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#2017207 - 05/30/15 10:46 PM Gift of Equity
RegObsessed Offline
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Working on TRID and the business line asked where to disclose a gift of equity. I cannot find anything anywhere that discusses this type of gift.

If anyone can point me in any direction, it would be greatly appreciated.

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TRID - TILA/RESPA Integrated Disclosures Rule
#2017211 - 05/31/15 01:50 PM Re: Gift of Equity RegObsessed
rlcarey Offline
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What is a "gift of equity" and why would it be reflected on a closing disclosure? What does it have to do with the loan?
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#2017239 - 06/01/15 03:06 AM Re: Gift of Equity RegObsessed
Kathleen O. Blanchard Offline

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Gift of Equity

A “gift of equity” refers to a gift provided by the seller of a property to the buyer. The gift represents a portion of the seller’s equity in the property, and is transferred to the buyer as a credit in the transaction. A gift of equity is permitted for principal residence and second home purchase transactions. The acceptable donor and minimum borrower contribution requirements for gifts also apply to gifts of equity. See B3-4.3-04, Personal Gifts.

http://wiki.fool.com/How_to_Give_Equity_as_a_Gift
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#2017240 - 06/01/15 05:53 AM Re: Gift of Equity RegObsessed
Kathleen O. Blanchard Offline

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I would say you reflect the cash value, otherwise the math won't work and the forms would reflect incorrect funds due at closing.
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#2017291 - 06/01/15 03:19 PM Re: Gift of Equity RegObsessed
Truffle Royale Offline

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In the current environment, a gift of equity is only shown on the HUD. They're fairly common in my world so I too am interested in knowing where you would put this on the LE.

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#2017317 - 06/01/15 04:19 PM Re: Gift of Equity RegObsessed
Kathleen O. Blanchard Offline

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I would place the dollar amount that is reducing the purchase price on the adjustments and other credits line. That is where " gifts from family members" are placed.
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#2017318 - 06/01/15 04:21 PM Re: Gift of Equity RegObsessed
Truffle Royale Offline

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Thanks, KB. I was hesitant to rely on the 'logical' answer without confirmation. wink

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#2017322 - 06/01/15 04:28 PM Re: Gift of Equity RegObsessed
Kathleen O. Blanchard Offline

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From the commentary:

37(h)(1)(vii) Adjustments and other credits.

1. Other credits known at the time the Loan Estimate is issued. Amounts expected to be paid by third parties not involved in the transaction, such as gifts from family members and not otherwise identified under § 1026.37(h)(1), are included in the amount disclosed pursuant to § 1026.37(h)(1)(vii).


It has to be reflected or cash to close will be inflated.
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#2018164 - 06/03/15 08:06 PM Re: Gift of Equity Kathleen O. Blanchard
RegObsessed Offline
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1. Other credits known at the time the Loan Estimate is issued. Amounts expected be paid by third parties not involved in the transaction.

Kathleen, based on the citation a Gift of Equity would not qualify to be shown in Adjustments/Other Credits because it is provided by the seller who IS involved in the transaction. That commentary states the parties are NOT involved in the transactions.

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#2048127 - 11/04/15 09:29 PM Re: Gift of Equity RegObsessed
CalifDreamin Offline
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Has anyone come up with an answer to this. I agree it seems the easiest place to put it to make the numbers work, but then it doesn't work with what the rules state.

It wouldn't be a seller credit because it isn't a cost paid for by the seller.
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#2048136 - 11/04/15 09:51 PM Re: Gift of Equity RegObsessed
Kathleen O. Blanchard Offline

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How did it work on the HUD, as a reduction in the sales price?
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#2048141 - 11/04/15 10:20 PM Re: Gift of Equity Kathleen O. Blanchard
CalifDreamin Offline
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I'm being told they put it in "Other Credits" on the HUD. (This is the first that I've come across "gift equity," so I can't answer that from experience. The processor is telling me that the "adjustments and other credits" area is greyed out, so she has to put it somewhere else for it to fill to that box. Perhaps putting it as a seller credit is the only option? That's just not logical to me since seller credits to reflect costs being paid by the seller.

I'm going through the string describing what goes in seller credits, and again, that is reflective of specific costs as disclosed:

1026.37(h)(1)(vi) Seller credits. The total amount that the seller will pay for total loan costs as determined by paragraph (f)(4) of this section and total other costs as determined by paragraph (g)(5) of this section, to the extent known, disclosed as a negative number, labeled “Seller Credits”;

Then 1026.37(f)(4) is the total of (f)(1) through (f)(3) which is origination charges, services you cannot shop for, and services you can shop for.

1026.37(g)(5) is the total of taxes/other gov't charges, prepaids, initial escrow, and other costs.
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#2048144 - 11/04/15 10:37 PM Re: Gift of Equity RegObsessed
CalifDreamin Offline
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The processor did find a way to get it on the adjustments and other credits line - it's showing as a negative $10,000, so I think we are fine. She figured out how to add an L4 line.
Last edited by CalifDreamin; 11/04/15 10:48 PM.
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#2048148 - 11/04/15 10:55 PM Re: Gift of Equity RegObsessed
Kathleen O. Blanchard Offline

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It just doesn't seem like an anticipated situation. I guess we will all find out!
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#2048208 - 11/05/15 03:17 PM Re: Gift of Equity Kathleen O. Blanchard
Cornfed Turtle Offline
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On the LE, processor put it on adjustments and other credits. Told to move to seller credits.

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#2087599 - 07/12/16 06:20 PM Re: Gift of Equity RegObsessed
ILMF2016 Offline
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Was the final decision to put Gifts of Equity by the Seller under Seller Credit as a negative number?

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#2100081 - 09/23/16 01:35 PM Re: Gift of Equity RegObsessed
Dodge Offline
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I have a Loan Estimate that needs to go out today. There is a Gift of Equity by the seller, should this credit go into the Seller Credit field?

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#2100095 - 09/23/16 02:24 PM Re: Gift of Equity RegObsessed
John Burnett Offline
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When will the buyer receive it?
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#2100110 - 09/23/16 03:21 PM Re: Gift of Equity RegObsessed
Dodge Offline
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At closing

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#2100120 - 09/23/16 03:45 PM Re: Gift of Equity RegObsessed
John Burnett Offline
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The include it on the LE as a seller credit, if it will be a reduction in the funds that the buyer has to bring to the table (and a reduction in the amount the seller will receive from the table).
Last edited by John Burnett; 09/23/16 03:47 PM.
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#2100131 - 09/23/16 04:08 PM Re: Gift of Equity RegObsessed
Dodge Offline
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Thank you!

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#2100195 - 09/23/16 07:55 PM Re: Gift of Equity RegObsessed
rlcarey Offline
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Define Gift of Equity by the seller please. Sounds like a lower sales price to me.
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#2100196 - 09/23/16 07:56 PM Re: Gift of Equity RegObsessed
RR Joker Offline
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There was another thread about this subject and that was the general concensus, Randy.

Hard equity [think lease to own] is one thing, but I agree that a 'gift' of equity is a concession.
Last edited by RR Joker; 09/23/16 07:56 PM.
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#2100197 - 09/23/16 08:00 PM Re: Gift of Equity RegObsessed
CalifDreamin Offline
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From Fannie: A “gift of equity” refers to a gift provided by the seller of a property to the buyer. The gift represents a portion of the seller’s equity in the property, and is transferred to the buyer as a credit in the transaction. A gift of equity is permitted for principal residence and second home purchase transactions. The acceptable donor and minimum borrower contribution requirements for gifts also apply to gifts of equity.
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#2114552 - 01/18/17 04:07 PM Re: Gift of Equity RegObsessed
mtgbnkr Offline
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How does the FDIC qualify this on a SLTV basis? Is it looked at as 100% financing or is the gift taken into consideration toward the LTV? I think this is what Randy is pointing out.

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