Banks requiring we prove how we spent a gift?

[LisaKinVA]

Really?

 

Several months ago, we received a gift from my BIL. We're in the middle of a refinance, and they asked for a statement from dh and bil that the money deposited was a gift. They also asked bil to complete this other form stating that it was a gift.

 

Now, they want us to prove we spent the entire amount on the activities that we said we spent them on (summer camp for oldest son, swimming, etc.), by providing copies of checks, invoices, receipts, etc.

 

WHAT??!!??

 

A gift is a gift... we spent the money, the kids went to their camps and swimming, and it didn't come to the full total... were we supposed to return the unused portion? What if we had a pizza party or went out for ice cream? What if the kids decided they didn't want to swim, so we went to an amusement park instead? Are the gift police going to come after us?

 

This is ridiculous.

 

Lisa

[Pippen]

If it was BIL asking for the statements, I'd be returning their money.

 

I've never heard of a bank asking for those details before.

[Annie G]

I'm not surprised they asked you to prove it was a gift- if they're refinancing, they probably saw it and want to make sure it wasn't a loan that you'll have to pay back. If it was, they'll need to figure it in when they calculate how much you can borrow.

But once it was documented to be a gift, what is their reasoning for asking HOW you spent it? Is it necessary to spend a gift? I'd sure be asking some questions about it!

[Lolly]

That is just odd.:confused:

[Kathryn]

I'm not surprised they asked you to prove it was a gift- if they're refinancing, they probably saw it and want to make sure it wasn't a loan that you'll have to pay back. If it was, they'll need to figure it in when they calculate how much you can borrow.

But once it was documented to be a gift, what is their reasoning for asking HOW you spent it? Is it necessary to spend a gift? I'd sure be asking some questions about it!

 

:iagree: that's just odd.

[MariannNOVA]

I am not surprised -- I have been asked this every single time I have been gifted more than a certain amount of $.

 

I can remember being asked this 20+ years ago -- it's not unusual.

[bolt.]

They probably want to make the distinction of whether you have turned the gift into an asset (property, jewelry) or into something easily sold. People about to go bankrupt do that so their true wealth is out of the bank and off the books. Then they have a nest egg that is off-book and are secretly more wealthy than they disclose. I imagine refinancing is similar -- they want to know your true 'net worth' which includes secret nest eggs, which aarge cash gift, quickly spent, would red-flag them to check out the possibility.

[Blueridge]

Banks are completely out of control, especially when it comes to processing and underwriting mortgages and refinances. We recently did one (took over 3 months to complete!), and they just came back again and again with more stupid questions. The closer told us that she had closed on a huge (million $) refinance that morning...and AT THE CLOSING TABLE the buyer had a phone call from her bank asking her to verify and explain a large deposit that had just been added to her account! It was her husband's real estate bonus or something, but the bank was checking their account and credit that very morning of closing. Ridiculous. They want to account for every penny of income.

[TranquilMind]

Really?

 

Several months ago, we received a gift from my BIL. We're in the middle of a refinance, and they asked for a statement from dh and bil that the money deposited was a gift. They also asked bil to complete this other form stating that it was a gift.

 

Now, they want us to prove we spent the entire amount on the activities that we said we spent them on (summer camp for oldest son, swimming, etc.), by providing copies of checks, invoices, receipts, etc.

 

WHAT??!!??

 

A gift is a gift... we spent the money, the kids went to their camps and swimming, and it didn't come to the full total... were we supposed to return the unused portion? What if we had a pizza party or went out for ice cream? What if the kids decided they didn't want to swim, so we went to an amusement park instead? Are the gift police going to come after us?

 

This is ridiculous.

 

Lisa

I'd ask to see the regulation or law that requires this in writing.

[LisaKinVA]

They probably want to make the distinction of whether you have turned the gift into an asset (property, jewelry) or into something easily sold. People about to go bankrupt do that so their true wealth is out of the bank and off the books. Then they have a nest egg that is off-book and are secretly more wealthy than they disclose. I imagine refinancing is similar -- they want to know your true 'net worth' which includes secret nest eggs, which large cash gift, quickly spent, would red-flag them to check out the possibility.

 

They have every bank statement going back to Sept. 2011, every income statement going back to Sept. 2011, have pulled two credit reports, done two property appraisals, have copies of every 401(k) statement, and credit card statement, and copies of checks, and $80,000 worth of receipts related to our house (of which they will only count $22,000, because in order to count we had to put the items on a credit card. Money spent out of pocket, cash/checks do not count towards the cost of building our home...(that's another thing that makes no sense). If we had any "hidden" money, they should have found it by now, because I would really, really like access to it!

 

It is perfectly clear from our monthly out-go vs. our monthly income that there is nothing extra. The "large" check isn't large enough to come anywhere close to hitting an IRS gift limit.

 

Another mortgage company just told me to pull the application, but that means another 60-90 days of this. :banghead:

[LisaKinVA]

I'd ask to see the regulation or law that requires this in writing.

 

I've asked...we'll see. I have also written a letter to our Congressman on this, since it's possible it's one of the government's grand ideas...they've had so many for the banking/mortgage industry of late (part of the reason our loan is taking so long is that the regulations keep changing...like the one about what we can COUNT as far as money we spent on our house. They will only accept credit card purchases for approved things, nothing we spent with check or cash counts...apparently, cash and receipts aren't good enough anymore, I have to use a credit card and then present my receipt, AND CCd statements verifying the receipt is accurate.

[linders]

Standard practice. The bank wants to ensure the gift was not actually a loan that you need to repay to BIL under the table (thus increasing your debt load).

 

My SIL actually pulled this scam - got FIL to "gift" them to help with a home purchase, promising to repay later. Then the bank mortgage company asked for a letter stating it was a gift. "Don't worry, Dad, just write the letter. We'll still repay you."

 

Three years later he passed away and she produced the letter for the lawyers as her means of saying she did not owe the estate thousands of dollars - it was just a "gift." The rest of the sibs were p**sed.

[LisaKinVA]

Standard practice. The bank wants to ensure the gift was not actually a loan that you need to repay to BIL under the table (thus increasing your debt load).

 

My SIL actually pulled this scam - got FIL to "gift" them to help with a home purchase, promising to repay later. Then the bank mortgage company asked for a letter stating it was a gift. "Don't worry, Dad, just write the letter. We'll still repay you."

 

Three years later he passed away and she produced the letter for the lawyers as her means of saying she did not owe the estate thousands of dollars - it was just a "gift." The rest of the sibs were p**sed.

 

No, this is not standard. We have already provided the documentation required that it IS a gift. What they now want is documentation as to HOW we spent the gift. The gift was not related to the house or mortgage in any way. It was a personal gift for our family, so that we could have some fun this summer.

 

We used the money to pay for camp, swim team, and some other things (like a pizza night...took kids out for ice cream...things we wouldn't normally do). This is the documentation they are asking for. They want to know how we spent the money.

[laundrycrisis]

It is standard practice. When you apply for any mortgage, you sign a statement that the money you are putting down was completely yours. And if you have received any financial gifts, they want to make sure those were not actually loans. You might want to ask if it would help if you get signed/notarized statement from your brother that you do not owe him any money. When I began the mortgage process for my first house, I was young, and I was warned by the bank that if I had been receiving financial gifts from my parents, they may have to provide a document stating that I had no financial obligations to them.

[ILiveInFlipFlops]

It is standard practice. When you apply for any mortgage, you sign a statement that the money you are putting down was completely yours. And if you have received any financial gifts, they want to make sure those were not actually loans. You might want to ask if it would help if you get signed/notarized statement from your brother that you do not owe him any money. When I began the mortgage process for my first house, I was young, and I was warned by the bank that if I had been receiving financial gifts from my parents, they may have to provide a document stating that I had no financial obligations to them.

 

Again, yes, THIS is standard practice. We had to do the same, and my parents submitted the letter. Asking for receipts to prove how the gift money was then spent is not standard practice.

[I talk to the trees]

This sounds very fishy to me, especially if they are asking for specific receipts. Honestly! Who keeps all of their receipts? Once a check or debit purchase clears my account, I shred receipts, otherwise, we'd be drowning in little slips of paper!

 

When we bought our home, my parents gave us a little money so that we could swing a larger down-payment. (Bless them!) All parties signed an affidavit stating that the money was a gift, and wouldn't be paid back. That was all we ever had to do, and there were no more questions.

[LisaKinVA]

It does sound fishy. However, the FHFA (new government regulatory body making lots of new regulations) has been very busy justifying their existence...I'm waiting for confirmation that this is in fact a legitimate condition for a mortgage.

 

I fired off a letter of inquiry to the FHFA (5-10 business days for a reply), a letter to the editor of the local paper, and a letter to our Congressman.

 

My word for the day is: Incredulous.

[NittanyJen]

Asking for receipts is definitely over the top. The letter from the giver stating that it is a gift and not a loan is sufficient.

[Happy]

Banks are completely out of control, especially when it comes to processing and underwriting mortgages and refinances. We recently did one (took over 3 months to complete!), and they just came back again and again with more stupid questions. The closer told us that she had closed on a huge (million $) refinance that morning...and AT THE CLOSING TABLE the buyer had a phone call from her bank asking her to verify and explain a large deposit that had just been added to her account! It was her husband's real estate bonus or something, but the bank was checking their account and credit that very morning of closing. Ridiculous. They want to account for every penny of income.

 

If you are getting your home refinanced or if you are gettting a mortgage, the banks WILL check your credit (and possibly confirm employment) the morning of closing. Or within the last 24 hours before closing. I have to tell (and retell) my buyers not to go buy furniture or new appliances or a car before they close. The day after--go for it.

 

The receipts thing is a new one for me. I've seen the need for an affidavit that money was a gift, but have not run into the need for receipts. I'd be asking why and is there something in writing that proves their need for the information.

 

Frankly, in my experience, some banks and some loan officers are MUCH better than others.

[gardenmom5]

you're in the middle of a refinance - they want to make sure you didn't spend it on mortage payments or other basic necessity expenses. the bank's perspective is - they want to make sure you can afford to meet all your financial obligations. (re: pay them back)

[LisaKinVA]

you're in the middle of a refinance - they want to make sure you didn't spend it on mortgage payments or other basic necessity expenses. the bank's perspective is - they want to make sure you can afford to meet all your financial obligations. (re: pay them back)

 

They also have 11 months of income and bank statements... and how does one "prove" what you bought wasn't a necessity? If you don't normally buy pizza from Dominos, and you do one month, does that count as a necessity? What about the gas to and from an activity you might not have done without the gift? Do clothes count? I buy clothes and books as gifts! We do ice cream and pizza as special treats? Who decides what is a "needs-based" expense vs. a gift-based expense? What if the money was used to help pay a medical expense (I've got $11,000 worth of medical still to do). Do we have the $$ to make the mortgage and pay the bills? We've been doing it for many, many months. The refinance will LOWER our monthly expenses by nearly $1,000... so even if we can just barely meet our mortgage NOW, if our mortgage will be $1000 LESS, is there any question?

Edited August 7, 2012 by LisaK in VA

[jewellsmommy]

Wow, this type of thing makes me cringe at the idea of ever buying a house. It sounds like a modern form of torture-death by red tape and receipts. :glare:

 

:grouphug:

[TammyS]

The reason they want to see the receipts is because they want to see that the money was spent and is not secretly going towards your down payment or refi costs. They have been burned too many times by the "it's a gift" thing with family, then it turning out to be a loan, knowing that many people will pay their family back but not the bank when things go bad. It probably would have helped to either have BIL pay for those things directly, or to have let the cash sit until after closing, but there is always some headache, so it probably would have been something else.

[dirty ethel rackham]

If they can't figure that out from the bank statements and tons of documentation already given, then they must be a bunch of morons.

[LisaKinVA]

The reason they want to see the receipts is because they want to see that the money was spent and is not secretly going towards your down payment or refi costs. They have been burned too many times by the "it's a gift" thing with family, then it turning out to be a loan, knowing that many people will pay their family back but not the bank when things go bad. It probably would have helped to either have BIL pay for those things directly, or to have let the cash sit until after closing, but there is always some headache, so it probably would have been something else.

 

As an FYI, we have no down payment or refi costs (at least not out of pocket, they are included in the loan). I can come up with receipts (errr, beg for receipts from the various groups) for about $1500 out of $2000 for swimming and camp, but that still leaves $500 "unaccounted for" which "could" have helped pay bills, buy food, or other "necessities."

[gardenmom5]

They also have 11 months of income and bank statements... and how does one "prove" what you bought wasn't a necessity? If you don't normally buy pizza from Dominos, and you do one month, does that count as a necessity? What about the gas to and from an activity you might not have done without the gift? Do clothes count? I buy clothes and books as gifts! We do ice cream and pizza as special treats? Who decides what is a "needs-based" expense vs. a gift-based expense? What if the money was used to help pay a medical expense (I've got $11,000 worth of medical still to do). Do we have the $$ to make the mortgage and pay the bills? We've been doing it for many, many months. The refinance will LOWER our monthly expenses by nearly $1,000... so even if we can just barely meet our mortgage NOW, if our mortgage will be $1000 LESS, is there any question?

I realize you're very frustrated, but please don't shoot the messenger.

mortgage companies use a formula of percentage of income to certain areas of basic expenses. e.g. mortgage, etc. they only allow a certain percentage of your income to go to a mortgage payment - to go above that percentage *often* leads to trouble for the homebuyer. aka: missed payments. (your payment dropping $1000 is in the 'future', it hasn't happend yet. not saying it's logical, it just is.)

 

Your bil's generous gift upended your income to expense ratio and made figuring out yours more complex than it would have been otherwise. there can be a huge difference between different brokerage companies. some will be more uptight about gathering documents that others.

[Seasider]

This happened with us many, many years ago. We had money tied up in an investment that wouldn't be released until too late for closing. But we knew that money was coming. So, a family member provided that amount in cash to fill the time gap, with the intention of receiving it back as soon as our investment cash cleared. At the time we were doing an FHA loan and the mortgage company asked our family member to write an affidavit stating the money was a gift.

 

The bank calculates a debt-to-asset ratio that is part of the loan approval process. They have to know whether that "gift" is actually a debt or an asset, so they know where to place it in that equation - unfortunately lots of folks get "gifts" that aren't actually gifts, making them officially liabilities instead of assets.

 

Refinance rates are low, but lenders have seem to have gotten really picky about qualifying people. Too many foreclosures in the past.

 

(sorry if someone already shared the above, I didn't read all the replies before answering)

 

ETA - read all the way through, wow, now I see they are asking how you spent the "gift." All I can say is this is the sad state of the home loan industry in the wake of the real estate market crash and all the government fixes. I am starting to think that loan processors are getting paid by the hour.... Sorry you are having to deal with such a mess. But restarting with a new company would not necessarily guarantee a trouble-free process.

Edited August 7, 2012 by Seasider

[mommaduck]

Another reason to do things in cash and not through banks....

[LisaKinVA]

8 months is a long, long time. Each time they present us with a list of conditions (proof), we provide it, and they come up with another list. This has been going on for too long.

 

The gift was given months ago, documented TWICE, and now suddenly, after everything else is cleared up, they want proof of how we spent it? Maybe if they had asked back in June this wouldn't be an issue...but now, I have to go back and beg people to do things that are out of the ordinary.

 

Excuse me, Ms. Swim Team Treasurer, my bank wants me to prove that we paid X amount to you...could you write me a letter stating that we not only paid, but they attended? Excuse me, Mr. Boy Scout Treasurer, my bank needs you to confirm that we paid for Christopher to attend camp, and that he went...

 

I am filled with snark at the moment. We have spent countless hours scanning receipts, tracking down (and paying for) copies of statements, checks, etc.

 

I am looking at alternatives now...and if I can find one, I am going to pull the application completely. I don't care how nice this mortgage broker is, 8 moths is ridiculous, and honestly, how can I even believe there is an end in sight. They have dragged it out this long!

[Barb_]

Have you just said, "No." Just no. I'm sorry, that is unreasonable. Let them pull the application or turn you down otherwise they may try to withhold some of your funds.

[brightside]

Wow, this type of thing makes me cringe at the idea of ever buying a house. It sounds like a modern form of torture-death by red tape and receipts. :glare:

 

:grouphug:

 

:iagree: Sounds like OP is dealing with the same bank that I am. I am begging my husband to just withdraw the application (however the mortgage will be half what we currently spend on rent).

[MomatHWTK]

The OP said that they are in the process of refinancing- the bank probably wants confirmation that they are not using money from a 3rd party to buffer their accounts.

 

For instance, someone could ask for and receive an "off the books" loan from a family member to make them appear financially sound, get the refinance and then hope to repay the loan to the family member. So the bank is wanting proof that it actually was a gift and won't be a debt that the lendee puts ahead of repaying the bank.

[mommaduck]

There comes a point where I would think you need to tell the bank that they either want to give you the loan or they don't. If not, then they can quit wasting your time and you'll go elsewhere. If they do, then they better get over it.

 

We nearly bought a house years ago. The day of closing we received one call after another, about every hour. Oops, we can't give you the loan. Oh, wait, we can give you the loan. Oops, nope, can't give you the loan. Oh, yes, we looked again and we can give you the loan. Oh wait, we can't give you the loan.

 

At that point, my husband told me to tell the bank to shove it, we weren't playing this emotional roller coaster anymore. We weren't going to sign only to have them pull it on us. No way, no how. The seller, a real estate agent herself, was so ticked that she did not return our earnest money (our real estate agent, also a relative of ours, paid us out of his pocket). Well, how did she think we felt about the dang thing?!

 

The upside, we didn't buy a house in an area that became a ghost town within a few years.

[mommaduck]

The OP said that they are in the process of refinancing- the bank probably wants confirmation that they are not using money from a 3rd party to buffer their accounts.

 

For instance, someone could ask for and receive an "off the books" loan from a family member to make them appear financially sound, get the refinance and then hope to repay the loan to the family member. So the bank is wanting proof that it actually was a gift and won't be a debt that the lendee puts ahead of repaying the bank.

A signed letter should suffice. If they gave it to them in cash, then that would not have been a problem. Makes no sense.

[Happy]

8 months is a long, long time. Each time they present us with a list of conditions (proof), we provide it, and they come up with another list. This has been going on for too long.

 

The gift was given months ago, documented TWICE, and now suddenly, after everything else is cleared up, they want proof of how we spent it? Maybe if they had asked back in June this wouldn't be an issue...but now, I have to go back and beg people to do things that are out of the ordinary.

 

Excuse me, Ms. Swim Team Treasurer, my bank wants me to prove that we paid X amount to you...could you write me a letter stating that we not only paid, but they attended? Excuse me, Mr. Boy Scout Treasurer, my bank needs you to confirm that we paid for Christopher to attend camp, and that he went...

 

I am filled with snark at the moment. We have spent countless hours scanning receipts, tracking down (and paying for) copies of statements, checks, etc. I am looking at alternatives now...and if I can find one, I am going to pull the application completely. I don't care how nice this mortgage broker is, 8 moths is ridiculous, and honestly, how can I even believe there is an end in sight. They have dragged it out this long!

 

Bolding mine.

 

The more I think about this, the more I think you should let the snark out.

 

Eight months for a refi? No way should it take that long. No way.

 

If this dude has an office, take the kids and go sit in the waiting area until he approves your loan. We did that once...it only took two afternoons with my 8 yr old ADD son and my 3 year old son to get our loan the attention it deserved. Ours was for a house purchase, but still...it got 'lost' when the original loan gal left the mortgage house. I had already told the reception gal I was bringing the German Shepherds the next day. We were living in a hotel because of the loan issues so the dogs would have loved the freedom from the kennels.

 

Get testy and tell the guy to get his act together today. Talk to his supervisor and that one's supervisor. This has gone on too long. Be polite but firm and persistant.

[QueenCat]

I've asked...we'll see. I have also written a letter to our Congressman on this, since it's possible it's one of the government's grand ideas...they've had so many for the banking/mortgage industry of late (part of the reason our loan is taking so long is that the regulations keep changing...like the one about what we can COUNT as far as money we spent on our house. They will only accept credit card purchases for approved things, nothing we spent with check or cash counts...apparently, cash and receipts aren't good enough anymore, I have to use a credit card and then present my receipt, AND CCd statements verifying the receipt is accurate.

 

I don't think it's a recent grand idea of the govt. I had to prove a gift wasn't a loan or for regular expenses when we bought our house 7 years ago. However, our lender didn't require as much of us as yours is as far as "proof" goes.

[LisaKinVA]

I've contacted our current lender (local bank), to look into options. She may have some. I also have a list of other recommended lenders at the ready. DH and I are looking at our options...I'm so ready to be done. I am really past my limit...I was actually past my limit in June, by dh said if we did this one last thing...then we were in July with this one last thing, and here it is AUGUST, and again...one last thing.

[SKL]

It sounds weird, but I guess if you're getting ready to loan a stranger some money in this economy, you get to ask whatever you want.

 

My first reaction would be to list the stuff and include the receipts I do have, and write "no receipt" if there's anything I can't prove either with a receipt or credit card statement. Then it's up to them if they want to be jerks about it.

 

If you're in a "protected class" and think this is discrimination, that's a different story. I assume there are procedures for addressing that rather quickly.

[Tammyla]

Re-fi's are a hassle. I hope you get a signature day soon.

[Katy]

If you want the best rate, give them what they want. It sounds like you are on the verge of a turn down because they think you don't have enough money coming in to cover your day to day expenses. A large financial gift, whatever it's spent on, is an easy way to CYA if you don't make enough money to support your current lifestyle.

 

See if you qualify for the HARP refinance program. It requires less documentation (but still some).

[cindergretta]

We didn't have to prove how we spent gift money, but we had to stand on our heads to prove it was, in fact, gift money. We had to have signed paperwork for cash gifts (checks dated 12/25) as low as $50. Uh, Christmas gift anyone??? :001_huh:

 

We were stunned at how much of a Hollywood production the whole thing was. They requested the owner of the company for which dh works to submit bank statements, with nothing redacted, to prove our financial situation! :001_huh: :001_huh: :001_huh: If you owned a company, would you submit your financial statements on behalf on an employee with NOTHING redacted?? God bless the man, he did because he cares about dh and our family, but seriously???? We were beyond angry.

[Blueridge]

EIGHT MONTHS????? I didn't know it was taking that long. I would seriously haven pulled it long ago. We were within days of pulling ours at only three months. I am so sorry. Hoping you can find a great alternative soon. You might call the title company and see if they will give you bank or loan officer suggestions as a courtesy, since they should know who sends them the best loan packages for closings. :grouphug:

ETA Yes, check on HARP loans because they don't have quite as much qualification..

[nono]

See if your lender does loan modifications. Ours is a small local bank, and they modified our loan, knowing that my dh's job was in shaky territory.

 

No, we didn't get rock bottom pricing, but there was zero cost, just two places to sign, and our payments went down by $450/month.

 

 

Oh, P.S. :grouphug::grouphug::grouphug:

[LisaKinVA]

See if your lender does loan modifications. Ours is a small local bank, and they modified our loan, knowing that my dh's job was in shaky territory.

 

No, we didn't get rock bottom pricing, but there was zero cost, just two places to sign, and our payments went down by $450/month.

 

 

Oh, P.S. :grouphug::grouphug::grouphug:

 

I did check...they don't have a modification program...we would have to refinance with them, too. But, she is checking on alternatives, and will get back to me tomorrow.

[nono]

I did check...they don't have a modification program...we would have to refinance with them, too. But, she is checking on alternatives, and will get back to me tomorrow.

 

I'll keep my fingers crossed for ya! The other guys are B.S. Hey, I probably can make you some receipts.... ;)

[Luckymama]

8 months :eek: Our refi this spring took 10 weeks from initial phone call to closing.

[laundrycrisis]

Eight months is ridiculous. It almost sounds like they are trying to send you away without refusing you. I would look for another lender.

[Excelsior! Academy]

I'll keep my fingers crossed for ya! The other guys are B.S. Hey, I probably can make you some receipts.... ;)

 

:lol::lol::lol:

 

 

We purchased a home last year and had a little gift $. It. was. ri. dic. u. las.

 

We had to get proof from everyone. They kept "losing" our papers. If they asked for something they wanted it yesterday. If they were supposed to provide something, well they would get to it, eventually. Unfortunately, with the type of loan we were getting there were not many options on banks. We just had to suck it up and sign on the dotted line. After getting permission, of course. Hang in there. It will be over soon.

[AngelBee]

Another reason to do things in cash and not through banks....

 

:iagree: