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#2128895 - 05/02/17 11:52 PM ATR HPML - workout
Baker Offline
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Joined: Nov 2005
Posts: 773
Washington State
If we refinance a commercial loan where the primary dwelling was taken as collateral and increase the loan amount to consolidate other loans (as part of a workout with the client) where the interest rate is reduced from the original loan, is this loan considered a refinance subject to HPML Ability to Repay underwriting standards?

The old obligation was replaced by a new obligation. It also appears that some of the funds may have been used to pay off other institutions.

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Ability to Repay/Qualified Mortgage Rule
#2128898 - 05/03/17 11:02 AM Re: ATR HPML - workout Baker
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 77,591
Galveston, TX
"If we refinance a commercial loan"

I guess I am confused as to why you think Regulation Z applies to this loan?
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#2128992 - 05/03/17 05:41 PM Re: ATR HPML - workout Baker
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,464
Bloomington, IN
It also appears that some of the funds may have been used to pay off other institutions.

You will have to determine how the majority of the funds were used. Were the other FIs being paid consumer debt of business debt?

If the majority of the funds are for a business purposes the loan is exempt for Reg. Z. If the majority of the funds are used to satisfy consumer debt then you have a loan subject to Reg. Z.

PS. Since you advance new funds to pay other FIs, and if the purpose falls into the consumer category, you do not have a workout loan under 1026.20.

Paragraph 20(a)(4)

1. Workout agreements. A workout agreement is not a refinancing unless the annual percentage rate is increased or additional credit is advanced beyond amounts already accrued plus insurance premiums.
Last edited by Dan Persfull; 05/03/17 05:45 PM.
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