The Inflated Pre-Approval and the Convenient Gift Letter

He must decline and issue a letter only at the documented maximum of $475,000. A pre-approval is a credit representation that a seller relies on when accepting an offer and that a future underwriter relies on when the file is submitted. Writing $615,000 knowing the file supports $475,000 is a knowing misrepresentation that causes foreseeable harm: the buyers could lose earnest money, and the eventual lender and investor are misled about the loan's quality.

The referral promise is a second, independent problem. Accepting a stream of business in exchange for a document favoring the agent is giving something of value for referrals, which is a RESPA Section 8 issue, and it is also dishonest conduct under New York's originator conduct rules and Banking Law Section 597. Devon should give the correct figure in writing, explain the income and DTI basis, put the request and his refusal in the file, and tell Karen that any future referrals must be earned without accommodation. He should also disclose the request to his supervisor, because if the branch later receives Karen's buyers, the record matters. The 20-basis-point incentive is irrelevant to the analysis and is itself a reason to document that the pricing decision was made on the borrower's interest, not his own.

He cannot certify primary residence. A primary-residence loan rests on a bona fide intent to occupy within 60 days of closing and to continue occupying for at least a year; FHA and conventional guidelines carry essentially the same expectation. Devon now has direct knowledge from the buyer's agent that the property will be rented immediately while they remain in Manhattan. Signing a primary-residence certification on that record would be a knowing false statement, exposing the loan to put-back, exposing the institution to fraud claims under 18 U.S.C. Section 1014 and wire fraud statutes, and exposing Devon personally to license discipline under the SAFE Act and New York's conduct rules.

The correct path is to re-underwrite as an investment property: investment pricing and loan-level price adjustments, a maximum LTV typically around 85%, reserves based on the new payment, and rental income documented by an appraisal's market rent rather than the cousin's word. If the numbers no longer work, decline the file. 'They'll move in eventually' is not an intent to occupy, and a realtor's assurance never substitutes for the borrower's own signed statement. Document the conversation contemporaneously.

Both the deposit and the letter need the same answer: source it truthfully or exclude it. Large deposits - generally anything above 50% of qualifying monthly income - must be documented as to source and seasoned. Devon should request the last two statements for the transferring account, a signed explanation from the Hendersons, and, if it truly is a gift, a gift letter executed by the actual donor with the donor's capacity to give documented and evidence of the transfer.

Karen cannot write that letter. She is not the donor, she is not party to the funds, and preparing a document that recites a gift that may not exist is fabrication, not a shortcut. If the money came from an unsecured loan, it must be counted as a debt in the ratio; if it cannot be explained, it is removed from available funds and the file is re-run. Devon should refuse in writing, tell the buyers directly rather than through the agent, and escalate to his supervisor and the Bank Secrecy Act officer if the circumstances suggest fraud - a plausible trigger for a suspicious activity report. Note also the pull toward the higher rate that pays him more: the deposit issue must be resolved on documentable facts.