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#2185829 - 07/18/18 02:30 PM Gift of Equity
violet Offline
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violet
Joined: Aug 2012
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How do you disclose a gift of equity on LE / CD?

Any thoughts or suggestions would be appreciated.

thanks.

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TRID - TILA/RESPA Integrated Disclosures Rule
#2185832 - 07/18/18 02:39 PM Re: Gift of Equity violet
rlcarey Offline
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As an adjustment.
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#2185836 - 07/18/18 02:41 PM Re: Gift of Equity violet
MScarn6942 Offline
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Land Lacking in Lakes, IL
Last edited by MScarn6942; 07/18/18 02:41 PM. Reason: added first line
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#2185843 - 07/18/18 02:50 PM Re: Gift of Equity violet
Adam Witmer Offline
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From the preamble to the 2017 TRID amendments:

"Final comment 37(h)(1)(vii)-1 clarifies that amounts expected to be paid at consummation by third parties not otherwise associated with the transaction, such as gifts from family members and not otherwise identified under § 1026.37(h)(1), are included in the amount disclosed under § 1026.37(h)(1)(vii), although amounts expected to be provided in advance of consummation by third parties, including family members, not otherwise associated with the transaction are not required to be disclosed under § 1026.37(h)(1)(vii)."
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#2185844 - 07/18/18 02:59 PM Re: Gift of Equity violet
violet Offline
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violet
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Thanks all - appreciate the input.

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#2185856 - 07/18/18 03:31 PM Re: Gift of Equity violet
rlcarey Offline
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Adam, a gift of equity is usually provided by the seller. As such, your citation which includes "paid at consummation by third parties not otherwise associated with the transaction" might not work.
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#2185861 - 07/18/18 03:44 PM Re: Gift of Equity violet
RR Joker Offline
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Or, the sales price may simply be lowered if the 'gift' is coming from a seller. Unless there is some true documented sweat equity or there was a contract where the buyer was renting and paying above market and that above market portion was going towards a 'down payment/equity'...I just don't see how a gift of equity can make up for a down payment and is just asking for inflated prices to cover the lack of dp funds.

my two cents.
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#2185928 - 07/18/18 06:07 PM Re: Gift of Equity violet
Adam Witmer Offline
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Agreed.
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#2192458 - 09/13/18 04:24 PM Re: Gift of Equity violet
RR Becca Offline
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out of the frying pan...
One of these landed on my desk today. Sales price is $63,000, with an $18,000 'gift of equity' from the seller to make the amount due from buyer (and our loan amount) $45,000. Is the consensus that this goes on the seller credit line or as an adjustment - assuming we can make our software do that? I've read both of these threads and that section of reg through a couple of times and am still confused.
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#2192470 - 09/13/18 05:37 PM Re: Gift of Equity RR Joker
RR Joker Offline
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Originally Posted By RR Joker
Or, the sales price may simply be lowered if the 'gift' is coming from a seller. Unless there is some true documented sweat equity or there was a contract where the buyer was renting and paying above market and that above market portion was going towards a 'down payment/equity'...I just don't see how a gift of equity can make up for a down payment and is just asking for inflated prices to cover the lack of dp funds.

my two cents.


I remain of this opinion.
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#2192483 - 09/13/18 06:06 PM Re: Gift of Equity violet
RR Becca Offline
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out of the frying pan...
Well, me, too. But that doesn't help with figuring out where to put it on the disclosures when everybody involved in the transaction insists it's an actual thing. laugh
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#2192486 - 09/13/18 06:15 PM Re: Gift of Equity violet
RR Joker Offline
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It wouldn't. It would simply end up a lower sales price wink If you are going to do a fake downpayment then I guess you have no choice but to show it as an adjustment.
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#2192488 - 09/13/18 06:21 PM Re: Gift of Equity violet
RR Joker Offline
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Of course, I'm also assuming it's not documented sweat equity or over market rent smile
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#2192504 - 09/13/18 07:29 PM Re: Gift of Equity violet
RR Becca Offline
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RR Becca
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out of the frying pan...
Neither of those. It's a family transaction, and the seller is wanting to show a higher purchase price + the gift to reduce the amount the buyer has to bring to closing.

Personally I think it's all a load of bunk, but if the LO allows it and management allows him to allow it then all I can do is figure out how to show it. smirk
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#2192511 - 09/13/18 07:47 PM Re: Gift of Equity violet
RR Joker Offline
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Load of bunk is right.
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#2192519 - 09/13/18 08:17 PM Re: Gift of Equity violet
MonicaMc Offline
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We have the same situation right now. Grandpa is selling to grandson. Purchase price is $150K and he is giving $25K gift of equity to grandson. Grandson is only putting about $18K as down payment and is using the rest to cover closing costs and prepaids so he doesn't have to physically bring any money to closing. We don't show the gift on the LE. We show it only as an Asset, as our Secondary Market investor requires this.

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#2192548 - 09/14/18 03:04 AM Re: Gift of Equity violet
Truffle Royale Offline

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Since AIR, the purchase price we see is usually the same or very close to the appraised value.
We won't let sellers jack up the purchase price to have equity to give. And if the sale price was lowered, we'd have all kinds of explanations to make to satisfy investors.
The reality is that a gift of equity is a thing of value equal to a check from a family member. We show it as a gift of equity on our CDs.

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#2192556 - 09/14/18 11:48 AM Re: Gift of Equity violet
rlcarey Offline
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Just remember, how you account for the required SLTV of the transaction has nothing to do with the consumer's disclosures.
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