Do underwriter's need to see cancelled checks from gift donors?

Asked by Teloterri, Virginia Mon Mar 19, 2012

Is a gift letter and a copy of the check sufficient?

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10
Clark Nieddu, Home Buyer, Martinez, GA
Fri Dec 16, 2016
Speaking from two different experiences, I'll give you two different answers:

First of all, my experience: in order for me to get a mortgage, the lender required that we pay off one of our two vehicles to bring down the debt:income ratio. A family member gifted the money to us. Our lender required that the donor sign a statement saying that the money was a gift and in no way requires a repayment of the money from us. The donor was also required to include their bank information: bank name, address, and account number. Since my family member wasn't comfortable with releasing his account information (he used a cashier's check to give us the money and so neither his name nor his account info was on the check), my lender required that he have his bank sign a memo on bank letterhead stating that the money came from his account and he had sufficient funds to cover it.

The second scenario is from my brother. His father-in-law sends him and his wife a significant check every year to encourage my brother and his wife to buy a plane ticket to visit them. His bank required proof of where the money came from and was also stating that they are going to require his father-in-law's account information. His father-in-law outright refused to give it, and my brother went back to his bank and told them that they could either move forward without it or my brother and his wife would just find another bank. His bank moved forward without the information.

Based on my brother's experiences and based on research my brother did on the Patriot Act (which is what has been thrown at me by my lender whenever I ask about it), I have concluded that it's not an actual requirement but a very very strong preference.

I think that at the end of the day, you just have to realize that the bank isn't required to give you a loan and if you want that loan, then you will likely need to be willing to give them whatever they want, unless what they're asking for is somehow illegal.
0 votes
Rob Weber, Mortgage Broker Or Lender, Plainfield, IL
Mon Mar 19, 2012
After 9/11 and the enhancements of the Money Laundering Control Act of 1986 (MLCA) via the Patriot Act (October 2001), banks now require thorough documentation on any large deposits or gift funds. Despite what people are saying here, underwriters who don't ask for a paper trail are playing with fire and will eventually get burned. Consumers should go on the assumption they'll have to provide a paper trail for any funds gifted and be prepared if the donor account has other large transactions (non-payroll direct deposit), they may be asked about those funds, up to and including documenting the source of that transaction and on-and-on until the trail stops or the funds can't be sourced. The underwriters who aren't asking for the full paper trail aren't doing their due diligence to address the government's money laundering concerns and as a result, may be out of a job one day.

Assume the worst, plan to document everything.

http://en.wikipedia.org/wiki/Patriot_Act
http://en.wikipedia.org/wiki/Money_Laundering_Control_Act_of_1986
Web Reference:  http://RobWeber.com
0 votes
Ken Krzak, , Naperville, IL
Mon Mar 19, 2012
Yes they do. Copy the personal check when the donor gives it to you and copy the deposit slip. Once the check clears ask the donor to print the back of the check and provide your statement showing the deposit and the new balance.
0 votes
Jirius Isaac, Agent, Kenmore, WA
Mon Mar 19, 2012
Yes, and any question you ask about any written documentation, the answer will always be yes.
Web Reference:  http://metromgi.com
0 votes
Mary Pratt K…, , Bellevue, WA
Mon Mar 19, 2012
It will depend on the type of loan you're getting, the stability of your loan scenario and the underwriter themselves...Best to follow what your lender is asking for. I promise, we don't ask for things if we're not pressured into it. If you're not working with a lender, I would be happy to help you structure your loan for you. Just give me a shout at 206.715.7708.
0 votes
Mary Pratt K…, , Bellevue, WA
Mon Mar 19, 2012
Yes! Underwriters will always need to see where funds are coming from. If it's a gift, you need a gift letter, a copy of the check, and a deposit receipt of which account you've placed it in to. Heads-up, if you're receiving other gifts, such as wedding presents (cash) or selling things on eBay or what-have-you, or if you're liquidating retirement funds, the rules will always be the same: You need to show what it was (the marriage certificate and the checks/eBay sale confirm/retirement account statement), what it becomes (check, paypal confirm, confirm of sale of stock or retirement funds & check) and the receipt of where it's deposited (your checking account in which you are gathering your assets).
Questions? Concerns? Feel free to email me at MaryPk@MAGLoans.net or call me at 206.715.7708
I'll be happy to help you any way I can-
Mary Pk
Mortgage Advisor, MLO #391349
0 votes
Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Mon Mar 19, 2012
We require proof that the donor had the funds to give, a copy of the donor’s bank statement is the easiest. The check doesn’t need to be cashed prior to closing, just certified, and then endorsed at closing. If you already cashed it before the loan officer documented it, then they will ask for a copy of the cancelled check.
0 votes
Scott Godzyk, Agent, Manchester, NH
Mon Mar 19, 2012
Not always cancelled but check but a letter where it came from and a copy of the account statement where the gift is being held is usally sufficient.
Web Reference:  http://www.ScottSellsNH.com
0 votes
The Cascade…, Agent, Issaquah, WA
Mon Mar 19, 2012
It will depend on the underwritter. Just ask your loan officer and they will find out for you.
0 votes
Tonya Brobeck, , Everett, WA
Mon Mar 19, 2012
Depending on the underwriting a gift letter and a copy of the check should be fine
0 votes
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