Too Much Income is a Problem?

After approving a loan for a strong borrower who has a stable government job, 800 credit scores and plenty of assets, the bank obtained a copy of the borrower’s tax return from the IRS. When they did, they found out that Schedule C income was showing on the return and not disclosed.  Besides the fact that this was (i) income not an expense (i.e. it improved her financial position) and (II) MORE income, not less, the bank still requested a letter from the borrower explaining this (NB It was her husband’s income who was not a borrower on the loan and therefore was not and should not have been disclosed). Moreover, since she was a salaried borrower, Fannie Mae never requested this documentation and it was not required for this loan so there was no reason for the bank to obtain the returns much less question additional income shown on them!