In this book we ask and answer the question, Can wedding gifts be used for either conventional or FHA mortgages? What are the guidelines and how do we document the funds?
Also, why should I care? How can we use wedding gift registries to market for new first-time home buyers?
How knowing and marketing wedding down payment registries will get you more clients. How marketing down payment gift registries gives you a differentiated offering. How to use this knowledge to get more real estate agent referral sources. Here is the list of key subjects:
What do you get when you cross a mortgage sales person and a computer geek, software programmer?
...hint... you get someone unique focused on solving problems for mortgage lenders and borrowers.
Loren is the co-founder of downpayment.gift, the downpayment registry application that helps mortgage loan officers close more purchase loans while providing them a unique service to offer clients and real estate agents. Loren was a Loan Officer and Branch Manager in Santa Rosa, CA, from Oct 2008 through 2017.
He loved the marketing and deal making of mortgage lending so today he’s focused on using technology to make the process easier for loan officers and borrowers. He holds a BS Engineering '95 from University of Illinois in Computer Science and tons of tech and startup experience over the years.
FHA put out guidelines in the late 90's explaining how to use wedding gifts for a house down payment with an FHA loan.
These guidelines saw little use after the 2008-2009 financial crisis except as a talking point.
The new 4000.1 HUD handbook is completely silent on wedding gifts so technically the old mortgage letters may still work, but your internal underwriters would like clearer guidelines since the 4000.1 on gift funds conflicts.
We also note that HOC underwriters have said it is allowed and the FHA website lists the '97 ML as Inactive.
The original guidance on wedding gifts was written in two mortgagee letters back in 1996 and 1997 (see links below and appendix). The FHA intended for the accounts either to be created and administered by a supervised FDIC/NCUSIF institutions, or for a correspondent/broker to work with a insured depository banks to create and administer accounts.
What actually happened before the financial crisis is that lenders just told borrowers to open an account somewhere and deposit all their wedding gifts in it, and it could be used as down payment. FHA was not actively auditing lenders much back then.1
Today, if we call the local HOC (FHA Home Ownership Center) and speak with underwriting, they say that bridal/wedding gifts are allowed but it’s up to the lender to determine if the documentation meets the requirements for gift funds. Vague-city.
Many lenders have just stopped allowing the bridal registry type accounts as allowable gift funds unless the gift is fully documented per FHA 4000.1 guidelines, which isn’t practical for a bunch of small $50-$100 gifts. 1
• FHA - ML97-20 – Homeownership Bridal Registry Accounts (dated 5-16-1997)
• FHA - ML96-56 – Homeownership Bridal Registry Accounts (dated 10-2-1996)
1mortgagecurrentcy.com Question & Answer Issue – February 25, 2019
To further add to the confusion, the "reference" on mortgagee letters superseded by 4000.1 omits the '97 mortgagee letter. However, the list of Inactive mortgagee letters references the '97 but not the '96. **next page**
Freddie Mac became the clear choice for wedding down payments
Freddie Mac Freddie specifically allows wedding gift funds and does not limit eligible donors to family members.
Wedding gifts only require the following:
• Copy of marriage license
• Verification of gift funds deposit within 60 days of the date of marriage
Freddie Mac Seller Guide 5501.3
Revised and expanded borrower asset qualification requirements, based on Seller inquiry and feedback, to better align with current industry practices by: Adding wedding gifts as an acceptable source of funds subject to certain eligibility and documentation requirements.
Freddie Mac quietly added wedding gifts to it's asset docs in 2017.
It was announced in late 2016 but LP docs were updated in March 2017.
Effective for Mortgages with Settlement Dates on and after July 6, 2017
Lending guidelines for wedding gifts are best ever!
Opportunity to promote and help more couples is growing and untapped.
First to REBATE credit card transaction fees
Freddie Mac has the most borrower friendly guidelines for wedding gift funds.
FHA guidelines need to be revised to clarify wedding gift funds. However, if a borrower does not qualify for conventional via Freddie Mac or they need a FHA specific feature, FHA is still an option by educating the borrower to season the wedding gift funds 60-90 days post event.
Lenders can reach engaged couples easily and in a compliant manner using online platforms like Facebook, Google, and Youtube.
Lenders can benefit from establishing relationships with potential buyers early in the process. In our experience, even if the couple decides not to move forward with a down payment registry or if the registry does not meet the funding goal, the lender can still assist them with a home purchase using although tools.
Lender can benefit from offering down payment registries by using this unique offering to help prospect for real estate agent relationships. Agents love the idea of helping friends and family members buy their first home.
Lender Partner Program and Rebates
downpayment.gift's program is the first online down payment registry to be offered through mortgage lenders. The registry is completely free to couples and donors/guests and we are the first to rebate transaction fees back to the couple at closing of a home purchase using a closing cost credit. The rebate is an industry first, enormously popular with couples, and boosts conversion of lead to closed loan. *
* limitations apply, see Terms of Service downpayment.gift/terms