We posed this question some time ago to hmdahelp; they indicated the loan would be classified as a purchase if the borrowers changed from the prior note - internally it would be classified as a refi, but for HMDA purposes I would report it as a purchase. We are FED regulated, so pretty much have to go by what HMDAhelp gives us, given the response was from the Fed!
Here was the above response from 2011 - perhaps if you posed it now, the answer may be different from a different person there. We attach a copy of their email to each one of these cases to keep us out of hot water!
Since the borrowers are changing from loan to loan the second loan would actually be reported as a home purchase and not a refinance. If all of the borrowers on the initial loan remained borrowers on the subsequent loan then that would be reported as a refinancing OR if all the borrowers on the initial loan remained on the subsequent loan and new borrowers were added then that would also be reported as a refinancing.
I would try to think of it as the new person is buying into the loan and that is how it would become a home purchase.
Moman, did your property change hands at closing? That is most definitely a purchase. If the property is deeded to the new party prior to closing, it is fairly standard for it NOT to be reported as a purchase because the borrower getting the loan already owns the property. Sloppy bookkeeping by the parties involved, but ownership was already transferred preclosing.
If you reported a pre-closing transfer as a purchase at HMDAHelp's advice and got away with it, that is great for you but unusual.