I think I understand the HMDA definition of a refi rather well. However, I keep getting challenged when the two following scenarios arrise:

1) Refinance of a loan for an inherited property: The loan being replaced and satisfied is in the name of a deceased family member of our customer. Since the same borrower is not taking out a new loan on the dwelling, this scenario does not appear to meet the HMDA definition of a refi, (or purchase for that matter). Is that correct?

2) Property owned free and clear: A cash-out mortgage on a dwelling owned free and clear is not replacing an existing lien on the dwelling. In this scenario, the purpose of the new loan does not meet the definition of a refi, correct?

Assuming neither of the above scenarios is a refi or purchase, and therefore neither is HMDA reportable, I am curious to hear what loan purpose options are typically used to cover the above situations. Does anyone use an ‘other’ option for the loan purpose?

Thanks in advance,

sd

2) is an equity loan and without a HMDA purpose is not HMDA reportable. (If any part of the proceeds are used for purchase or home improvement, it would be HMDA reportable.)

No experience with 1), but if i were faced with it, my instinct would be to deal with it as a HMDA reportable transaction, since in my mind the person who inherited the property is sort of the original borrower in absentia. Just my opinion. (The GIR states the loan must be to the same borrower--you might be safer in not reporting for HMDA; i wonder if that was really the intent behind the rule.)

1. The person has acquired ownership of the property through the settlement of the estate and in order to get clear title must satisfy any and all liens against the property. Refinancing the loan in the deceased person's name is satisfying a lien for them to get clear title but as you surmised it does not meet the definition of a refinancing for HMDA reporting purposes.

2. As Jay states this is simply a cash out equity loan. If none of the proceeds will be used for a home purchase or home improvement then it also does not meet any of the reportable definitions for HMDA.


We never use "other". The loan officer must state what the funds are being used for such as debt consolidation, new car, vacation, etc.

We occasionally have a situation where a surviving spouse refinances a loan originated prior to the death of his/her spouse and on which both were borrowers. Is it reasonable to consider this type of transaction does not qualify for HMDA reporting as a refinance because the new loan is not being made to both original borrowers?

The word borrower in the definition is singular not plural.

If any of the original borrowers remain on the new loan then you have a reportable refinancing.

Thanks Dan.