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#2087119 - 07/08/16 12:06 PM
Loan Payoff HELOC/Money towards Investments
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Posts: 147
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I have a loan to payoff a HELOC and the majority of the funds will be used for investments purposes. Should it be reported as a refi or purchase since most of the funds will be used for that purpose.
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#2087121 - 07/08/16 12:20 PM
Re: Loan Payoff HELOC/Money towards Investments
Cat Lover
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So even if the 80% of the funds will go towards investments, you do not in this case reported as a purchase? I wanted to be sure that it was correct.
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#2087123 - 07/08/16 12:24 PM
Re: Loan Payoff HELOC/Money towards Investments
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TN
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What does 'investments' mean?
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#2087128 - 07/08/16 12:39 PM
Re: Loan Payoff HELOC/Money towards Investments
Cat Lover
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Invest in real estate opportunities.
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#2087139 - 07/08/16 01:02 PM
Re: Loan Payoff HELOC/Money towards Investments
Cat Lover
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#2087143 - 07/08/16 01:10 PM
Re: Loan Payoff HELOC/Money towards Investments
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In the past any cash-out transaction secured by a residential property and funds are to be used for investments, we reported as purchase and we use the collateral property for census information. We have never had to proof that there was a property out on the table, if it was secured by 1-4 we use residential, if it's multifamily we use for additional apt. opportunities and report it as a multifamily, on the other hand if we did not report it was considered a violation. On the other hand, if its only cash out reimbursement we don't report.
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#2087146 - 07/08/16 01:18 PM
Re: Loan Payoff HELOC/Money towards Investments
Cat Lover
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Bloomington, IN
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From the GIR:
Paragraph 4(a)(3). 1. Purpose—statement of applicant. An institution may rely on the oral or written statement of an applicant regarding the proposed use of loan proceeds. For example, a lender could use a check-box, or a purpose line, on a loan application to determine whether or not the applicant intends to use loan proceeds for home improvement purposes.
If we do a cash out refinance or a cash out equity loan and the borrower tells us they will be using the funds to purchase another residential property we will report it as a purchase.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#2087149 - 07/08/16 01:24 PM
Re: Loan Payoff HELOC/Money towards Investments
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Thank you Dan. Since 80% of the funds will be used for investments, should I report it as a purchase? They are terming out their HELOC with the other 20% of the funds.
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#2087164 - 07/08/16 01:58 PM
Re: Loan Payoff HELOC/Money towards Investments
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How the majority of the funds are going to be used is not a factor. See the definitions in 1003.2.
If any proceeds of a dwelling secured loan will be used to purchase another dwelling it is a home purchase by definition.
Page D-8 of the GIR allows you to rely on the purpose statement obtained from the borrower. In this case you are going to have to determine what "investments" mean. Are they other dwellings (residential properties) or are they business properties?
You will have to review the information provided in this thread and the known information for the loan request and the perceived intent of the borrower to make the call how you will handle this scenario.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#2087165 - 07/08/16 02:01 PM
Re: Loan Payoff HELOC/Money towards Investments
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Between the lines
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Now that you have defined investments as purchases of dwellings, you could report as Purchase. The loan is for the stated purpose of purchasing dwellings and it is secured by a dwelling.
As Kathleen said, some banks treat as Purchase, some as Refi.
I think the issue that was causing you to receive various answers was your use of the term "investments". In lending, this could be properties, investment instruments (mutual fund, etc.), buy-in to a business venture, etc.
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#2087170 - 07/08/16 02:27 PM
Re: Loan Payoff HELOC/Money towards Investments
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#2088094 - 07/14/16 07:43 PM
Re: Loan Payoff HELOC/Money towards Investments
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To piggy back off this, am I to understand that there is no time frame needed as to when the purchase to takes place? In my situation, we are paying off two existing loan plus adding funds for "future" purchases; no time frame is given for when these purchases may take place. He could essentially hold the money for the next 2 years before buying another property, and this would still be reported as a Purchase?
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#2088768 - 07/19/16 04:08 PM
Re: Loan Payoff HELOC/Money towards Investments
George
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I don't see anything in HMDA or the GIR that puts a time limit on when the purchase takes place. We currently have a loan secured by a dwelling where the business is lessors of residential buildings and dwellings, and the stated purpose is to purchase dwellings as they become available. In this case, however, it is either reportable as a purchase or not reportable since we are taking a dwelling as security but we are not paying off any existing loan. We are reporting this as a purchase based on the section that Dan quoted that says we can rely on the oral or written purpose as noted by the borrower.
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#2088806 - 07/19/16 06:19 PM
Re: Loan Payoff HELOC/Money towards Investments
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And it doesn't matter how much money the borrower received, correct? If he/she only netted $10,000 from the cash-out refi but intends to use for future purchase, then it is still purchase?
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