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We are refinancing a dwelling-secured loan with another dwelling-secured loan; however, the ‘borrower’ is changing from an individual to a LLC. The individual still is grantor of the property, and is not transferring the property to his business LLC. Would this still be considered a refinance?
Everything references ‘A refinancing is any dwelling-secured loan that replaces and satisfies another dwelling-secured loan to the same borrower’. In this case, it is not technically the same borrower, but same individual that has security interest in the property and is sole owner of the LLC.This would not be a refinancing since it is not made to the same borrower and it would not qualify as a purchase since the title of the property is not being transferred to the LLC so we do not believe this loan would be reportable.
There is no clarification of the “same borrower” in the current regulation or Commentary.The 1/1/18 rule clarifies the concept of “same borrower.” While not mentioning an entity as a borrower, the guidance states, “On the other hand, if only borrower A is obligated on obligation X, and only borrower B is obligated on obligation Y, then obligation Y is not a refinancing under§ 1003.2(p).” This seems to apply to your question as of 1/1/18. There is no current guidance that contradicts this.
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