"Comfort Letter" to mortgage borker

Be sure to include a final paragraph that states this information is provided in good faith, that you do not accept any responsibility if your client does not repay the loan.

Good suggestion, Thanks.

Generally speaking, it's a client that comes to you for this type of letter, for purposes of this response, I'll assume it's a tax compliance client. The lender is trying to put another person in the mix that they can seek $$$ from if the loan goes bad. Be sure an indicate in your letter that you prepared the client's tax returns (assuming you did so) from unaudited information that the client provided and that you are providing no assuarance as to the accuracy of the numbers. Also, include a paragraph similar to the following putting the onus firmly on the lender as to who is responsible for making the credit decision:

As you know, a credit decision should be based on a lender's exercise of due diligence in obtaining and considering multiple factors and information. Any use by you of Mr. & Mrs. Xxxxxxx 20XX federal income tax return and this letter is solely a matter of your responsibility and judgment, and this letter is not intended to establish a client relationship with you nor is it intended to establish any obligation on my part to provide any future information to you with regard to Mr. & Mrs. Xxxxxxx.

We just received guidance from our liability insurance company yesterday saying that these comfort letters are becoming rampant and to do exactly what San Diego CPA said. The banks are just trying to shift the work of the credit check on to the CPA.

You could also charge $1000 for such a letter while also attaching the legal disclaimer.

The banks are not trying to shift the work of employment verification on to the CPAs, but we have no way of verifying self employed business owners' employment tenure; we can't call our borrower who is also the business owner and ask him how long has he employed himself.

Regards,

Scott Miller National Commercial and Residential Lender/Broker

"$cott" wrote

Then you are expecting some form of assurance that the claimed business income and expenses are valid over the prior two or three or four years. Tax return preparation is not an attestation function and no assurances attach.

You could easily contact other business associates, get copies of their business license for the past three years, pull a D&B, or at least thirty dozen different ways to verify their self-employment status besides putting the CPA on the hook. You have copies of the tax returns, why isn't that sufficient? What is it about those copies that makes lenders have to call and verify with the preparer?