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Reg Z and RE Contract Payoff purpose

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  • April 7, 2021 at 1:00 pm EDT #33767
    slmunson
    Participant

    Could you help me understand why the financing to payoff a real estate contract is considered a purchase?

    April 7, 2021 at 2:55 pm EDT #33768
    rcooper
    Member

    Can you provide a few more details so I can help you determine the purpose?

    April 7, 2021 at 3:10 pm EDT #33769
    slmunson
    Participant

    We have a customer who is paying off a contract for deed on a primary residence with a loan from our bank. From what I can tell and previous experience with auditors this is considered a purchase and not a refi. I have others at the
    Bank questioning why. I hope this information is helpful.

    April 7, 2021 at 3:24 pm EDT #33770
    rcooper
    Member

    If they are acquiring the property upon paying off the contract for deed (with the loan you’re making) then it would be a purchase.
    1026.37(a)(9)”(i) Purchase. If the credit is to finance the acquisition of the property identified in paragraph (a)(6) of this section, the creditor shall disclose that the loan is for a “Purchase.””

    If they have previously acquired the property (through the contract for deed/land contract) then it would be a refinance.

    Let us know if you have other questions.

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