We have a loan on which we have taken the borrowers' primary residence, as well as their second home, as collateral. Now, the borrowers are refinancing the loan, but we are structuring the transaction in two loans. The loans will close on the same day, but one will not disburse until after the rescission period expires. The proceeds of the loan that is not subject to rescission will be applied to the existing loan and the lien on the second home will be released. The lien on the primary residence will remain until the rescission period expires. Would both loans be reported as refinances? I'm thinking they would, but, although the lien on the second home is being satisfied and replaced by another lien on the home, the original loan has not been fully paid off, it's been paid down. Once the rescission period expires, the existing loan will be completely paid off (unless the borrowers rescind, of course).

I hope that's clear and I will appreciate any thoughts on this. Maybe I'm making it more complicated than it is.

Bump

Can anyone help with this?

This sounds like no new money was advanced. If that's correct there would be no ROR.

If both loans disbursed simultaneously and paid off the existing loan I would report both loans as refinancings. There was a recent discussion on this issue. If you search on refinancing using my user-name you should find it.

Your scenario is a little different. You are disbursing the one loan separately and paying down the existing loan, then 4 days later you are disbursing the second loan and paying off the existing loan. Although my tendency is to report both loans, in this scenario I would only report the second loan because you have two distinct payments to the existing account on separate days.

Thanks, Dan. I do realize that they didn't need ROR, but they gave it, so I need to make sure our HMDA reporting is accurate based on how we handled the transaction. I just want to make sure that I understand. You would not report the first loan as a refi even though we released the lien on the customers' second home with the paydown of the first loan and then we took a new lien on the second home with the second loan. I guess my confusion is with what is considered "satisfying" one obligation and replacing it with another. I can see it both ways (reporting or not reporting).

Thanks for your help.

Releasing your lien does not satisfy the obligation. The obligation is the note. Therefore in how you handled the transaction the first payment simply paid down the obligation. It did not satisfy or replace it.

Deena...in rereading this I want to be sure I understand what I think I understand.

The loan was secured by both the second home and the primary residence, therefore when the loan was paid down with the first loan and the lien on the second home was released the loan was still secured by the primary residence.

If that understanding is correct then I stand by my previous responses. However, if once you released the lien on the second home the loan was no longer dwelling secured then your second loan would not be reportable either because the obligation it satisfied was no longer dwelling secured.

You understand it correctly, Dan - and now, so do I. We will only report the second loan as a refi. Thanks for your help.