or
- certain information on a designated form.
Tax returns are prepared by a CPA based on the client’s information and representations, which are neither audited nor verified by the CPA. Tax return preparation standards for due diligence under both Treasury Department Circular No. 230 and the AICPAs Statements on Standards for Tax Services generally allow the CPA to rely on information furnished by the taxpayer. However, these standards are not sufficient if the CPA is being asked by a lender or broker to validate the information furnished by the taxpayer, or to provide confidence in the accuracy or sufficiency of the information provided by the taxpayer for reporting on the tax return. For a CPA to validate or certify information reported on a tax return without performing additional procedures would constitute a violation of professional standards, resulting in licensure implications for the CPA.”
Please note that select lenders do not require comfort letters and/or verifications/confirmations to be provided for purposes of underwriting. Accordingly, if you encounter issues in moving forward with your current loan application, it may be prudent to seek out the services of an alternate lender.
Thank you for your attention to this matter. Please contact us with any questions that you may have.
Very truly yours,
CPA
Zootematix wrote:Spoke to a lender today who demanded I write an expense ratio comfort letter stating my client will keep expenses under 10%.
You agree to indemnify and hold us harmless with respect to all claims arising from the use of the tax return(s) prepared under this engagement for any purpose other than filing with Federal and/or state and local revenue agencies. Tax returns are not suitable documents for obtaining credit since tax regulations may cause tax returns to not adequately or correctly reflect the actual income and cash flows of Client. It is the sole responsibility of a lender or other third-party to perform proper and sufficient due diligence and it should be deemed an act of absolute negligence for any party other than a tax agency to rely solely or heavily on any tax return for any purpose.
...
No “lender comfort letters” will be issued by this Firm, including but not limited to confirmation or attestation of amounts, financial position of Client, ability to pay, etc. With an added non-refundable fee of $400 (four hundred dollars and zero cents) payable in advance, Firm will confirm having prepared a specific tax return, and such acknowledgement to a lender will contain all necessary language to indemnify and protect Firm against legal action by the lender. Lenders only ask for “comfort letters” to have as many parties as possible to hold legally liable if a loan goes into default or because of their own incompetency as lenders. Any such correspondence with a lender requesting such information will clearly communicate such negligence in relying on a tax return in determining, in whole or in part, the credit worthiness of applicant(s) or their ability to repay a debt."
missingdonut wrote:Zootematix wrote:Spoke to a lender today who demanded I write an expense ratio comfort letter stating my client will keep expenses under 10%.
Zootematix wrote:I actually had one loan fall through because I refused to write that the down payment would not affect operations.
Worst part besides not being allowed, the down payment obviously significantly impacted operations.
Nearly lost a great client over this.. Honestly having backup lenders saves me. But how is this even a normal thing? You can't tell me attorneys have to deal with this.
Zootematix wrote:missingdonut wrote:Zootematix wrote:Spoke to a lender today who demanded I write an expense ratio comfort letter stating my client will keep expenses under 10%.
Dear Lender,
I am in receipt of your request. In my current capacity of being a contracted advisor to X Company, I am not involved in management decisions and therefore cannot make any representation that the company will be in future compliance with this proposed mortgage covenant. However, if Y Lending Company hired me to be the CFO of X Company, I would be able to perform these management duties for you. I will require a base salary of $180,000 per year with three weeks' paid vacation, a 20% bonus payable on meeting said covenant, and we will need to negotiate a golden parachute payment in case of termination.
Please let me know when the employment agreement has been drafted so that my attorney can review it.
Love,
Zootematix
--
All joking aside, as you recognized, these letters aren't a requirement. Of course, the less ethical ones will wait until the last minute to get this letter in the hopes that we'll concede to the "deadline". Just be professional and make sure you have a couple alternative lenders in your pocket so that you return the pressure to the person fighting for the commission.[/quote
I actually had one loan fall through because I refused to write that the down payment would not affect operations.
Worst part besides not being allowed, the down payment obviously significantly impacted operations.
Nearly lost a great client over this.. Honestly having backup lenders saves me. But how is this even a normal thing? You can't tell me attorneys have to deal with this. ]
CaptCook wrote:He did go on to say that the broker asks for it to illustrate that they've performed greater due diligence and he'd never heard of any CPA being pursued because of it.
missingdonut wrote:I would imagine that a mortgage broker would be less likely to do this to an attorney... think of the type of letter an attorney could reply with. Allegations made were untrue and defamatory against the attorney, that the lender must cease making further untrue statements, and that the attorney will consider whether their statement has been retracted to the client in writing before X date when making their next course of action. They could probably write that letter in their sleep, to be honest.
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