Importance of Properly Representing Gifted Down Payments

Why Full Transparency Around Gifted Down Payments Matters:

1. Lender Risk Rating Depends on Accurate Disclosure
   Lenders assess the overall risk of every file. If they aren’t provided full and accurate information, they cannot make informed decisions. For example, in a recent case where a father took out a loan to gift his child a down payment, full disclosure might have led the lender to adjust the LTV, require the father on title, or apply other risk mitigants. By withholding this information, the broker removes the lender's ability to manage risk appropriately — which can be catastrophic.

2. Lenders Are Accountable to Investors
   Lenders must operate within strict investor guidelines. When a broker is not fully transparent, it puts the lender at risk of breaching those investor requirements — which could impact funding for future deals and damage long-term relationships.

3. Trust and Access to Exceptions Go Hand-in-Hand
   Lenders are our partners. Without their trust, our business suffers. Every time there is a misrepresentation, that trust erodes. As a result, future deals may be subject to greater scrutiny, delayed turnaround times, and fewer exceptions granted — even for honest brokers.

4. Misrepresentation = Fraud
   Let’s be clear: failing to disclose the full facts is a form of misrepresentation. When it's deliberate, it’s considered fraud. This can lead to broker termination, fines, reporting to regulators, and reputational damage that can follow you for years.

5. Regulators Are Watching
   Provincial regulators like FSRA, BCFSA, and RECA are increasingly focused on broker conduct. Misrepresentation of down payments — especially when third-party funds or undisclosed loans are involved — can lead to enforcement action, audits, and compliance flags.

6. You Risk the Client’s Deal Collapsing
   If the lender uncovers the true source of down payment late in the process — or post-funding — the deal can fall apart. Worse, the lender could call the loan or refuse future renewals, putting the client in financial distress.