Good Morning Everyone,

I am looking for guidance on the following situation:

We have a husband and wife customer who is getting divorced. The home loan was solely in her name. The woman abandoned the loan, along with the house. So the loan is delinquent, and we do a workout loan for the husband so he can stay in the house. Because it is either we finance the loan for him, or we will take possession of the property which is undesirable solution.

The APR spread on this loan surpasses 6.5% therefore this loan should be classified as HOEPA. However, the underwriter put notes on this indicating that they were not going to classify it as HOEPA or HPML because of it being a workout loan. So my first question is: What issues can arise from not classifying this loan as HOEPA.

Now, since this loan is not classified as HOEPA it is not showing up on the HMDA LAR as a HOEPA loan. So my next question in, should this loan be included on the HMDA LAR labeled as HOEPA?

Thank you for your guidance.

Sounds like an assumption to me if he is not on the current loan. How is this being accomplished?

We did an entirely new loan for the husband, which paid of the delinquent loan in his ex-wife's name. Different notes, and different loan numbers. The husband would not have qualified for the loan unless we did a balloon payment etc. But because of the risk he received a higher interest rate, which would have made it a HOEPA loan, base on the rate spread. However, the underwriters did not flag it as HOEPA.

Doesn't sound like a workout agreement under 1026.20(a)(4), as it is brand new borrower. Sounds like all of the Reg. Z requirements should have applied.

We did an entirely new loan for the husband, which paid of the delinquent loan in his ex-wife's name.

I agree with Randy. I see nothing in the information you have provided that would qualify this as a workout under Reg. Z's 1026.20.