SECTION 3: BORROWER'S CASH INVESTMENT IN THE PROPERTY

 C.        Gift Funds.  An outright gift of the cash investment is acceptable if the donor is the borrower’s relative, the borrower's employer or labor union, a charitable organization, a governmental agency or public entity that has a program to provide homeownership assistance to low- and moderate-income families or first-time homebuyers, or a close friend with a clearly defined and documented interest in the borrower.  The gift donor may not be a person or entity with an interest in the sale of the property, such as the seller, real estate agent or broker, builder, or any entity associated with them.  Gifts from these sources are considered inducements to purchase and must be subtracted from the sales price.  No repayment of the gift may be expected or implied.  (As a rule, we are not concerned with how the donor obtains the gift funds provided they are not derived in any manner from a party to the sales transaction.  Donors may borrow gift funds from any other acceptable source provided the mortgage borrowers are not obligors to any note to secure money borrowed to give the gift.)  This rule also applies to properties of which the seller is a government agency selling foreclosed properties, such as the Veterans Administration or Rural Housing Services.  Only family members may provide equity credit as a gift on a property being sold to other family members.  These restrictions on gifts and equity credit may be waived by the jurisdictional HOC provided that the seller is contributing to or operating an acceptable affordable housing program.