Verification of adequate liquid assets is required for source of funds to close, or when assets are dissipated as effective income or assets are identified as a compensating factor via:
• Most recent 1-month bank statement (with all pages) that evidence account holder name(s), address, account #, beginning and ending balances and all monthly transactions, OR
• Most recent 1-month bank statement, and a written Verification of Deposit
- 30 - Note: The bank statement must show the previous month’s ending balance, or the most recent 2 months consecutive statements are required.
• If the Borrower(s) do not hold the deposit account solely, all non-Borrower parties on the account must provide a written statement that the Borrower(s) have full access and use of the funds.
• Any bank printouts must be stamped and signed by an authorized bank employee.
• For recently opened accounts and recent individual deposits of more than 1% of the LESSER OF Purchase Price, Max Claim Amount, or HECM Lending Limit a satisfactory explanation and source of funds are required.
• For purchases, earnest money/down payment must also be verified if the amount exceeds 1% of the sales price or appears excessive based on the borrower(s) history of accumulating savings.
• Any liquidation of retirement and/or investment funds must be paper trailed to closing or through other borrower account(s). Terms and conditions for withdrawing of funds is also required.
• Any documentation obtained through the internet must contain the same information, i.e., account holder name(s), account #, etc. that would be on an original hard copy of the document and include the URL information at the top or bottom of the document.
• We cannot accept or use documents relating to assets of borrower(s) that have been handled by, or transmitted through, the equipment of unknown parties or interested third parties (Realtor(s), Seller(s), etc.). We cannot accept or use any third-party verifications that have been handled by or transmitted from or through, any interested third party or the borrower(s).
• Authentication of all documents received electronically by examining the source identifiers (e.g., fax banner header or the sender’s email address) or contacting the source of the document by telephone to verify the document’s validity is required. Document the name and telephone number of the individual with whom LBF verified the validity of the document.
• Authentication of all documents obtained from the Internet including the uniform resource locator (URL) address, as well as the date and time the documents were printed is required.
Visit the URL, or the main website listed in the URL if the page is password protected to verify the website exists and print out evidence documenting our visit to the URL and website.
Borrowed funds
Funds acquired by an unsecured loan or a collateralized loan are not acceptable funds to close, asset dissipation or earnest money. Including but not limited to, loans against;
• Real Property,
• 401k, or
• Life Insurance.
Unacceptable Sources of Funds
• Unsecured loans,
• Collateralized/Secured loans,
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• Credit card advances,
• Sweat Equity,
• Trade Equity,
• Rent Credit,
• Cash on hand,
• Seller, broker, or lender credits or incentives on a HECM for Purchase, or
Note: Seller may pay fees that are required to be paid by a Seller under state or local law, fees customarily paid by a seller in the subject property locality, and Seller may purchase a Home Warranty Policy, or
• Secondary financing.
Gift Funds
In order for gift funds to be considered a gift, there may be no expected or implied repayment of the funds to the donor(s) by the borrower(s).
An outright gift of the cash investment is acceptable if the gift donor(s) are:
• the Borrower’s Family Member;
• the Borrower’s employer or labor union;
• a close friend with a clearly defined and documented interest in the Borrower(s);
• a charitable organization;
• a governmental agency or public Entity that has a program providing homeownership assistance to low or moderate income families or first-time homebuyers.
Cash on Hand is not an acceptable source of donor gift funds.
A gift donor may not be a person or entity with an interest in the transaction or sale of the property, such as:
• The seller(s),
• The real estate agent(s) or broker(s),
• The builder,
• The lender; or
• An associated entity.
As a general rule, LBF/FHA are not concerned with how the donor(s) obtain the gift funds provided that the funds are not derived in any manner from a party to the transaction.
Donors may borrow gift funds from an acceptable source, provided the mortgage borrower(s) are not obligors to any note to secure money borrowed to give the gift.
We must document any gift funds through a gift letter, signed by the donor(s) and borrower(s). The gift letter will need to include at a minimum:
• The donor(s) name(s), address, telephone number,
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• The donor(s) relationship to the borrower(s),
• The dollar amount of the gift, and
• A statement that no repayment is required.
We must document the transfer of gift funds from the donor(s) to the borrower(s). The table below describes the requirements for the transfer of gift funds.
If the gift funds … Required…
Are in the borrower(s) account • The donor(s) bank statement showing the withdrawal, and
• Evidence of deposit into the borrower(s) account.
Are to be provided at time of closing • Certified check or money order or cashier’s check or wire transfer or other official check evidencing payment to the borrower(s) or settlement agent, and
• The donor’s bank statement evidencing sufficient funds for the amount of the gift.
Sale of Personal Property
The borrower(s) may sell various items of personal property, such as:
• Cars,
• Stamps,
• Coins,
• Recreational vehicles,
• Baseball card collections, or
• Power equipment (i.e. generators, tractors, loaders, backhoes, skid steer, etc.) The estimated worth of the items being sold may be in the form of:
• Published value estimates issued by organizations, such as o Automobile dealers, or
o Philatelic or numismatic associations, or
• A separate written appraisal by a qualified appraiser with no financial interest in the loan transaction.
Only the lesser of the estimated value or actual sales price are considered as verified assets.
- 33 - Sale of Real Estate
The net proceeds from an arms-length sale of a currently owned property may be used for funds to close or cash investment. The borrower(s) must provide a fully executed Closing Disclosure/HUD-1 Settlement Statement, and copies of disbursement checks and/or wires. Evidence of deposit of net proceeds into the borrower(s) account may also be required depending upon the sale date to closing date of the subject property.