Question by Kai: For a mortgage professional: How does a gift letter work on a refi?
I am in the process of refinancing my home and I am becoming a bit annoyed with the lender I am working with. It’s a typical rate/term refi. However, I am receiving a K gift from my father to to bring my loan down to 80% LTV to avoid MI. I used to work in the mortgage industry and based on my experience, all I should need is a signed gift letter and canceled check.
However, the lender is now (in the 9th inning) asking for 2 months of my FATHER’S bank statements and claiming it’s some new law as the reason why they’re needed.
Is this lender correct that I really need to provide my FATHER’S bank statements? If yes, please explain why and what the law is and what the rationale is. Thanks.
Thank you to all who answered so far. I could totally understand if this was a purchase transaction and they needed to verify my downpayment wasn’t coming from an ineligible party (broker, seller). However, this is a REFI. Is this standard practice to ask for my father’s bank statements? Or, is this lender incorrect?
Best answer:
Answer by the tax lady
The banks are cracking down on loans that are called gifts only long enough for the bank to approve the loan.
By checking your dad’s bank statements, they hope to guess correctly whether or not your dad could afford to give you a gift of this size.
BTW, if you are single and your dad is single, he need sto file a form 709 with the IRS because the gift is more than ,000 in one year.
the changes came in 2008 with the Mortgage Disclosure Information Act that requires ‘proof of funds’ for both you and your dad.
Add your own answer in the comments!
In fairness, lenders are very skittish these days with respect to mortgage fraud. You’re right, however. If you can prove that the gift is irrevocable, that should be enough. I’d suggest you go back to the lender and work with them from that perspective. Don’t bother butting heads with them, its not worth it. Give them the comfort that the gift is not a “sham”. If that doesn’t work, consider taking your business elsewhere.
Its completely understandable for a lender to want to avoid any risk of mortgage fraud. However, if they are being overly-intrusive for no reason, as a consumer you have a right to “vote with your feet”. Good luck.
That’s nuts. The only time I have found banks get very anal about fund sources is FHA loans. If you have the money and it’s not from unsecured funds (that will reflect on your credit report) there should be no reason to know where that cash came from. I would do some bank shopping if I were you. I’m on my 5th home purchase and we have done everything from 0 down to 20% and at that 20% level there were very very few questions asked. A refinance should be twice as easy as a purchase too.