Hi, we are working to get a short sale done that is a WF loan and Freddie backed. The negotiator is asking for corp tax returns and P&L's for the borrowers S Corp that they own all the shares. Has anyone heard of this one before? Why would they want corp financial information? We have given them everything they have asked for in regards to personal financial information. Is this a Freddie guideline anywhere?
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If the borrower / seller is the sole owner of all the shares in the company, they could "manage" their income to show less than their actual business / net income. The lender wants to see proof of their actual income which is likely derived solely from the business. Was the loan Stated Income / Stated Assets loan? Believe it or not, lenders are getting smarter!
If the borrower owns a company or is self employed this is standard practice and totally normal.
Along with the others' comments, many/most S corp or LLC people violate separation by using their own name, co-mingling funds with personal use/accounts, etc. Once that is done, there is no separate corp - it is all personal stuff.
Can the bank require S corp returns and a P&L even though it is not Freddie required documentation to determine eligibility? Can the bank ask for whatever they want? All of the below has already been submitted.
The Borrower Response Package includes: Form 710, IRS Form 4506T-EZ or 4506-T, and required income and hardship documentation
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