I have a borrower who has insufficient cash flow, if we use tax returns they have a negative cash flow (not sure if we need to include these regardless or not)? If we do a fully funded set aside are they able to still get approved for a reverse or do they need to meet the residual regardless? Great credit, no late payments in last 12+ months.
If borrower shows losses on taxes we would need to further evaluate those losses and use against income if necessary. If they are ongoing businesses then yes they would need to be used. A short residual does require a LESA unless there are compensating factors to use. If borrower has no income, and only is a negative income then a LESA would not make up for that.