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When you package a loan with a grant from a nonprofit, the underwriter requires a gift letter. This is the only documentation the underwriter needs. Most lenders allow grants providing underwriting guidelines are followed, and the 501(c)(3) tax-exempt status from the IRS is included with the loan. If the underwriter requests a copy, download it here: Acrobat - Word. |
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If your underwriter says that nonprofit organizations must be approved by FHA to provide gift funds, refer them to HUD Mortgagee Letter 00-8, dated March 3, 2000, signed by William C. Apgar, Assistant Secretary for Housing-Federal Housing Commissioner. Page 5 of the letter states: "There has been widespread confusion regarding the Department's role in approving down payment assistance programs in the form of gifts. FHA does not approve down payment assistance programs in the form of gifts administered by charitable organizations. Mortgage lenders are responsible for assuring that the gift to the homebuyer from the charitable organization meets the instructions described in HUD Handbook 4155.1, REV-4, Change 1 (e.g. no repayment implied etc.). Thus, while FHA will issue approval letters to nonprofit agencies for their participation as mortgagors, providers of secondary financing, and as purchasers of HUD homes at a discount, such letter are not to be construed as approval of the nonprofit agency's down payment assistance gift programs. FHA will not issue approval letters for down payment assistance gift programs." |
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Your underwriter will need the Federal Tax Identification Number to be entered into the CHUMS computer system. Failure to do this will result in the loan not being insured by FHA. |
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Newsong is a tax-exempt 501(c)(3) nonprofit organization with program-specific approval from the Internal Revenue Service. The grant is a gift to the buyers to be used for their down payment and/or closing costs. Gifts from nonprofit organizations are allowed per FHA guidelines. The Federal Tax Identification Number for Newsong is 73-1518616. |
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