[tressa]

Loan A is in the name of ABC Company and secured with a dwelling. The dwelling is owned ABC Company. Loan B is name of Joe Smith (owner of ABC Company)and secured with a dwelling and the proceeds are used to payoff Loan A. An Act of Donation was prepared and filed, which transfers the ownership of the dwelling from ABC Company to Joe Smith. Loan A and Loan B are not in the same borrower name so it does not meet the refinance definition when reporting Loan B.

There was no cash sale only the Act of Donation. Do you think Loan B should be reported as a home purchase or “other” loan purpose?

Topic

[jholzknecht]

We are not familiar with the concept of an “Act of Donation.” It appears that Joe Smith is assuming the debt of ABC Company. An assumption is reported as a purchase loan if there is a written agreement whereby your bank accepts Joe as the obligor on the loan to ABC. We suspect a close analysis will show that the transaction is not an assumption, therefore the loan is not a purchase loan. We agree with your analysis that the loan is not a refinance. There is no indication that the loan is for home improvement.

If the loan is not home purchase, home improvement or refinance, it is reported as “other.”

[lriddick@applecreekbank.com]

If we have a loan that the customer owns their primary residence free and clear of any liens and wishes to have cash out to purchase an investment property. It is not a refinance because we are not paying off another lien. Would you report this as a purchase or other purposes?

[Kimberly Boatwright, CAMS, CRCM]

Since the proceeds are being used to purchase investment property it would recorded as a purchase. Anytime proceeds will be used to purchase a new property it is to be recorded as a purchase.

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