Decline Reason

Posted By: Anonymous

Decline Reason - 12/06/02 05:20 PM

Is it okay to mark "unable to verify income" if you have the previous 2 years tax returns? Customer is cosmetologist, so there's no paystub information we can obtain, but the file indicates that "current business income documentation not provided."

Re: Decline Reason - 12/06/02 06:05 PM

Doesn't seem very customer friendly, since you have the tax returns (assuming that they are "real") - the loan people should have looked at copies of statements, e.g. showing the amount of deposits over time, to support the tax returns. Self-employed people have a hard time dealing with banks as income is difficult to verify, but there are ways to verify self-employment income.
Posted By: Dan Persfull

Re: Decline Reason - 12/06/02 06:07 PM

Did you request current business income documentation? My daughter is a cosmetologist and would be in the same situation, however if you request her YTD income, she can provide it based on her appointment book and her use of Quicken.

If you did not request it then I would say it's a bogus reason, and if you did and the person did not, or cannot, provide it then I would say it would be legitimate.
Posted By: Richard Insley

Re: Decline Reason - 12/06/02 06:24 PM

A tax return is the LAST place an applicant's likely to overstate income. Aside from the reliability issue, do you accept tax returns from other applicants--especially applicants of a different gender, race, age....? The problem with the AA notice could be a symptom of something more serious.

Re: Decline Reason - 12/06/02 06:32 PM

It does seem discriminatory to decline based on no pay stub. Big time entrepreneurs have no pay stub, so the little people should also be provided services that require similar documentation, e.g. current income statement & tax returns.
Posted By: Richard Insley

Re: Decline Reason - 12/06/02 06:39 PM

Although "little person" is not a protected class, it's usually not too hard for examiners to cook up a disparate treatment theory that does relate to one of the characteristics. Your risk increases each step down this trail.
Posted By: straw

Re: Decline Reason - 12/06/02 08:32 PM

Does your loan/underwriting policy have an alternate means of verifying income? I know pay stub is the preferred method, but surely your policy points a loan officer to an alternative if stubs are unavailable.
Posted By: Richard Insley

Re: Decline Reason - 12/06/02 10:43 PM

You would certainly use a tax return to verify income for a self-employed person.
Posted By: Lucy Griffin

Re: Decline Reason - 12/07/02 01:42 AM

This is ripe for a discrimination case. All the examiner needs to find is a series of loan files with male applicants running typically male businesses where the tax returns are accepted as proof of income. As Richard points out, one never tells IRS that one is earning more than one is willing to pay taxes on. This fact situation has a bit of eau de discrimination -- not to be confused with the nicer perfumes that the cosmetologist sells.