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#2124628 - 03/31/17 05:49 PM Refi or Purchase
Snowgirl Offline
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We have a loan for investment property. The purpose states to refinance a private short-term RE contract & cash-out for renovations that he already completed (paying himself back) on two four-plexes to be used as rental property that he originally purchased in July 2016 (on private contract). The funds are being disbursed to the Title Company and a portion of the funds are paying off the private contract and the remaining funds are going back to the borrower. The Deed was still in the name of the original owners, so with this transaction the deed will now be in the name of our borrower.

Also would this be considered 1-4 family property or multi-family property?

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#2124631 - 03/31/17 05:59 PM Re: Refi or Purchase Snowgirl
Truffle Royale Offline

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Under today's rules, this is 1-4.

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#2124632 - 03/31/17 06:02 PM Re: Refi or Purchase Snowgirl
Truffle Royale Offline

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As for refi/purchase, was the private contract in your borrower's name? Is so, I'd say refi.

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#2124633 - 03/31/17 06:05 PM Re: Refi or Purchase Snowgirl
Snowgirl Offline
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It was a private contract between him and the original owners.

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#2124634 - 03/31/17 06:11 PM Re: Refi or Purchase Snowgirl
George Offline
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What are the terms of the contract? If he was making payments to them while completing the renovations, then I would say refi. If it states that he is going to make the renovations and then secure financing (or purchase straight out) after they were complete, then I'd say purchase.

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#2124635 - 03/31/17 06:14 PM Re: Refi or Purchase Snowgirl
Truffle Royale Offline

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The terms of the contract don't matter.
For HMDA a refinancing is any dwelling-secured loan that replaces and satisfies another dwelling-secured loan to the same borrower.
This is a refinance of two 1-4 family dwellings.

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#2124636 - 03/31/17 06:16 PM Re: Refi or Purchase Snowgirl
Snowgirl Offline
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We don't have any information on the terms of the contract. What we know about the contract is that it was a short-term balloon pay.

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#2124649 - 03/31/17 06:52 PM Re: Refi or Purchase Snowgirl
RR Joker Offline
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TR, does it not matter that title never transferred with the original transaction?
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#2124653 - 03/31/17 06:58 PM Re: Refi or Purchase Snowgirl
David Dickinson Offline
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Central City, NE
Technically, the terms of the contact do matter.
Under today's rules, most institutions call this a purchase if the title hasn't transferred yet (when the borrower gets the "purchase" loan from the bank). If the title has transferred, most call it a "refinance".

Under the new rules, the contact terms are even more important. Commentary to §1003.2(d) #2 states:
. . .some transactions completed pursuant to installment sales contracts, such as some land contracts, are not closed-end mortgage loans because no credit is extended. For example, if a land contract provides that, upon default, the contract terminates, all previous payments will be treated as rent, and the borrower is under no obligation to make further payments, the transaction is not a closed-end mortgage loan.

There are more details in the section by section analysis, but in short, a dwelling secured loan or line to pay off a land contract will be reported as a purchase in 2018.
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#2124656 - 03/31/17 07:15 PM Re: Refi or Purchase David Dickinson
Snowgirl Offline
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Thanks David. we will go with purchase!

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#2124721 - 04/02/17 01:13 AM Re: Refi or Purchase Snowgirl
Truffle Royale Offline

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Quote:
TR, does it not matter that title never transferred with the original transaction?
yup. sorry. missed that in the original post.

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#2124739 - 04/03/17 01:41 PM Re: Refi or Purchase Snowgirl
RR Joker Offline
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The Swamp
smile
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