[Evelyn]

Can’t seem to locate a clear answer to this – I know that the “purchase” definition is “any loan secured by and made for the purpose
of purchasing a dwelling.”

Situation: Parents use their home as collateral to borrow money to purchase a home for a child. Loan meets the definition but the parents loan documentation is not RESPA disclosed (purchase or construction) because the proceeds are payable to the parents and gifted to the son 😕 . Is this still a HMDA reportable loan?

😕

[Anonymous]

I am not understanding this at all. Either that or I haven’t had enough caffiene…

So you did a refi-cash out on the parents home to purchase the son’s home? Or was the parents home paid off prior to? And you didn’t do RESPA or etc?

Depending on if you replaced a lien and if it’s temp financing is if I would report it to HMDA or not.

[Evelyn]

It was a cash-out refi; old mortgage satisfied and replaced. Not temporary financing.

So, I think you’re suggesting to treat it as a refinance rather than a purchase?

But if the parents had no prior mortgage, how would you treat it?

[Anonymous]

The HMDA definition of a refi is: (p. 29 Getting it Right)
Any dwelling secured loan that replaces and satisfies another dwelling secured loan to the same borrower. The purpose of the loan being refinanced is not relevant to determining whether the new loan is a refinancing for HMDA purposes. Nor is the borrowers intended use of any additional cash borrowed relevant to determining whether the loan is a refinancing, though the borrowers intended use of the funds could make the transaction a home improvement loan or a home purchase loan.

Therefore, from what you’ve mentioned already, I’d classify this loan as a refinance and on the LAR I’d call it a purchase.

IF the parents did not have a previous mortgage you could consider this to be, in essence an Equity loan. Usually these are not reportable to HMDA, depending on what the proceeds were used for.

Hope this helps! 😀

[jholzknecht]

The HMDA GIR also states that when a loan is both for home purchase and refinance, the loan should be reported as a purchase loan.

[Author]

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