[amberb]

We have a commercial loan with the purpose of refinancing 9 investment property loans secured by a dwelling. All of the loans that will be satisfied & replaced have a common borrower with the exception of one. Is this transaction not considered a refinance under HMDA because 1 of the 9 loans do not have a common borrower? Or can it be treated as a refinance since 8 of the 9 loans have a common borrower?

Topic

[jholzknecht]

The term refinance means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.
* A closed-end mortgage loan or an open-end line of credit that satisfies and replaces one or more existing debt obligations is not a refinancing under § 1003.2(p) unless the existing debt obligation (or obligations) also was secured by a dwelling.
* Section 1003.2(p) provides that a closed-end mortgage loan or an open-end line of credit is not a refinancing unless the same borrower undertakes both the existing and the new obligation(s). Under § 1003.2(p), the “same borrower” undertakes both the existing and the new obligation(s) even if only one borrower is the same on both obligations. For example, assume that an existing closed-end mortgage loan (obligation X) is satisfied and replaced by a new closed-end mortgage loan (obligation Y). If borrowers A and B both are obligated on obligation X, and only borrower B is obligated on obligation Y, then obligation Y is a refinancing under § 1003.2(p), assuming the other requirements of § 1003.2(p) are met, because borrower B is obligated on both transactions. 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).

If the borrower on the new note is the borrower on all of the old notes, then the new transaction is a refinancing. If one old note has a borrower other the borrower on the new note, then it appears the transaction is not a refinancing.

[pparks]

While it is clear if all these properties will be involved in separate loans specific to themselves, are you saying this will be 1 transaction involving and collateralized by all 9 properties together? If the latter, are you saying they are refinancing 8 properties and purchasing 1? If so, and this is a multi-purposed transaction, 1-Purchase is higher on the pecking order than 31/32-Refinance. My answer can’t be 100% definitive as the facts are 100% clear. I hope this helps.

[amberb]

Yes, this would’ve been 1 transaction involving and collateralized by all 9 properties together. This was actually a withdrawn loan file. Each of these properties had different ownership. Some had two of the co-borrowers or just one co-borrower. One was in the name of the actual business. One property is in a name that did not have a common borrower. However, it is my understanding that the ownership of all properties would’ve been moved into the business name only prior to close of the loan if we had followed through with it. So I’m having a really hard time determining if this is actually a purchase if ownership would’ve already been transferred prior to closing of the loan. Or if this loan would even qualify for HMDA.

[jholzknecht]

You have a covered HMDA transaction if you have open-end or closed-end loan secured by a dwelling, unless an exemption applies. It appears your loan is secured by a dwelling. None of the exemptions in Section 1003.3(c) obviously applies to the transaction. There is an exclusion for loans made for business or commercial purpose, however a loan made for a business or commercial purpose is covered if it for home purchase or refinance. Although the details are a bit fuzzy, it appears that you loans is either purchase or refinance, which would make it HMDA reportable.

[Author]

Replies