- September 22, 2006
- All Florida Offices and Agents
- Transactions in which "Gift Funds" are Used
Occasionally, a buyer will provide a "gift letter" stating the down payment was furnished outside of closing from a donor. For example, a young adult's parents may provide a down payment. This is perfectly legitimate provided the agent verifies the seller received the funds.
On the other hand, the lender may direct a third party to provide "gift funds" to assist the buyer. The third party will typically wire funds into the agent's escrow account. The third party will provide instructions to wire or overnight the funds back to the third party after the closing along with a sizeable service fee.
Although these returnable "gift funds" may arise in any transaction, they particularly occur in a mobile home purchase. They are not paid toward land acquisition costs, closing costs, or toward the mobile home price and set-up costs, but are added into the loan amount.
These "gift funds" may be a disguised lender's fee. Such a disguised fee may be in violation of the Truth in Lending Act or other consumer protection laws, and may constitute usury. Agents should avoid transactions in which "gift funds" are to be returned to the donor after the closing. Instead, it is the agent's responsibility to collect these funds and disburse them to the seller, or to verify that the funds were paid to the seller outside of the closing.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.