If a bank discovers a down payment loan, the borrower should first consult legal and financial advisors to ensure compliance with federal and state regulations. They must provide accurate documentation proving the loan's legitimacy, including proof of income, asset sources, and disclosure forms. The borrower should cooperate with the bank's review process, correct any inaccuracies promptly, and seek clarification if the bank's concerns remain unresolved. If the loan was obtained through a legitimate program like an FHA or VA loan, the borrower should highlight eligibility criteria met and submit supporting evidence.

Banks are required under the Equal Housing Opportunity Act and Consumer Financial Protection Bureau (CFPB) guidelines to verify loan terms and documentation. In 2022, the FDIC reported that 15% of mortgage applications involved documentation discrepancies, often leading to delayed approvals or denials. Proper handling of down payment loans mitigates legal risks, such as accusations of mortgage fraud or predatory lending. For example, the CFPB found that 30% of borrowers who faced loan denials due to documentation issues cited insufficient proof of down payment sources. Proactive transparency and adherence to regulatory standards reduce regulatory penalties and preserve creditworthiness. A 2023 Urban Institute study noted that borrowers who corrected documentation errors within 30 days had a 70% success rate in loan approval, compared to 25% for those who delayed action. Thus, timely, accurate responses to bank inquiries are critical to maintaining compliance and securing financing.