Years ago several law firms developed a unique program to combat the cost, time, and pain associated with traditional audits. The Opening Audit Program for FHA mortgage lenders has become an important program and is more relevant than ever with FHA loan reform, home value conditions and the need to have an FHA license to survive in the current home financing marketplace. Lenders can obtain FHA licensing in six weeks.
We form a holding company of your existing business; and then form a new entity which will be a wholly owned subsidiary of the parent company. The new company may also be a standalone entity if the client wishes; and the firm can pursue a separate state license simultaneously for qualification purposes. The client will then contribute the required assets to the new corporation for FHA purposes; which is $ 63,000.00. Keep in mind that only 20% of this must be in liquid assets; and that many other forms of assets can be used to qualify according to GAAP accounting.
An outside CPA firm of the clients choosing in their marketplace is indentified to perform an “Opening Audited Balance Sheet of the new FHA lending entity. The client can use their CPA firm if they are qualified to perform audits; or the firm will assist with relationships that we have with CPA firms in every market. Keep in mind that the opening audit could be as easy as writing a check for deposit to be verified. This procedure and process takes about an hour of CPA time; and about $ 1,000.00 of cost depending upon the market you are in. This is a tremendous time and cost savings to traditional audits that could cost up to $ 20,000.00; and take three to four months to perform. You can obtain your FHA license in six weeks from filing, and it takes our firm about two weeks to be in a position to file your FHA application once this information is gathered.
Additionally, if the new entity keeps there originations to FHA loan products, and structures there year end of the business to a June 30th or September 30th year end; it will further allow you cost and time savings by positioning the new entity to coincide away from tax season. This puts you in a great position to negotiate the best rates for further audits; as you have minimized the originations and activity in this business, and CPA firms will be in the summer months seeking business to perform.
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