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QUESTION:

Did the U.S. Department of Housing and Urban Development (“HUD”) recently clarify its requirements in relation to Documenting the Transfer of Gift Funds?

ANSWER:

Yes, as part of the revised HUD Handbook 4000.1 (the “Handbook”), issued March 27, 2019, HUD clarified its requirements for verifying and documenting the transfer of gifts from a donor to a Borrower. 

Specifically, the Handbook now indicates in relevant part:

• If the gift funds have been verified in the Borrower’s account, obtain the donor’s bank statement showing the withdrawal and evidence of the deposit into the Borrower’s account.
• If the gift funds are not verified in the Borrower’s account, obtain the certified check, money order, cashier’s check, wire transfer, or other official check evidencing payment to the Borrower or settlement agent, and the donor’sbank statement evidencing sufficient funds for the amount of the gift (pg. 230).

Regardless of when gift funds are made available to a Borrower or settlement agent, the mortgagee must be able to make a reasonable determination that the gift funds were not provided by an unacceptable source.

Italicized language above indicates revisions made to the Handbook.