Would the following scenario meet the definition of "consumer purpose" (i.e., subject to Reg Z) and be HMDA reportable as a "refinance"?

The borrower owns 4 rental properties. He is refinancing each of those properties and taking out cash which he then plans to combine to use to purchase his new primary residence. The new primary residence will not secure any of the 4 loans. So, the purpose of the refinances is "consumer purpose" to purchase his dwelling - but it does not meet the "purchase" test since the loan is not secured by the dwelling being purchased.

The majority of funds for each of the new loans is to refinance the existing loan - the cash out for the purchase is small (maybe 1/6th of the funds).

I'm not sure if we're on the right track as to being HMDA reportable as a refinance. Thank you!

We really need to know the purpose behind the loan (or is it loans) being refinanced.

But i don't understand this statement: "but it does not meet the 'purchase' test since the loan is not secured by the dwelling being purchased." That's not the case....a HMDA purchase loan is a loan to purchase a dwelling, secured by a dwelling......it never says it has to be the same dwelling.

I'm also curious...it sounds like you will be refinancing 4 loans...will you consolidate into one loan with cash out for the primary residence purchase? Or will there still be 4 loans?

Just re-read...it sounds like there will still be 4 loans....you have 4 different determinations to make, and you can't combine the total funds for all 4 loans for making your Reg. Z determination....each loan must be looked at individually to see if the majority of funds are business or consumer purpose. If each individual loan has the majority of funds tied to a business purpose, then it would be exempt from Reg. Z.....but again, we really need to know the purpose behind the original loans......being secured by a rent home doesn't automatically make it business purpose.

We already made 4 separate loans and did not combine them into one. Thank you for the clarification that a purchase loan does not have to be secured by the dwelling being purchased - I was off on that one! So, it would appear then that we have a consumer purchase purpose. The original loans on the 4 rental properties were to purchase the rental properties.

If the majority of funds for each loan are business purpose, then each loan sounds exempt from Reg. Z to me.

But you'd have 4 HMDA purchase loans.

Thank you. That's the part I was wondering about. The majority of each refinanced loan is refinancing the loan used to purchase the rental property (i.e., business purpose), so our refinance retains the business purpose since it is primarily for a business purpose (the cash-out is less than 50% going toward the consumer purpose of purchasing the new dwelling)? Therefore, not HMDA reportable then, right?

You're mixing regulations. You have a Reg. Z determination to make and a Reg. C (HMDA) determination to make for each loan.

If each loan is PRIMARILY for a business purpose (the majority of funds tie back to the original purchase of non-owner occupied rent homes), then each loan could be exempted from Reg. Z.

However, for HMDA, each loan has a HMDA purpose (actually, 2 HMDA purposes)....purchase and refinance. Since purchase trumps refinance in the HMDA hierarchy (it doesn't matter what part of the funds are going for a purchase and what part are going for a refinance), then if funds from each of the 4 loans are going to be used to purchase his primary residence, then each of the 4 loans is a HMDA PURCHASE.

Thanks again - just saw your edited comment above. I appreciate the quick response!!