I'm trying to refinance my home. Have all the equity I need and would be straightforward except for the fact that I have moved to self-employment over the past year, from being salaried and paid with a w2 in previous years. I'm told that according to Fannie/Freddie guidelines, I will need to submit at least one year's tax return showing self-employment/returns with 1099. But I cannot file my taxes... [more]
I'm trying to refinance my home. Have all the equity I need and would be straightforward except for the fact that I have moved to self-employment over the past year, from being salaried and paid with a w2 in previous years. I'm told that according to Fannie/Freddie guidelines, I will need to submit at least one year's tax return showing self-employment/returns with 1099.
But I cannot file my taxes now. I have an investment that will not provide tax information until the middle of the year and on previous returns I have filed for an extension. I want to close on this loan now and not wait until July or August when I officially file.
I am thinking about providing the lender with a copy of the return that I would submit if this investment did not exist. This will not be my final return, but I will present it to him as such.
Please comment on the risks involved. What are the penalties if this is detected, though I think it is highly unlikely? I don't have any doubt that its in everyone's interest for this loan to go through, since I've comfortably made every payment at a higher rate. I view this as a reasonable step to adapt to a requirement that should not be applied.
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Response by generalogoun
almost 13 years ago
Posts: 329
Member since: Jan 2009
I will skip over all your self-serving rationalizations about why rules shouldn't apply to you. If you haven't already, you'll probably find out one day that trying to get over on people often backfires.
In the past, in similar (not the same) circumstances, I just told the bank exactly why I was filing in October. I paid the IRS in April, as usual, and gave the bank everything I would have submitted to the IRS if I had filed in April. They had no problem with it. When we filed the return in October, I gave the bank a copy of the official return.
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Response by rb345
almost 13 years ago
Posts: 1273
Member since: Jun 2009
Concealment or musrepreseb=ntation of any material fact, in particular what you
have earned or claimed on a filed tax return, would probably be felony bank fraud
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Response by Guywithcat
almost 13 years ago
Posts: 329
Member since: Apr 2011
It will not work. When you submit your returns you will be asked to sign a transcription approval which allows the bank to confirm your submitted return with the data PROVIDED by the IRS. So you would be caught immediately. Who knows about the risk, I am sure you are breaking a number of civil and criminal codes though I am not an attorney, If you tell the bank you are doing it, they might consider it but a big bank would be less likely to consider it. Some smaller banks might not require transcriptions.
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Response by dmargolies
almost 13 years ago
Posts: 9
Member since: Jan 2010
if the refi is fannie/freddie backed they will NOT make an exception-- no bank would take that risk in this climate. Also getting any mortgage as self employed or an independent contractor puts you through a whole new level of scrutiny.
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Response by kharby2
almost 13 years ago
Posts: 279
Member since: Oct 2009
All you really want to know is whether you can hide this investment from the lender, and how much penalty you're facing when you get caught.
Because the truth is this mysterious investment prevents you from getting the loan at rate/terms you want, or at all.
Otherwise you'd just wait to refi after you file your taxes in the summer, or you would obtain an accounting from the officer/manager of the investment today and do your taxes now, filing an amended return later if necessary. As an investor you have a legal right to an accounting at any time in any business organization type in the USA, regardless of the organization's fiscal year calendar. You know and I know interest rates aren't moving much between now and the summer. So your whole premise as presented here makes no sense to me.
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Response by streetsmart
almost 13 years ago
Posts: 883
Member since: Apr 2009
There are portfolio lenders that may consider.
Email me or call.
Ellen Silverman
Licensed Mortgage Broker
Tel:212-786-9682
Esfunding.instantlender.com.
esfundingco@ aol.com
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Response by streetsmart
almost 13 years ago
Posts: 883
Member since: Apr 2009
P.S. Of course there are no misrepresentations, no matter what lender is used .
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Response by tcurranmortgage
almost 13 years ago
Posts: 52
Member since: Jul 2012
Good morning ethana,
First, it's TWO years, not ONE. For Self-Employed individuals FannieMae and FreddieMac require TWO years filed tax returns for qualifying purposes.
Second, what you're proposing is misleading on your loan application and could get you in a whole heap of trouble, so don't even consider it. Be clear with your Loan Officer about your filing status.
Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528
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Response by truthskr10
almost 13 years ago
Posts: 4088
Member since: Jul 2009
>it's TWO years, not ONE. For Self-Employed individuals FannieMae and FreddieMac require TWO years filed tax returns for qualifying purposes
Actually I just refinanced with Wells who had a program called "timesaver refinance" only requiring 1 year's worth of returns. However, generally 2 years will likely be required.
It's possible a bank would actually acquiesse to a certified balance sheet for the most recent year by a CPA in lieu of an extended filing.
Truthskr10
Posts: over 3000
Member since: Jul 2009
Brought to you by Carl's JR
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Response by ethana
almost 13 years ago
Posts: 27
Member since: Mar 2012
Thanks to everyone who commented in this thread, several points were very helpful. In particular, the suggestion that I press the investment manager for a statement of my account that would allow me to file right now. I didn't know that was possible and have contacted the firm to see if its really feasible.
In further conversations with the lender, I learned that another point, also mentioned in this thread, will probably deep six the possibility of a refi. Guidelines require that 1099 income be averaged over a two year period. I would not be able to take any writeoffs on this year's return in order for self-employment income to meet the required income threshold over the last two years.
I don't know what a portfolio lender is, but Ellen I'm going to drop you an email. If anyone has any other ideas I would welcome their input. It's pretty absurd that with perfect credit, >40% equity in the property, and enough assets to pay the principal outright that I can't go through the process of lowering the monthly rate.
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Response by crescent22
almost 13 years ago
Posts: 953
Member since: Apr 2008
I would just guess at the income from this investment, file based on that guess and hand it over to the bank.
If the income is materially higher when the 1099 shows up, just amend the return later.
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Response by streetsmart
almost 13 years ago
Posts: 883
Member since: Apr 2009
A portfolio lender is a lender that doesn't sell their loans to Fannie or Freddie, therefore doesn't have to meet the Fannie or Freddie guidelines. They keep the loan in their portfolio.
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Response by alanhart
almost 13 years ago
Posts: 12397
Member since: Feb 2007
Ellen, do portfolio lenders do 30-year fixed? Are the terms substantially similar to FNMA?
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I will skip over all your self-serving rationalizations about why rules shouldn't apply to you. If you haven't already, you'll probably find out one day that trying to get over on people often backfires.
In the past, in similar (not the same) circumstances, I just told the bank exactly why I was filing in October. I paid the IRS in April, as usual, and gave the bank everything I would have submitted to the IRS if I had filed in April. They had no problem with it. When we filed the return in October, I gave the bank a copy of the official return.
Concealment or musrepreseb=ntation of any material fact, in particular what you
have earned or claimed on a filed tax return, would probably be felony bank fraud
It will not work. When you submit your returns you will be asked to sign a transcription approval which allows the bank to confirm your submitted return with the data PROVIDED by the IRS. So you would be caught immediately. Who knows about the risk, I am sure you are breaking a number of civil and criminal codes though I am not an attorney, If you tell the bank you are doing it, they might consider it but a big bank would be less likely to consider it. Some smaller banks might not require transcriptions.
if the refi is fannie/freddie backed they will NOT make an exception-- no bank would take that risk in this climate. Also getting any mortgage as self employed or an independent contractor puts you through a whole new level of scrutiny.
All you really want to know is whether you can hide this investment from the lender, and how much penalty you're facing when you get caught.
Because the truth is this mysterious investment prevents you from getting the loan at rate/terms you want, or at all.
Otherwise you'd just wait to refi after you file your taxes in the summer, or you would obtain an accounting from the officer/manager of the investment today and do your taxes now, filing an amended return later if necessary. As an investor you have a legal right to an accounting at any time in any business organization type in the USA, regardless of the organization's fiscal year calendar. You know and I know interest rates aren't moving much between now and the summer. So your whole premise as presented here makes no sense to me.
There are portfolio lenders that may consider.
Email me or call.
Ellen Silverman
Licensed Mortgage Broker
Tel:212-786-9682
Esfunding.instantlender.com.
esfundingco@ aol.com
P.S. Of course there are no misrepresentations, no matter what lender is used .
Good morning ethana,
First, it's TWO years, not ONE. For Self-Employed individuals FannieMae and FreddieMac require TWO years filed tax returns for qualifying purposes.
Second, what you're proposing is misleading on your loan application and could get you in a whole heap of trouble, so don't even consider it. Be clear with your Loan Officer about your filing status.
Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528
>it's TWO years, not ONE. For Self-Employed individuals FannieMae and FreddieMac require TWO years filed tax returns for qualifying purposes
Actually I just refinanced with Wells who had a program called "timesaver refinance" only requiring 1 year's worth of returns. However, generally 2 years will likely be required.
It's possible a bank would actually acquiesse to a certified balance sheet for the most recent year by a CPA in lieu of an extended filing.
Truthskr10
Posts: over 3000
Member since: Jul 2009
Brought to you by Carl's JR
Thanks to everyone who commented in this thread, several points were very helpful. In particular, the suggestion that I press the investment manager for a statement of my account that would allow me to file right now. I didn't know that was possible and have contacted the firm to see if its really feasible.
In further conversations with the lender, I learned that another point, also mentioned in this thread, will probably deep six the possibility of a refi. Guidelines require that 1099 income be averaged over a two year period. I would not be able to take any writeoffs on this year's return in order for self-employment income to meet the required income threshold over the last two years.
I don't know what a portfolio lender is, but Ellen I'm going to drop you an email. If anyone has any other ideas I would welcome their input. It's pretty absurd that with perfect credit, >40% equity in the property, and enough assets to pay the principal outright that I can't go through the process of lowering the monthly rate.
I would just guess at the income from this investment, file based on that guess and hand it over to the bank.
If the income is materially higher when the 1099 shows up, just amend the return later.
A portfolio lender is a lender that doesn't sell their loans to Fannie or Freddie, therefore doesn't have to meet the Fannie or Freddie guidelines. They keep the loan in their portfolio.
Ellen, do portfolio lenders do 30-year fixed? Are the terms substantially similar to FNMA?