Consumer Law, Warranties Repayment of a "gift"

[2giving]

Over a year ago I loaned my "brother in law" $4015 for the closing costs of a house he was purchasing. We had a clear verbal agreement that he would pay me back, tho no spacific time frame was arranged. The realty company told us that he wouldn't be able to get financing on the house if he was shown oweing me money, so they had us sign a gift letter. However, both before and after the signing of that letter it was agreed that he was expected to pay me back. I don't have any audio recordings or anything, but everyone was aware of the agreement, so I do have witnesses. Some time after that he flat out told me he doesn't have to pay me back, giving me the impression he is not going to. I have been wanting to know what chance I have to be repayed if he doesn't willingly do it.

 

[jharris352]

None. You have two choices here. You can agree that you defrauded a federal lender by claiming what you gave him was a gift when it was actually a loan. OR You can abide by the gift letter that you signed and he doesn't have to pay you back.

You simply can't FOOL the lender by saying it is a gift but *wink wink* have a side deal with him to actually make it as a loan. That's fraud. No judge is going to make him pay you when you claimed to a federal lender that it was a gift.

Now I know it happens all the time. Morally he SHOULD pay you back because he agreed to, but you have ZERO chance of making him pay you back.

 

[2giving]

In that case, what would be the consequences of defrauding the lender? Also, wouldn't we both have consequences since we technicaly both defrauded the lender?

 

[jharris352]

Well, let's see. You made a material misrepresentation to a federally insured lender to induce them to lend money. That would be mortgage fraud and it generally carries 10-20 years in prison if they really come after you for it. No, he didn't commit mortgage fraud. His story is that what you did was a gift. You are the one trying to say that you only SAID it was a gift and now it is a loan. So only you made a false statement to the lender.

Let me be clear, I'm not against you. I think what he did is wrong. He should pay you back the money. I don't think the lender is ever going to come after you for mortgage fraud, though you did make false statements to induce them to loan him money. HOWEVER, no Judge is going to overlook what you said in writing and override that by what you did on the side in secret. It just doesn't work that way. You GAVE him the money in writing. Now you want to call it a loan. I know you were lying when you did the gift letter, but apparently so was he when he said he would pay you back. The difference is that you did it in writing and the judge is going to hold you to it.

Sorry man, you have no recourse.

 

[2giving]

Well really, he borrowed the money and wanted to call it a gift in order for him to get the loan on the house, which was actualy the realty companies idea i belive. What I was thinking, was that it wasnt my mortgage, or my house, he wanted me to lie for him to get those things. None of this was at all my idea, and before and durring the signing I had said I didn't like the fact that we were signing it, and he assured me that he was going to pay me back. So in reality, though i realise reality and the law are not the same thing, he was the one who lied in order to get a loan on a house, not just one loan, but two, one from me and one from the lender. It is a well known fact that he was supposed to pay me back, there might even be a text to call or something somewhere that shows that, but maily i have an entire family of witnesses, even the realter i would imagine knew about that. I might actualy call them and see what they have to say. In any case, I find it hard to belive that since he was the one to get the loan, and the one who initiated the whole "fraud" procedure, that he would not be held responsible at all.(keep in mind im not the only one whos signature is on this letter)

Also, somewhat unrelated, suppose I were to plead guilty to fraud or whatever I were to do to show that me and him had agreed that he was to pay me back, wouldn't that then void the gift letter, making it so that it was no longer a gift? If it was no longer considered a gift, wouldnt I have better chances of being paid back?

I also just had a thought, i belive i was only seventeen when I signed the gift letter, would that have any weight in the matter, such as not being old enough to legitmatly sign a contract.

 

[jharris352]

You really don't get it do you? YOU signed the gift letter that you now say is a lie. You have ZERO means of proving that there was a loan that would overcome the WRITTEN DOCUMENT YOU SIGNED. The fact that you are 18 and were 17 explains your attitude toward this whole thing, but it does nothing to make him liable for a note that you said in writing doesn't exist. You didn't sign a contract, you signed a letter that said it was a gift.

Like I said, he should pay you back, but if he doesn't you are screwed.

You had $4,000 as a 17 year old to give/loan your brother in law? That's interesting.

I'm sorry you got beat out of your money, but the next time you sign a statement, make sure it is a true statement because you will be held to it.

 

[2giving]

Well, not that it really matters, but I had that money because I had a good job and spent my whole life saving money for when I was older, but instead spent it on him because he promised to pay it back. It was actualy all but like a hundred from my bank account. That aside, i do get it obviously or I would not be here asking people who know more about the law then I do. There are thousands of laws out there, some of which might apply here, I really don't think you know enough about the situation to know whether or not there is evidence for or against me. I dont expect a reply, considering the rudeness of your last one, which was totally un called for by the way. Thanks anyways for your response.

 

[jharris352]

Not trying to be rude, but it just seems pretty clear to me. I want you to know I don't think he is doing the right thing. I wasn't asked if I thought he was right or wrong. You asked me if you could sue him and recover. The answer to that is no. I owned a mortgage company for 15 years so this isn't the first time I've seen this problem.

I wasn't trying to be derogatory when I mentioned that you were only 17. It was just a curious question. I'm sure you are very upset about being screwed out of your money.

The only thing I have to say is that you can't represent in writing that something is a gift and then sue him over it as a loan.

I'm not against you, it just is what it is.

 

[eric_m]

Hey jharris352. The information above is quite useful. I'm dealing with a similar situation on behalf of my girlfriend. She was pressured into purchasing a condo for about $40K above market value. The seller of the condo was her boyfriend at the time, who had been trying to unload the condo on the market without luck for about a year. She didn't have money for a downpayment, so he "gifted" her $48K for the 20% down. There was a gift letter signed. She gave him the proceeds from the $8K tax credit, and she's been paying off the $40K balance at $750 per month over 5 years at 5%.

Immediately following the closing, he has his attorney draw up a promissory note for the $48K loan. It contains language stating that it supersedes the gift letter. it also states that if he has to sue her or use collection agencies, etc, she would be responsible for the legal costs.

About 30 days after closing, he broke off their relationship. She's continued to pay him for 13 months, but is now close to defaulting on all of her debt due to loss of income. The current balance on the loan to him is $33K.

The question is this: If she simply stops paying him, is there a chance he could win a judgement that forced her to repay him? My initial thought is that the judge would see very clearly that they both knowingly signed the gift letter, thus defrauding the bank. (she was naive to this point at the time, as she did not have her own attorney or a real estate agent representing her interests, but I think that's outside of the scope here).

Do you think he would have any legal means to collect the remaining $33K?