[kmeade]

If a borrower applies for a loan to purchase a dwelling as their primary residence. The borrower ends up getting a personal loan to purchase the property before the contract expiration date. The borrower wants to continue with the original loan but now it is a Home Equity instead of a purchase. We will be paying off the unsecured loan and the fees are the same as disclosed on the original Loan Estimate. Would we need to redisclose just because the purpose changed or can we just change the purpose when the closing disclosure is issued?

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[rcooper]

This would be a change requested by the consumer so it would be changed circumstance. If there are no fees that you need to re-disclose you could still issue an informational LE reflecting the change in purpose or you could reflect it on the CD. Be sure your file is well documented showing why there was a change.

[kmeade]

Follow up question. In the situation above if the original application says purchase and a lender collected monitoring information would you need to update the application at closing to say home equity and remove the monitoring information? I didn’t know if monitoring information goes on the purpose at the time of application or at the time of closing.

[kowsley]

The monitoring information should be collected as part of the application process so if the application continues to be utilized even though the purpose has changed, I would not remove the monitoring information. I would document on the application or in the loan file the original purpose for the app. and why the monitoring information was collected. As long as the monitoring information is not utilized in a discriminatory manner and the file is well documented there should be no issues.

[Author]

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