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Some of you may recall my venting about "Betty," one of our local restaurant owners, a couple years ago. In the grand scheme of things, little has changed, but I wouldn't be writing a new post if I didn't have new things to vent about.
So here's a quick recap: Betty owns a restaurant named after herself in the town where I work. The restaurant is barely hanging on. Betty neglects to forward the taxes she withholds from her employees' paychecks to the IRS, so she has multiple tax liens against her. And it is against her personally, since she owns the business and real estate directly, without being incorporated to protect herself from the consequences. She continues to maintain a small balance in her checking account. In the past year or so, she has maintained enough of a balance to make her payments for the restaurant loan, but we frequently have to turn away her employees who wish to cash their checks because there's insufficient funds in the checking account.
The current round of WTF started with Betty and her husband's home loan maturing last month. It has a balloon payment due, and we would normally do a balloon renewal for another 5 years and amortize the payments such that it pays off on schedule. However, Betty and her husband were behind on their real estate taxes, and they didn't have insurance. So I sent Betty and her husband an application for the balloon renewal (we do it almost as if it were a new loan) along with a letter listing the things we needed in order to renew the loan: proof of insurance, proof that the real estate taxes were paid, and 2 years of tax returns for proof of income.
Betty brought me a partially-completed application, a receipt for her paid real estate taxes (no idea where she found the money), and her 2010 tax return. She said it was the last tax return that was done and that her accountant was still working on the 2011, 2012, and 2013 taxes. I contacted her accountant, hoping he would be able to provide me with at least some information. He provided the extension filings for the tax returns and provided the forms from 2011 showing the husband's income from his logging business. He had received nothing more recent than that, but he offered to provide me with tax forms showing their gambling winnings at the casino.
I declined, since I can't use that for proof of income. He said he was still waiting for some information from Betty to complete her 2011 taxes. 
The 2010 tax return shows a net loss on the restaurant of over $20,000 and over $8,000 on the husband's logging business. I can understand writing off everything you can for tax purposes, but I can't support the loan with that!
Despite Betty's financial situation, I had an application for a balloon renewal to process, so I pulled their credit reports. I was expecting a difference between their credit reports because the business and its tax liens were in Betty's name, but it was even more stark than I expected. The husband's credit score is in the 800s (practically perfect) while Betty's is in the mid 500s (not quite the lowest I've ever seen, but close). Nearly $40,000 worth of federal and state tax liens plus multiple late payments on credit cards are pulling down Betty's credit score. If this was a new loan, we wouldn't go any farther. This would be more than enough to turn them down.
Since some portion of their income theoretically comes from the restaurant business, I want to mention here the status of that loan. The payments have been current since we set them up on automatic payments (as mentioned in the thread I linked at the top). About a year ago, she finally got insurance. But she has let the real estate taxes go unpaid. Since it's commercial property, it goes tax forfeit faster than her house would. If she doesn't pay all her back real estate taxes (about $6,000 worth), the county will take the restaurant and sell it off to pay the real estate taxes. A few weeks ago, we sent her a pre-foreclosure letter warning her that if she doesn't pay the real estate taxes, we have to start foreclosure proceedings. I got confirmation today that she doesn't read her mail when I mentioned the letter and she acted surprised. We've been sending her letters every month for a year reminding her how much she owed and that the property was going to go forfeit next year.
I went over all this information with Goodhair, and he instructed me to do a 90-day extension. We move the maturity date out 90 days, giving them enough time to purchase insurance on their house and get their tax returns completed. I prepared the documents and made an appointment with Betty and her husband to come in this morning at 9:00. At 10:00, I left her a voicemail asking her to reschedule. She called me back to say she didn't realize she had to work
, and she'd be in at 1:00. At 1:40, she finally strolled in and signed the documents. No sign of her husband. I went over what she needed to do for us to do a longer renewal, plus went over the situation with the restaurant. She asked me not to tell her husband that the IRS is taking payments out of her checking account, nor that the restaurant is going to go tax forfeit next year. I gave a non-committal answer. I won't tell him anything about her checking account (since he's not on it), but real estate taxes are public record. I'll only be telling him what he could find out if he cared to go to the county website and look it up. She said she'd send him in to sign the documents for the house loan extension. We'll see when he shows up.
So here's a quick recap: Betty owns a restaurant named after herself in the town where I work. The restaurant is barely hanging on. Betty neglects to forward the taxes she withholds from her employees' paychecks to the IRS, so she has multiple tax liens against her. And it is against her personally, since she owns the business and real estate directly, without being incorporated to protect herself from the consequences. She continues to maintain a small balance in her checking account. In the past year or so, she has maintained enough of a balance to make her payments for the restaurant loan, but we frequently have to turn away her employees who wish to cash their checks because there's insufficient funds in the checking account.
The current round of WTF started with Betty and her husband's home loan maturing last month. It has a balloon payment due, and we would normally do a balloon renewal for another 5 years and amortize the payments such that it pays off on schedule. However, Betty and her husband were behind on their real estate taxes, and they didn't have insurance. So I sent Betty and her husband an application for the balloon renewal (we do it almost as if it were a new loan) along with a letter listing the things we needed in order to renew the loan: proof of insurance, proof that the real estate taxes were paid, and 2 years of tax returns for proof of income.
Betty brought me a partially-completed application, a receipt for her paid real estate taxes (no idea where she found the money), and her 2010 tax return. She said it was the last tax return that was done and that her accountant was still working on the 2011, 2012, and 2013 taxes. I contacted her accountant, hoping he would be able to provide me with at least some information. He provided the extension filings for the tax returns and provided the forms from 2011 showing the husband's income from his logging business. He had received nothing more recent than that, but he offered to provide me with tax forms showing their gambling winnings at the casino.
I declined, since I can't use that for proof of income. He said he was still waiting for some information from Betty to complete her 2011 taxes. The 2010 tax return shows a net loss on the restaurant of over $20,000 and over $8,000 on the husband's logging business. I can understand writing off everything you can for tax purposes, but I can't support the loan with that!Despite Betty's financial situation, I had an application for a balloon renewal to process, so I pulled their credit reports. I was expecting a difference between their credit reports because the business and its tax liens were in Betty's name, but it was even more stark than I expected. The husband's credit score is in the 800s (practically perfect) while Betty's is in the mid 500s (not quite the lowest I've ever seen, but close). Nearly $40,000 worth of federal and state tax liens plus multiple late payments on credit cards are pulling down Betty's credit score. If this was a new loan, we wouldn't go any farther. This would be more than enough to turn them down.
Since some portion of their income theoretically comes from the restaurant business, I want to mention here the status of that loan. The payments have been current since we set them up on automatic payments (as mentioned in the thread I linked at the top). About a year ago, she finally got insurance. But she has let the real estate taxes go unpaid. Since it's commercial property, it goes tax forfeit faster than her house would. If she doesn't pay all her back real estate taxes (about $6,000 worth), the county will take the restaurant and sell it off to pay the real estate taxes. A few weeks ago, we sent her a pre-foreclosure letter warning her that if she doesn't pay the real estate taxes, we have to start foreclosure proceedings. I got confirmation today that she doesn't read her mail when I mentioned the letter and she acted surprised. We've been sending her letters every month for a year reminding her how much she owed and that the property was going to go forfeit next year.
I went over all this information with Goodhair, and he instructed me to do a 90-day extension. We move the maturity date out 90 days, giving them enough time to purchase insurance on their house and get their tax returns completed. I prepared the documents and made an appointment with Betty and her husband to come in this morning at 9:00. At 10:00, I left her a voicemail asking her to reschedule. She called me back to say she didn't realize she had to work
, and she'd be in at 1:00. At 1:40, she finally strolled in and signed the documents. No sign of her husband. I went over what she needed to do for us to do a longer renewal, plus went over the situation with the restaurant. She asked me not to tell her husband that the IRS is taking payments out of her checking account, nor that the restaurant is going to go tax forfeit next year. I gave a non-committal answer. I won't tell him anything about her checking account (since he's not on it), but real estate taxes are public record. I'll only be telling him what he could find out if he cared to go to the county website and look it up. She said she'd send him in to sign the documents for the house loan extension. We'll see when he shows up.
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