Evolving Trends in EB-5 Adjudication: Source of Funds Issues - EB5Investors.com

Evolving Trends in EB-5 Adjudication: Source of Funds Issues

Lauren A Tetenbaum

In order to make an “at risk” investment that qualifies for an EB-5 visa, the investor must make a cash equity investment into a new commercial enterprise. In exchange for that cash equity contribution, the investor may become a member of a Limited Liability Company, or a limited partner in a Limited Partnership, depending on the EB-5 project. Each investor must then prove the exact source of his or her cash equity investment. One way that an EB-5 investor may leverage his or her assets to make the cash equity investment is to take out a loan secured by his or her assets. While a mortgage loan against a property is presently one of the most common sources of funds for EB-5 petitioners, USCIS generally denies I-526 petitions using a loan not fully secured by the investor’s own property as the source of funds.

The latest trend in adjudication relates to the mortgage-issuing bank’s authorization to use the mortgage loan proceeds for immigration purposes. Specifically, USCIS has made it clear it will assess whether the loan proceeds have been used pursuant to the stated purpose of the loan contract. Under 8 CFR §204.6, the investor must demonstrate that he or she has invested capital (i.e. cash, equipment, other tangible property, etc.) secured by assets owned by the petitioner. Such capital must be obtained lawfully. To prove the legality of the source of funds, each EB-5 petition must include relevant documentation identifying the source of capital, such as foreign business registration records, corporate and/or personal tax returns, or evidence in connection with the mortgage loan.

Mortgage loan contracts typically specify the purpose of the loan pursuant to the agreement with the borrower. USCIS may send a notice of intent to deny or request further evidence if the contract’s stated purpose of the loan does not cover the use of the proceeds for personal reasons or, in particular, personal investment or overseas’ immigration. Before filing, petitioners should consult with experienced EB-5 attorneys to ensure they have the documentation needed to accompany their I-526 petition to avoid any mortgage loan purpose issues.

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