Etiquette Hell

General Etiquette => Life...in general => Topic started by: CharlieBraun on June 04, 2014, 09:14:58 PM

Title: The loan request.
Post by: CharlieBraun on June 04, 2014, 09:14:58 PM
E-hellions...my DH said I should talk to this group of level-headed folks.

About 3 months ago, a friend asked me for a loan of $5K as part of a down payment for a house.  She made it clear that it was a loan, that she expected to pay it back, and that it was all acceptable under the specific loan program she was participating in.  While we did not say "yes," I left it as open.

We'd occassionally exchange FB messages about the topic, the loan program, the house, and the fact that she wasn't really sure that she'd need the money.

Two days ago, she sent me an excited FB message that the offer was accepted, the loan approved, and "just send the check to me because closing is on the 16th.  Or wire it."

I sent back a couple of queries - how was the mortgage broker handling this, what documentation would be required to affirm that it is a loan.  She wasn't exactly forthcoming but said "If you send the check I'll deposit in my account then give it to my mom, then she will write me a check for it for closing."

I looked into the loan program that she said she was participating in, and it's pretty clear that if money comes from me to her, I have to sign a "gift letter" that says exactly that - it's a gift, I never am going to get paid back, happy house, etc. etc.  I said I wanted to talk to her and her mortgage broker, and she didn't get back to me until later today, saying that she had been busy and could we talk tomorrow.

I responded that, after looking at the loan program, that any money I give her is considered a gift and not a personal loan and that our verbal agreement was that this was a loan to her.  She replied that yes, for purposes of getting the real estate loan, it was considered a gift but that she personally was going to treat it as a loan and was going to pay it back.

OK.  Thanks for staying with me.

Look, there is no way I can do this.  First of all, and not to get into legal territory, but it sounds like mortgage fraud to me.  Second of all, it went from being a personal loan to a "gift" with a wink-wink & that would be completely unenforcable as a personal loan plus, you know, dishonest and all.

The only POSSIBLE suggestion I can come it with is that I loan the money to her mother and her mother gifts it to her - but why I am I trying to find a solution to this?

I need...I need the language for this painful call tomorrow.  I know full well if I don't give her the money, the deal is gone, no house for her. 

"Debbie, our understanding all along was that this is a personal loan and not a gift.  You are asking me to sign a legally binding document that says it's a gift.  That's a pretty big change.  We can't do this."

What do you think?  Questions, comments, corrections, word-smithing?

Thanks in advance from both of us.
Title: Re: The loan request.
Post by: wolfie on June 04, 2014, 09:26:23 PM
I had a friend who was in the same situation - only it was her fiancee at the time (now husband) who was going to get the "gift". Basically they were buying a house together but she was pulling her money from the house she currently owned and he was getting a mortgage on his half. The documents stated that the money was a gift - which she didn't like because she paid half and if things didn't work out then she wanted it back. Her lawyer said that was the way it was, and they signed a document with the lawyer saying that half of the house was hers. I am not a lawyer so I don't know the nuances about exactly what happened there but she did take steps to ensure that she wasn't just giving away that kind of money.
Title: Re: The loan request.
Post by: TootsNYC on June 04, 2014, 09:27:20 PM
I like it.

Maybe add, "I can't take that risk. Legally, financially, and in terms of our friendship."

Add, "I'm really sorry. If I'd had all these details earlier, I'd have been able to be definite earlier."
Title: Re: The loan request.
Post by: purple on June 04, 2014, 09:27:53 PM
I think your wording is pretty good.  I might make this one little change, to be absolutely clear that the money is not forthcoming.

"Debbie, our understanding all along was that this is a personal loan and not a gift.  You are asking me to sign a legally binding document that says it's a gift.  I'm afraid that it will not be possible for us to loan or give you the $5000".

Title: Re: The loan request.
Post by: bloo on June 04, 2014, 09:35:19 PM
...and the fact that she wasn't really sure that she'd need the money.

then she does this:
Two days ago, she sent me an excited FB message that the offer was accepted, the loan approved, and "just send the check to me because closing is on the 16th.  Or wire it."

She skipped a step. And if banks won't allow people to skip steps when borrowing money then friends and family shouldn't either. I would already have a sense of disquiet just from that. She's not taking a very business-like approach to something so important and something what will have an impact on your relationship going forward.

"Debbie, our understanding all along was that this is a personal loan and not a gift.  You are asking me to sign a legally binding document that says it's a gift.  That's a pretty big change.  We can't do this."

Your wording is good! My only advice is to be...firm. Absolutely no equivocating when you let her know you cannot loan the money in these circumstances. I might say, "We won't do this," instead of "we can't".

I think being firm is important because this will be a big letdown and when the smoke clears she needs to understand that it's her handling of the situation that is responsible for the outcome, not yours.

ETA: posted too soon.
Title: Re: The loan request.
Post by: AmethystAnne on June 04, 2014, 09:35:50 PM
$5000 is a lot of money.

There is no way that I would feel comfortable handing over that amount of money to a friend, not even to my children, even with written documentation. And then that little piece of paper she wanted you to sign? No way, no how.

I like what you said:

"Debbie, our understanding all along was that this is a personal loan and not a gift.  You are asking me to sign a legally binding document that says it's a gift.  That's a pretty big change.  We can't do this."


She will be upset no matter how gently you try to explain your "no". I am so sorry.



Title: Re: The loan request.
Post by: aiki on June 04, 2014, 09:41:13 PM
Banks and similar financial institutions are far better placed to take a risk on a marginal borrower than almost any private individual, and they do take those risks. They expect and budget for a certain amount of defaulting, they have insurance, and they have the legal framework and resourcing to attempt to recover the funds if they have to.

If an acquaintance is unable to get a loan from a bank, that's a really good sign that you shouldn't be lending to them either. Don't lend this friend any more than you can afford to lose.
Title: Re: The loan request.
Post by: cheyne on June 04, 2014, 09:42:14 PM
I think you should go with purple's wording to make it clear that the $5000. isn't on the table anymore.

Why would she need to deposit the check in her account then give it to her mother to give to her?  That part makes no sense to me.

This friendship may be over either way.  If you give the money and don't get paid back you'll end it.  If you don't give the money she may be very angry and end it.  I am sorry you are in this position. 
Title: Re: The loan request.
Post by: Psychopoesie on June 04, 2014, 09:56:50 PM
I like what you said too, OP.

Also agree she's going to be upset any way you phrase it. And that's ok. OP has a lot more to be upset about.

It sounds like she deliberately misled OP about the circumstances of the loan. It wasn't until she was confronted that she admitted that it was expected to be a gift for the purposes of her mortgage. She now wants OP to lie for her, in ways that could bite the OP more than her. Also OP was doing her a big favour and she seems to have no appreciation of that, based on the info provided. That's not behaviour that would encourage me to want to loan her the money at all now, even if she signed a contract. Words like bait and switch come to mind. Red flags.

Agree with PPs who say to make it clear that the whole thing is off.

OP, do you still want to go through with the loan?

Title: Re: The loan request.
Post by: Mergatroyd on June 04, 2014, 09:58:36 PM
I think you should go with purple's wording to make it clear that the $5000. isn't on the table anymore.

Why would she need to deposit the check in her account then give it to her mother to give to her?  That part makes no sense to me.

This friendship may be over either way.  If you give the money and don't get paid back you'll end it.  If you don't give the money she may be very angry and end it.  I am sorry you are in this position.

My understanding is that the OP would send the money to friend (aka, the loan) which friend would then slide under the table to mama, so that she could put a bow on it and hand it back  (aka the 'gift'). Mama would sign the paper saying it was a gift.

OP, unless you can get it signed up as a loan of 5000$ and entirely unrelated to the purchase of the house, I think you are doing the right thing by hanging onto your money. This sounds very shady.
Title: Re: The loan request.
Post by: CharlieBraun on June 04, 2014, 10:00:52 PM

OP, do you still want to go through with the loan?


No - we don't (DH and I are the "we".)  It seems very - I think the word is "fraught."
Title: Re: The loan request.
Post by: Psychopoesie on June 04, 2014, 10:05:29 PM

OP, do you still want to go through with the loan?


No - we don't (DH and I are the "we".)  It seems very - I think the word is "fraught."

Thanks for clarifying. Fraught is spot on.

Good luck with this.
Title: Re: The loan request.
Post by: doodlemor on June 04, 2014, 10:10:01 PM
I like what you said too, OP.

Also agree she's going to be upset any way you phrase it. And that's ok. OP has a lot more to be upset about.

It sounds like she deliberately misled OP about the circumstances of the loan. It wasn't until she was confronted that she admitted that it was expected to be a gift for the purposes of her mortgage. She now wants OP to lie for her, in ways that could bite the OP more than her. Also OP was doing her a big favour and she seems to have no appreciation of that, based on the info provided. That's not behaviour that would encourage me to want to loan her the money at all now, even if she signed a contract. Words like bait and switch come to mind. Red flags.

Agree with PPs who say to make it clear that the whole thing is off.

OP, do you still want to go through with the loan?

I think that Psychopoesie put this very well.  I'm so glad that you are not going to loan this person any money.

This person is not your friend, and is likely not someone that you will want for a friend if you truly know her.  Her dealings with you about this were slippery and duplicitous. She has tried to manipulate you into a position in which you will be embarrassed to say No.  Say it anyway.

I think that your wording was fine.  Don't jade, just tell her that she didn't fully disclose the details of her plan in a timely manner, and that you won't be doing this.  Don't let her argue - you know that she will be unhappy - end the call as soon as possible.

Title: Re: The loan request.
Post by: Sirius on June 04, 2014, 10:21:17 PM
The people in this thread have given a lot of good advice that I can't improve on. 

I will say this, though:  We bought our house 18 months ago, and because we needed earnest money very quickly I borrowed it from an estate account, fully intending to pay it back as soon as the weekend was over.  Come to find out we shouldn't have done that, because it caused an issue with where we got some of our money, as the estate account wasn't included in our income.  The mortgage broker about had a fit when she found out; we had to write a letter about what we did to the mortgage company, who instructed us to repay the money and fax a copy of the receipt to our mortgage broker.  We did this, and the mortgage broker told us (very nicely) not to do that again. 
Title: Re: The loan request.
Post by: jedikaiti on June 04, 2014, 10:22:00 PM
I think your wording is pretty good.  I might make this one little change, to be absolutely clear that the money is not forthcoming.

"Debbie, our understanding all along was that this is a personal loan and not a gift.  You are asking me to sign a legally binding document that says it's a gift.  That puts me in the very bad position of lying on a legally binding document, and that is just not something I am able to do. I'm afraid that it will not be possible for us to loan or give you the $5000".
Title: Re: The loan request.
Post by: guihong on June 04, 2014, 10:25:39 PM
Friendships break up on Judge Judy every single day over just such a convoluted sceme as this.  I second (third?) Purple's wording.  I think that's a pretty nervy request to ask a friend.
Title: Re: The loan request.
Post by: jedikaiti on June 04, 2014, 10:26:30 PM
I think you should go with purple's wording to make it clear that the $5000. isn't on the table anymore.

Why would she need to deposit the check in her account then give it to her mother to give to her?  That part makes no sense to me.

This friendship may be over either way.  If you give the money and don't get paid back you'll end it.  If you don't give the money she may be very angry and end it.  I am sorry you are in this position.

That is a very good question. When I was getting a mortgage at the end of last year, I had to hand over bank statements and account for any significant amount, which this would certainly be!
Title: Re: The loan request.
Post by: LifeOnPluto on June 04, 2014, 10:30:45 PM
I too, think your wording is fine.

I suspect your friend will try to argue "Oh, but it doesn't matter what the document says! I still intend to pay it back to you."

In which case, I'd tell her straight out "I'm not comfortable with an informal agreement. I'd hate for something to go wrong, and for you to get in trouble OR for our friendship to end."

She might also try to guilt trip you. "Oh, this means I won't get to buy the house! You've spoilt my plans/dreams/whatever." But stay strong. She was wrong for not giving you all the facts upfront.


It sounds like she deliberately misled OP about the circumstances of the loan. It wasn't until she was confronted that she admitted that it was expected to be a gift for the purposes of her mortgage. She now wants OP to lie for her, in ways that could bite the OP more than her. Also OP was doing her a big favour and she seems to have no appreciation of that, based on the info provided. That's not behaviour that would encourage me to want to loan her the money at all now, even if she signed a contract. Words like bait and switch come to mind. Red flags.


I completely agree with this. I'd be pulling back from this "friendship", frankly.
Title: Re: The loan request.
Post by: Kaypeep on June 04, 2014, 10:33:00 PM
This isn't a lot of money in the scheme of buying a house, I'd be wary that she needs to borrow it from a friend and can't just take a loan from her 401K/retirement plan or something like that.  Add in the fact that all legal documentation would list it as a gift.  Nope, not kosher.  She did a poor job communicating how this would go down, and as a result, you know see it's not possible.  If this transaction is make or break based on your $5K then perhaps she shouldn't be buying this house.
Title: Re: The loan request.
Post by: doodlemor on June 04, 2014, 10:41:31 PM
This isn't a lot of money in the scheme of buying a house, I'd be wary that she needs to borrow it from a friend and can't just take a loan from her 401K/retirement plan or something like that.  Add in the fact that all legal documentation would list it as a gift.  Nope, not kosher.  She did a poor job communicating how this would go down, and as a result, you know see it's not possible.  If this transaction is make or break based on your $5K then perhaps she shouldn't be buying this house.

Yup to all of this, too.  If she is solvent, she should be able to get the 5k from somewhere else.
Title: Re: The loan request.
Post by: sammycat on June 04, 2014, 10:44:36 PM
The way I see it, the friendship is very likely to end anyway. Either now/sooner because the friend is upset that the money isn't forthcoming, or later because it isn't repaid (if it had been leant). I'm.not saying the friend is deliberately setting out not to repay OP, but sometimes things happen, and repaying a friend can get pushed to the bottom of the list.

If I'm going to lose a friend anyway, I'd rather not lose my money as well, which is why I'm glad to see that OP has decided against the loan, for the reasons previous posters have stated.
Title: Re: The loan request.
Post by: Amara on June 04, 2014, 10:45:11 PM
I think your friendship is dead regardless of your decision. But I also think the only right decision for you, that you two made already, is to decline. Firmly. Quickly. No JADEing. It'll at least make the pain end faster than if you try to justify your decision or "make it easer" for her to hear.
Title: Re: The loan request.
Post by: CharlieBraun on June 04, 2014, 10:46:48 PM
Thank you very kindly, everyone.  I will update you tomorrow.  We are on vacation right now with the doggy and are getting up early to head to the beach and watch the sunrise, drink coffee and eat breakfast sandwiches and watch the waves, spend some time wading, then returning to the house to make the call.

I've very appreciative of everyone who offered their insight.
Title: Re: The loan request.
Post by: JenJay on June 04, 2014, 11:07:36 PM
There's no way she can deposit $5k into her checking account and then somehow get it to her mom without the bank seeing that she got/spent that money. The only thing I can think of is that she intentionally waited until the last minute to get the money so that the most recent bank statements won't show the transaction yet by the time she closes, or, it's going to be "Oops, can you make that out to my mom? I guess you can't give it to me after all." Hinky.

When DH and I bought our first home his dad did gift us some cash toward closings and the banks still wanted to see not only our statements but FIL's too. I guess they were worried we'd obtained the money via a loan or credit card, slipped it to FIL, then had FIL slip it back. Which is exactly what your friend is proposing. These two women are trying to outsmart the bank and it's not going to work. I wouldn't want to be anywhere near this.

She must have assumed you were planning to send $5k on her honor and not get anything in writing. I really like your wording. I would probably add something like "My offer was for a loan, legally binding  and including a repayment plan. I'm afraid I cannot sign documents stating I am gifting you $5k." She intentionally "misunderstood" your offer because she assumed when it came down to it you'd feel bad and give her the money anyway. If she loses this deal it's 100% her own fault and she needs to be held accountable for what she's trying to do, which is manipulate both you and the mortgage industry.
Title: Re: The loan request.
Post by: shhh its me on June 04, 2014, 11:09:04 PM
I think you should go with purple's wording to make it clear that the $5000. isn't on the table anymore.

Why would she need to deposit the check in her account then give it to her mother to give to her?  That part makes no sense to me.

This friendship may be over either way.  If you give the money and don't get paid back you'll end it.  If you don't give the money she may be very angry and end it.  I am sorry you are in this position.

That is a very good question. When I was getting a mortgage at the end of last year, I had to hand over bank statements and account for any significant amount, which this would certainly be!

What I think.....

Friends mom will be doing the "gifting" on paper.  Friend may or may not use her bank account maybe she'll decide to deposit it in her moms account.  IF the $5,000 goes in and out and is not counted as assists it may not make a difference to the lender.

Why the lender wants it to be a gift and not a loan....

1) most importantly a loan toward any portion of down payment may create a "lender with claim on the home"   
2) they want the borrower to actually have a downpayment.  AS it looks like they are willing to take the gift from her mom this is a non issue ethically IMHO
3) the loan repayment will not be counted in her income to payment ratio.  It depends on the payment reschedule how much this will effect the ratio so it may be a big issue or not an issue at all. 

lenders don't tend to mind "wink wink" loans from mom as long as mom is willing to officially assign it as a gift.  Mom has no , zero nadda legal redress if the loan goes unpaid.  The lender doesnt care if you pay mom back or stiff her.  Lenders normally check the accounts of the gifter too , to make sure they have the money to give and that they didn't borrow it.  **People who lend money can in general try to take back what you bought with borrowed funds for a short amount of time, even credit cards or personal loans even if you file bankruptcy. Its not easy its not normally worth pursuing but the theory applies.  I don't mean this as legal advise just explaining the lenders position**  Lenders don't like gifts from friends , they don't have plausible dependability  to claim "we did not know it was a loan" IF you're a billionaire you can give someone $20,000 for a down payment but the don't buy "Mrs Smith who earns $60,000 a year gave her pal Sue $5,000 no strings attached" . Charities can give gifts as down payments , you can use lottery winnings, you can sell your baseball card collection etc , you just can't borrow it from an unapproved source. 

I wouldn't like my friend being caggy about telling me what they were planing.  I would be very concerned about the payment schedule, houses always have unexpected expenses.  $5,000 is a lot of money , how long will it take her to pay you back ?  is that set?  $100 would take more then 4 years if she plans on paying it faster then why does she need the loan( this is based on the common occurrence  that buying a home increases a person minimum monthly expenses if she plans on paying you $250 a month and her bills with be $250-500 a month more , why didn't she save up the $5,000)
Title: Re: The loan request.
Post by: GrammarNerd on June 04, 2014, 11:30:36 PM
"I've always intended for this to be a loan, because we just can't afford to give away $5000.  And with a loan, it needs to be treated like a true loan, with an amortization schedule for repayment, and with the appropriate legal paperwork in case something would happen to you before we are repaid.  Without proper paperwork, we can't proceed.  I thought I was very clear about the status of the loan when we were talking about it before.  I'm sorry if this throws a wrench in things for you."

One other thing that I've heard people suggest (if it makes it easier when you're talking to her) is to put the blame on the fictional professional adviser.  "My accountant has advised me to always get everything clearly documented.  So no, I can't proceed with the loan unless the loan and repayment plan is in writing."
Title: Re: The loan request.
Post by: cicero on June 04, 2014, 11:46:07 PM

I responded that, after looking at the loan program, that any money I give her is considered a gift and not a personal loan and that our verbal agreement was that this was a loan to her.  She replied that yes, for purposes of getting the real estate loan, it was considered a gift but that she personally was going to treat it as a loan and was going to pay it back.
<snip>


"Debbie, our understanding all along was that this is a personal loan and not a gift.  You are asking me to sign a legally binding document that says it's a gift.  That's a pretty big change.  We can't do this."

I think your wording is fine.

her response to you is exactly what small claims courts cases are based on. Whatever signed document you have (in this case - the one indicating that this is a gift) will supersede whatever verbal agreement you have.

Title: Re: The loan request.
Post by: Lindee on June 04, 2014, 11:51:59 PM
I couldn't help noticing that you hadn't actually agreed definitely to the loan, but had left the offer open and you were still discussing whether it would even be needed and then it skipped a step and became send the money right now and take part in legal shenanigans.  I'm with everyone else, No "loan".
Title: Re: The loan request.
Post by: cass2591 on June 05, 2014, 12:34:37 AM
Locked for the obvious reason. Good luck.