Reasons for the current FHA scrutiny of gifts?

  • #1
Stephen Tashi
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Recently, I've encountered two examples of how the Federal Housing Adminsitration requires banks to scrutinize borrowers who acknowledge receiving gifts of money to help purchase a house. The banks require an "affidavit of gift" document from the giver and a copy of a bank statement showing that the gift funds were withdrawn from an account - a copy with the account number showing, not redacted.

What abuses led to these regulations? Were people doing a type of pyramid scheme where they borrowed money from one bank and gifted it to themselves to bolster the financial statements they submitted to a different bank?
 

Answers and Replies

  • #2
DavidSnider
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It's probably simpler than that. People telling the bank it was a gift when in fact it was a loan from a friend\relative that had to be repaid.
 
  • #3
BWV
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Yes you can’t count a personal loan from a family member or friend as a down payment
 
  • #4
Stephen Tashi
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Yes you can’t count a personal loan from a family member or friend as a down payment

That rule may be an old one, but when I bought my house in the 80's, the bank didn't investigate where I got the down payment. I have the impression that the gift affidavit is recent requirement. Is that correct?
 
  • #5
Klystron
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Could the government be trying to reduce small-scale money laundering via real estate transactions? Small scale since the OP stipulates an FHA loan, not a buyer plunking down bags of money in an all-cash transaction.

Suppose people launder small amounts of money, below $10,000 USD, as apparent gifts to FHA home buyers. Demanding gifts be from legitimate banking transactions might close that avenue.
 

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