Christmas Gift and Verification

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  • #39671
    Pearl609
    Member

    Hello again.. I am here with yet another question for @ttrumble,

    So I am headed to visit my family next week for the holidays and my older sister has been hinting to me that she thinks my dad is going to write me a nice check this year, since he knows I am in the process of purchasing a home (he did the same for her YEARS ago when she bought her first home). Plus, he has asked me a few detailed questions about how much I saved and how much I need, etc.

    Now, my first NACA intake meeting is not until February 2018, but I am trying to be as prepared as possible.

    I read in the workbook that all gifts need to be in your account prior to NACA qualification and remain there, and it also states that a letter and a verification of gift form needs to be completed for any gifts from relatives. I have no doubt he will be more than willing to write me a letter of gifting funds, but I saw the gift verification form (my coworker had a paper copy that she used) and while I understand why the form is in place, it is VERY intrusive on the donor’s part… it asks for the donor’s bank account number and current balance.

    So the problem is, I know for a fact that my dad WILL NOT be willing to provide his bank information, he is VERY private about his money and accounts (as most of us are). In fact, if I told him he would need to provide the info, he would probably not be willing to give me the money at all.

    So my question is this… if my dad gives me a check as a Christmas gift (it will most likely be around 10k), will NACA at some point throughout the process ask me for his information to complete this form? If so, what if he is not willing to provide his banking information?

    Thanks!

    • This topic was modified 4 years, 5 months ago by Pearl609.
    • This topic was modified 4 years, 5 months ago by Pearl609.
    #39674
    TTrumble
    Member

    Hello Pearl609,

    Gift verification serves two purposes. First, it certifies that the money is in fact a gift and not a loan of any sort, and is not coming from “the seller, builder, real estate agent or any other interested party”.

    Second, the disclosure of information regarding the source of a gift (of this size especially) is a requirement under federal anti-money laundering laws, which have been in place since 1986 and were tightened up further after the economic collapse. In fact, a sudden increase of $10,000 at once or over a brief period of time may cause your bank to also require some verification of source for the same reasons.

    On a gift that large, you should count on needing to provide verification. As is noted at the top of the form, “You do not have to provide this information, but if you do not your application for approval as a prospective mortgagor or borrower may be delayed or rejected.”

    In reality, it’s no more intrusive than having been given a check by someone and calling the bank to make sure that the check is good.

    Your best bet is to probably going to be starting to warm up your dad to the idea of verification.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #39685
    DC_Lady14
    Member

    @Ttrumble,

    Wow so glad I saw this! I had a similar question, I was going to post it as a topic, but I figured I’d reply here…

    My situation is sort of similar to @pearl609 except I am not expecting a gift… in 2013, my brother and his wife were going through a difficult time and he borrowed money from a few family members, I lent him 12k to be exact. He is in the position to repay me in full, but now that I am interested in the NACA program, I am unsure how we would go about documenting this for NACA.

    I should add… we have a signed (and witnessed) loan agreement that we both signed at the time I gave him the funds.

    So would someone repaying a loan to you count as “gift funds” and would it be the same verification process?

    Thanks!

    #39686
    Pearl609
    Member

    @Ttrumble thank you again for the detailed response. If I am looking at a check for Christmas, I sure hope I can convince him to give up his bank information, he’s an old stubborn man!

    If not, I am thinking to ask him to write the check out to my sister and have her provide me with the gift in 30 days, I know for sure she will be willing to give me the information needed for the process.

    Thanks again Tim!

    #39690
    TTrumble
    Member

    Hello DC_Lady14,

    Your situation is actually quite different, but even though this doesn’t qualify as gift funds, you will need to still provide some documentation because of the amount. However, this time it’s mainly on you to do so.

    Two basic principles to keep in mind regarding the NACA program: “If you can’t prove it, you can’t claim it” and “Better twenty pages too many than one too few”.

    With an amount that large, you will definitely want to provide a copy of the original loan agreement, the cancelled loan check if possible and your corresponding bank statement for the date you gave him the loan. Go to the bank if need be to get the cancelled check copy and bank statement. (I’ll bet you have them with the loan agreement though!)

    He shouldn’t need to provide any bank records, but you’ll want to provide a copy of the repayment check, a Letter of Explanation from you and a letter from him verifying that it is in fact repayment of the loan.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    • This reply was modified 4 years, 5 months ago by TTrumble.
    • This reply was modified 4 years, 5 months ago by TTrumble.
    #39770
    Pearl609
    Member

    Hey @TTrumble

    Happy Holidays!

    So I will be getting a gift from my dad to help me with my home buying. I talked with him about the process with NACA and he is NOT willing to share his bank statements, BUT has a separate account he has been saving for me in the event of his passing, He said he can use the money from that account instead of his personal checking/savings account.

    He said he will obtain a cashier’s check from the bank made out to me. Since a Cashier’s check is a check guaranteed by a bank, drawn from its own funds and signed by a cashier or teller, that would be proof the funds were available. Also, I read you can obtain an official letter from the bank certifying the funds were available and for how long they have been available. Would this be sufficient?

    If not, because he is in another state (4 hours from me), he does not have access to a fax AND his health doesn’t allot him the opportunity to do much commuting (back and forth to the bank)… would NACA be able to deal with the bank directly?

    If I need to, I can plan travel to his state and go with him to the bank and obtain all the information I need in one day.

    Thanks Tim!

    #39772
    TTrumble
    Member

    Hello Pearl609,

    I’m afraid you’re missing the point. It isn’t a matter of proving that the funds actually exist or are available. It’s proving where the money is coming from that makes all the difference.

    The cashier’s check, letter from your dad and letter from the bank will satisfy the requirement that the funds are not coming from an “interested party”.

    The part that worries me though is that it won’t meet the anti-money laundering requirements. While I’m sure there won’t be any actual doubt about the legitimacy of the funds, the “if you can’t prove it, you can’t claim it” principle may well kick in here.

    It’s like when you have your first appointment with your counselor. There’s no actual doubt that you are who you say you are, but you still have to show ID before we can move forward.

    The only way you are going to know for sure is to go ahead and proceed. I hope I’m dead wrong about this one, but I would be prepared to at the very least face some delays.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #39774
    Pearl609
    Member

    @Ttrumble Thank for the response!
    I understand the point of the Anti-Money Laundering, this is why I mentioned the bank providing a certified letter from the bank stating how long the account has been opened and the balances, etc.

    If the lender is asking for bank statements (let’s say three months), and the funds have been there for all three statement periods, that satisfies the requirements. But how does the lender know the money wasn’t laundered 4-5 months ago?? Meanwhile, if the bank can provide a letter certifying when the account was opened and that the money has grown over a certain amount of time LEGITIMATELY, why wouldn’t that be proof enough?

    My MC agreed with my idea of having my Dad give the funds to my sister and having her gift it to me since she is willing to provide her bank statements, BUT this would seem like that would be more suspicious activity than just having my dad provide the money to me from his already established bank account that has grown over the years.

    I am not trying to get around the rules, I am simply trying to make my process easier without inconveniencing my elderly dad who is graciously willing to help me.

    #39786
    TTrumble
    Member

    Hello Pearl609,

    As I wrote earlier, the only way you are going to know for sure is to go ahead and proceed. And if you look back through this thread, at no point did I endorse your idea of running the money through your sister’s account. That would indeed throw up a BIG red flag!

    Go ahead and get the letter from the bank if you can, but why would your dad approve of a letter from the bank that contains the the very same information (account number, etc.) that he objects to providing in the first place? Sorry, but that doesn’t quite make sense.

    The only thing you can do is proceed. Again, I may be wrong and will be happy for you if I am, but I just need to make sure you are prepared if the underwriter rejects the documentation behind the gift funds.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

    #39826
    Pearl609
    Member

    Hey Tim, Happy New Year!!

    Thanks again for the tips, really appreciate all your help! I am sure people are probably not comfortable providing their personal monthly bank statements, as they show detailed information of purchases which they may want to keep private… The letter would strictly provide financial information to serve as proof that the account and the funds have been seasoned and satisfy the anti-money laundering laws. I mean, I am sure if my dad had a secret hobby I would not want to know about it LOL!!

    Anyway, after I explained to him (AGAIN) what I needed and why in greater detail, he told me he is okay with providing these account statements because the account has only been accruing interest over years, he does not use it for personal or business reasons. So hopefully I will be good to go!!!

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