Author Topic: The loan request.  (Read 3804 times)

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CharlieBraun

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The loan request.
« on: June 04, 2014, 10:14:58 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.
"We ate the pies."

wolfie

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Re: The loan request.
« Reply #1 on: June 04, 2014, 10:26:23 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.

TootsNYC

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Re: The loan request.
« Reply #2 on: June 04, 2014, 10:27:20 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."

purple

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Re: The loan request.
« Reply #3 on: June 04, 2014, 10:27:53 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".


bloo

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Re: The loan request.
« Reply #4 on: June 04, 2014, 10:35:19 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.
« Last Edit: June 04, 2014, 10:41:19 PM by bloo »

AmethystAnne

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Re: The loan request.
« Reply #5 on: June 04, 2014, 10:35:50 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.




aiki

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Re: The loan request.
« Reply #6 on: June 04, 2014, 10:41:13 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.
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cheyne

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Re: The loan request.
« Reply #7 on: June 04, 2014, 10:42:14 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. 

Psychopoesie

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Re: The loan request.
« Reply #8 on: June 04, 2014, 10:56:50 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?


Mergatroyd

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Re: The loan request.
« Reply #9 on: June 04, 2014, 10:58:36 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.

CharlieBraun

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Re: The loan request.
« Reply #10 on: June 04, 2014, 11:00:52 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."
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Psychopoesie

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Re: The loan request.
« Reply #11 on: June 04, 2014, 11:05:29 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.

doodlemor

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Re: The loan request.
« Reply #12 on: June 04, 2014, 11:10:01 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.


Sirius

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Re: The loan request.
« Reply #13 on: June 04, 2014, 11:21:17 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. 

jedikaiti

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Re: The loan request.
« Reply #14 on: June 04, 2014, 11:22:00 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".
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