Asc Success!!

[jennifer123]

hi everyone,
i am new to the forum. i am currently in the process of a loan mod with americas servicing comp. my husband has his own business. he receives a w-2 which hardley shows any income. because of this we did a stated loan. today ASC asked me to submit a profit and loss statement for the business so they can see my husband is receiving an income. that thru me for a loop becuase i never had to do this. going thru our paperwork i don't see a profit and loss statement. i have a statement of operations which i was told is the same. ASC also told me i could make one for the month of january. i was wondering if you could please advise me on what the percentage between profit and loss should be in order to qualify. i want to be sure that it is not to high or to low. ASC has been very good about wanting to help their customers. has anyone had any experience with them. i appreciate all your help.
jennifer

[Mary Salzer]

Welcome and thank you for joining the forum.....

Now that you are in modification the terms and circumstances are entirely different, this is predicated on income and expenses. In order to qualify for modification you have to provide the income documentation with the expense documentation. They will want 2 years tax returns in most cases as they want to establish that the income is stable and can be expected to continue. All of the Stated loans are required at this level to provide income. It is not the original terms now, this is a new request that must be supported by real income.

[jennifer123]

thank u so much for reponding to my post. i am so overwhelmed right now. i am not sure how i am going to do this proof of income they asked for. is it correct about them wanting a profit and loss on the business and not on us personally. they didnt say anything about sending tax info. they said any of the three items would be fine: copy of paycheck,one month profit and loss, or tax return. our business profit and loss statement is showing an amount of 3,000.00 left over in the business account after all expenses are paid at the end of the month. i am just not sure if they will consider that too much or not enough or will they not even look at that being it is not the business applying for the modification. i appreciate your advice and guidance.
jennifer

[mar639]

Jen hi,

I think you confused me with someone else but my husband isn't self employed. I own my own business. He is on the loan and submitted his pay stubs along with the financial worsksheet.
You need to send them a the proper documentation.As for the loss profit , I dont know how you can come around it, maybe you can consult with your accountant.
Once you have all the paperwork , fax it to Asc along with hardship letter etc. After two days call them back to make sure they recieved it and have it on their files. Then keep calling to check on your status. I statrted calling them twice a week and in the past three months I have been calling them everyday till now when I found out I was apporved.
Be persistant and never give up. You will come out of it just fine. But please call , call, call

[Cat Damiano]

Jennifer,
Unfortunately, there is no getting around what they need for the modification.......the original loan was a stated income loan and now in order to do a modification the lender wants proof that the income is there in order to approve. If you are showing 3k left over at the end of each month, they are not going to think of that as a hardship if that is the reality of the situation. In a hardship case they are looking for around 100-250 left after household expenses are taken away from income in most cases, but each lender and each case has been different and there are no magic numbers or formulas that we can tell you to improve your situation.

[Mary Salzer]

The profit and loss is the statement that provides a net amount left over at the end of a month after all business expenses are taken from the business profit. Then at that point they apply all of the household expenses to the remaining amount to determine if you can afford the house, consumer bills (credit cards and autos that the business does not pay), utilities, gas (personal use), groceries, insurance (that the business does not pay), cable, phone, all the things that make up a household.

That is why they are asking for the P&L, to determine at the end of the month is there enough after running the business to run the household. This is not a percentage issue anymore like in front end underwriting, it is what does it cost kind of decisioning. Is there enough after the business is run and then the household bills applied to result in a favorable outcome for the borrower and the lender to compel modification.

So after the business expenses you have the household expenses....that is where the real number crunching occurs. Now the reason that you want a 2 year tax return history is to prove that the one month that you gave them for the P&L is supported as being what the business can consistently bring in as you know one month in a business can be better than the other month and they need to see an average over the year to determine that it is really workable. You should also do the same with household expenses, average them out, if you are in a cold weather area, utility bills are higher in the winter and lower in the summer so you need to have a realistic view of what it takes to run the household every month, not just for that month.

Now is your husband's business a corporation that pays him by a W-2 each year to avoid tax hits....or does he work for an outside party that pays him by W-2 and due to the nature of the business he still is self employed, i.e. sub contractor to framing, electrical....etc....

[jennifer123]

thank you sooo much Poppy for explaining it to me in a way that i finally understand why they are asking for this P&L. i have been so consumed with this issue all day that i could not focus on anything else. we are a corportion so my husband is issued a w-2 with our business but the amount on his w-2 will make them wonder how we are surviving. i have a statement of operations for the last 2 months which i was told is the same as a P&L. is that true? it shows that dec and jan the business generated 24,000 each month and with our business expenses paid out there is 11,000 left so i guess they use the 11,000 as the money left over to pay our personal expenses which come to a little over 5,500 a month which would then leave a resulting balance of around 5,000 for the business. is that right? thank you again for helping me understand this. i think i might be able to sleep tonite.

[Mary Salzer]

Do you guys use and accountant for this business? If so they can prepare a proper financial for you....let me know.

[jennifer123]

we do have an accountant but we owe her some money right now. when business slowed down we were having difficulties paying her. she told me i could do this myself. is that true?

[Mary Salzer]

Yes you can, but it is always easier to have an accountant do the dirty work. Now the 5500.00 you have left over from the business after all expenses are paid. That is representative of what your husband could take home it he chooses to?

Because this is very, very important. The business must leave only the amount for monthly household bills after it pays all of its expenses and only its expenses. You need to make sure that the business expenses are totally different than the household expenses. So that what I understand is that in a 2 month period of time the business had 11,000.00 or there abouts left over after all of the business expenses were paid out?

[jennifer123]

yes, each month there was 5,500 that was showing was left over after business and personal was paid out. do you think that is to much to be showing? i was wondering about that. but i thought they must take into consideration that the business should have a surpluss to carry over to the next month. this is why i am so worried that i will get denied if we show that there is 5,500 left over in the business acct. what should i do?

[Mary Salzer]

They do not look at it that way, the fact that there is so much left over at the end of the month will not allow a modification to go through...in other words that kind of money at the end of the month allows the payment on the house. I really think that you need to go see your accountant and deal with this issue through them. The profit and loss for a corporation is entirely different than a sole proprietor, I understand the carry over as that is my job to be able to analyze a financial statement, but the folks you are dealing with on modification do not have that ability.

Please see you CPA/Accountant and have them jump on line with me and I will explain the concept that she needs to report for the basis of modification. There are some things that can be done legitimately to report the income properly on a corporation that you do not do with a sole proprietorship. Your husband may have to start taking a larger paycheck to accommodate the requirements on this situation, however I am not sure that the W-2's from the prior year will allow the amount of income required to qualify...this is something that you accountant will have to do. I do not think that if you submit this financial data that you would be approved for the modification as the monthly amount left over for the corporation is far to great for the allowance of modification.

I have to ask if the corporation is doing that well, why not take a larger draw against profits and accommodate the adjustment? I know the business needs carry over, however, that degree of carry over every month could and will allow for the adjustment in payments....apparently your business had some set backs, I would question the 2 months statements if that is the case, since there were set backs.....has the business recovered? These are all questions that you need to have the accountant address....immediately.

[jennifer123]

good morning Poppy,
thank you so much, you are a true blessing. that is very nice of you to offer to advise our accountant on how this should be done. i did call her this morning and read your email to her. she wanted me to ask you if there is any way you could email her the information. she is out most of the day today with clients. she told me she will check her email when she gets home and could work on it for us this evening. my husband does take some draws on the business acct. i dont see it listed on the operations statement unless she put in with some of the other expenses. is a draw considered an s-distribution? we currently owe for nov,dec,jan and now feb. we have not received any acceleration letters from ASC. they told me we are not in foreclosure and if at all possible i can still send in one payment and they will put it in suspense acct. it seems to me that ASC really wants to help there customers. i am hoping thst is true because i have read some horror stories about them. i was also wondering if i could post my hardship letter for you to read and get your opinion on. thanks for all your help.
jennifer

[Mary Salzer]

Tell her to extract the draws from that operating statement and to reflect in the operating statement excess $$$ as capital contributions to the corp.....all excess, that does not meet the draw or loan to officer criteria. She will understand....then the draw and loan to officer (husband) is the income that you derive your household expenses on, you can not draw that out of the corporation unless it is treated as a direct draw to the husband (officer of the corp). She will understand my drift. Business is a break even after excess capital reinvested and draws to officer/salary.....whatever they call it in your corp.

[jennifer123]

hi everyone,
i was wondering if you could please read my hardship letter and tell me if it is alright or if i should make some changes. thanks for all your help.

To Whom It May Concern:

I am writing this letter to explain our unfortunate set of circumstances that have caused us to become delinquent on our mortgage. Our business suddenly slowed down for a while and our interest rate on our mortgage had adjusted from 8.5% to 10.5% and now to 11.5% causing our house payment to increase. We are asking if you would please consider us for a loan modification. Our situation has got better because business has picked back up and is now back to being consistent and we feel that a loan modification would benefit us both. Our number one goal is to keep our home and we would really appreciate the opportunity to do that. Thank you for taking the time to review our file and we are very grateful that we were given the opportunity to apply for your loan modification program.