Question for attorney about legality of financing

[Benjamin Lemieux]

Goodmorning Biggerpockets,

*Note* I intend on consulting my actual attorney this week, but until I hear back my anxiety needs an answer.

Basically I'm questioning if what I am doing is legal. It was the loan officers suggestion. A partner and I are under contract on a triplex. Splitting the funding roughly 50/50. He can't be on the mortgage due to the fact he hasn't had a solid income for 2 years. Very lucrative job but non the less not 2 years. (Partner was backpacking Asia prior for quite some time lol)

I am able to get approved based off my income by myself, but I only have about 40K liquidity I'd like to put toward this deal, so that I have an okay cash cushion in case of emergency in my life. (If I include my retirement I technically have enough to do it, but don't want to create a taxable event.)  Our loan officer suggested putting me on my partners bank accounts so we are joint co owners. We have done this. Got it notarized. I am joint co owner on this account.  We are not "inflating" what my assets look like just to get approved. These are funds we would actually use for part of the down payment. We could also keep me on this account and use it as the main bank account for the 3 family we are buying. Also this partner would be on the deed of the house as well. Not sure if that matters, but just trying to give a clear and concise view of what we are attempting to do. 

If anyone has any insight on whether or not this would be some sort of mortgage fraud I would appreciate it.

[Terri Wyzkoski]

Quote from @Benjamin Lemieux:

Goodmorning Biggerpockets,

*Note* I intend on consulting my actual attorney this week, but until I hear back my anxiety needs an answer.

Basically I'm questioning if what I am doing is legal. It was the loan officers suggestion. A partner and I are under contract on a triplex. Splitting the funding roughly 50/50. He can't be on the mortgage due to the fact he hasn't had a solid income for 2 years. Very lucrative job but non the less not 2 years. (Partner was backpacking Asia prior for quite some time lol)

I am able to get approved based off my income by myself, but I only have about 40K liquidity I'd like to put toward this deal, so that I have an okay cash cushion in case of emergency in my life. (If I include my retirement I technically have enough to do it, but don't want to create a taxable event.)  Our loan officer suggested putting me on my partners bank accounts so we are joint co owners. We have done this. Got it notarized. I am joint co owner on this account.  We are not "inflating" what my assets look like just to get approved. These are funds we would actually use for part of the down payment. We could also keep me on this account and use it as the main bank account for the 3 family we are buying. Also this partner would be on the deed of the house as well. Not sure if that matters, but just trying to give a clear and concise view of what we are attempting to do. 

If anyone has any insight on whether or not this would be some sort of mortgage fraud I would appreciate it.

I've been a lender for 29 years, now CRE broker. The lender has provided a creative approach to provide you with adequate liquidity, ensuring your partner has skin in the game, since he's on the DOT, but not on the mortgage.

There’s nothing wrong or illegal going on here.  However, as a Lender and if I were you as his partner, I’d expect him to be obligated on the mortgage, or at least as a guarantor.  Even if he brings no financial strength to the table, he should be on the hook.  At this point, he enjoys all the benefits, and none of the financial responsibility.

At the very least, you should have an Operating Agreement or side agreement evidencing his obligation for half the financial responsibility.