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#1935570 - 06/25/14 07:33 PM Home Purchase
dac Offline
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An applicant and co applicant own their home free and clear of debt, and they offer it as security for a mortgage, the proceeds will be used to purchase a home for their daughter and husband. The loan will be paid off in three months when their daughter and husband obtain a mortgage. Is this HMDA reportable?

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#1935577 - 06/25/14 07:42 PM Re: Home Purchase dac
Truffle Royale Offline

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yes. It's a purchase.

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#1935634 - 06/25/14 11:09 PM Re: Home Purchase dac
Darth HMDA, CRCM, CAMS Offline
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I agree. This is a purchase as the collateral is an SFR and the use of proceeds will be to purchase an SFR.
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#1935726 - 06/26/14 02:56 PM Re: Home Purchase dac
JSD Offline
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Are they gifting the money to the daughter? If so we don't report those transaction because the money that is being given to the parents is not purchasing - just an other consumer purpose loan.

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#1935744 - 06/26/14 03:29 PM Re: Home Purchase dac
Truffle Royale Offline

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While I can see where JSD is coming from, and probably argue it with an examiner too, I think I'd stick with purchase on this.
You know what the money will be used for. Nowhere in the reg does it say that the borrower must be on title. It just says that the money will be used to purchase a dwelling.

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#1935748 - 06/26/14 03:36 PM Re: Home Purchase dac
raitchjay Online
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OK
But i would argue that what a non-borrower does with the money is irrelevant for HMDA purposes. What the borrower is doing with the money is giving it to someone else.....not buying a home. Even if you went the flip side on this, i would argue that the loan is temporary, since the plan is to pay off the loan with long-term financing.
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#1935756 - 06/26/14 03:42 PM Re: Home Purchase dac
RR Becca Offline
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out of the frying pan...
I agree with raitchjay on this one. Even if you know the daughter is going to buy a house, the immediate use of proceeds by mom & dad is "give $ to daughter."
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#1935777 - 06/26/14 04:24 PM Re: Home Purchase dac
Truffle Royale Offline

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Even if the money never actually goes to the daughter?
yea...I know. I'm splitting hairs.
I do like the temporary argument enough tho that I'll switch my stance to non-reportable.

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#1935796 - 06/26/14 04:53 PM Re: Home Purchase dac
Kathleen O. Blanchard Offline

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I agree re temporary. If it was not temporary, I don't think the original post gives us enough info to know if the borrowers are handing the $ to their daughter or are actually purchasing the home.
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#1936216 - 06/27/14 05:01 PM Re: Home Purchase Kathleen O. Blanchard
Frank Ernest Offline
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I don't see how this is temporary. If they are actually buying the house and not just giving them the money to buy it, then it is a purchase. The length of the loan does not make it temporary and it is being paid off by the borrower, not being refinanced by the borrower. I don't see this any different than a splash and dash where they buy the home and sell it to pay it off 6 months later.

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#1936520 - 06/27/14 11:41 PM Re: Home Purchase dac
Darth HMDA, CRCM, CAMS Offline
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I don't mean to disagree, I am just responding out of curiosity and to make sure I am reporting correctly.

I think you could make an argument to support either stance. I think in this case if the application stated that the purpose of the funds was to purchase another SFR, we would code it as a purchase. Even if they state it is temporary, they are still taking a mortgage out on their property for the purchase of a home. (purpose = home purchase, collateral = dweliing)

What if the daughter's funding falls through and the loan is not paid off for a couple of years? I agree with KB that we need more info to make a determination, but based on the limited information I think we would report this loan as a purchase.

We have business customers whose model is to take equity out of a home to purchase another SFR to rehab/flip them. They might stay on the books 6 months to 2 years but we code them as HMDA purchases as both properties are SFRs and the purpose is to purchase an SFR. We have been told by our regulators that these must be coded as purchases and reported under HMDA, even though the borrower pays the loan off within a short period of time.
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The opinions expressed are mine, do not represent the opinions of my employer, and they are not to be taken as legal advice.

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#1936522 - 06/28/14 12:15 AM Re: Home Purchase dac
Truffle Royale Offline

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In keeping with the 'not enough info from OP', if it's set up as a temp loan, ie: 90 days vs a 30 yr fixed, then I'm going to stick with raitchjay and Kaybee on non-reportable.
If it's a regular mortgage, I'll stick with my original purchase response.

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#1936635 - 06/30/14 04:04 PM Re: Home Purchase dac
Darth HMDA, CRCM, CAMS Offline
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Thanks Truffle!
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