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#2178026 - 05/14/18 07:18 PM Personal name to Corporate name - Refi?
Melissa S Offline
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Melissa S
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We have two individuals who personally borrowed funds to purchase residential rental investment properties through a financing company. They came to us to consolidate and refinance and decided to put the loan into a corporate name. The two individuals are the sole owners of the corporation.

Is this truly considered a refinance?

Thank you.
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#2178029 - 05/14/18 07:46 PM Re: Personal name to Corporate name - Refi? Melissa S
Skittles Online
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Is the title also changing to the corporation?
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#2178070 - 05/15/18 12:34 PM Re: Personal name to Corporate name - Refi? Melissa S
Melissa S Offline
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That's a very good question, and one I don't have an answer to. The loan was withdrawn by the borrower before it got to closing.

What are the "If/Then" scenarios?
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#2178072 - 05/15/18 12:44 PM Re: Personal name to Corporate name - Refi? Melissa S
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IMHO - if the title was changing then it would be a purchase (changing the owner of the property). If the title wasn't changing then I don't believe it would be HMDA reportable as the borrowers were changing.
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#2178073 - 05/15/18 12:45 PM Re: Personal name to Corporate name - Refi? Melissa S
Dan Persfull Offline
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No ownership change in the property or the ownership changed before the loan was made - not reportable. Does not meet the definition of a refinancing since the loan will be to different borrowers.


If the ownership changed from the individuals to the corporation as part of the loan transaction then it is a reportable purchase transaction for the corporation.
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#2178888 - 05/21/18 01:43 PM Re: Personal name to Corporate name - Refi? Dan Persfull
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If the ownership changed... would this still be HMDA reportable as a purchase when title is transferred from parent to child at closing and property is being used as collateral and loan proceeds are for another purpose? No loan funds will be given to the parent. Can you provide where in the regulations this can be supported?
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#2178889 - 05/21/18 01:52 PM Re: Personal name to Corporate name - Refi? Love those Regs
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Originally Posted By Love those Regs
If the ownership changed... would this still be HMDA reportable as a purchase when title is transferred from parent to child at closing and property is being used as collateral and loan proceeds are for another purpose? No loan funds will be given to the parent. Can you provide where in the regulations this can be supported?


Well, you threw in a whole different scenario. Dan was just pointing out that if the loan transaction actually facilitated a transfer of property, then it is a purchase transaction.
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#2178893 - 05/21/18 02:43 PM Re: Personal name to Corporate name - Refi? Melissa S
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This is a different poster with a different scenario.

Love those Regs, I'm not sure how you can not call it a purchase if title is changing at closing. That's a really odd set up, so hopefully someone else will chime in as my Monday brain hasn't had enough coffee yet.
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#2178897 - 05/21/18 02:53 PM Re: Personal name to Corporate name - Refi? Melissa S
raitchjay Online
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Doesn't sound like a purchase transaction to me....sounds like parent is gifting a child a house at the closing table, which the borrower (child) will then use as collateral for some other loan purpose.
Last edited by raitchjay; 05/21/18 02:56 PM.
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#2178911 - 05/21/18 03:53 PM Re: Personal name to Corporate name - Refi? Melissa S
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Yes, it does...but I'm not entirely sure how that's any different than changing from personal to corporation or vice versa deals.

If it were me, I'd have them QC the ownership prior to my loan closing.
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#2178912 - 05/21/18 03:55 PM Re: Personal name to Corporate name - Refi? Melissa S
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I agree with that.
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#2178917 - 05/21/18 04:13 PM Re: Personal name to Corporate name - Refi? Melissa S
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We don't know the circumstance of the home being signed over to new owners and simply because no money is being given directly to the parents does not necessarily mean they received no consideration for the property transfer. We also don't know the "other purpose".

Is the house truly being gifted or is part of the loan being used to pay off an existing loan secured by the home?

If any portion of the loan proceeds are paying off a loan secured by the home or is being used in some other way for the benefit of the parents then IMO that would be a purchase for the kids. They are paying off the loan or providing the other benefit in exchange for ownership of the home. If they are purchasing another dwelling it would also be a purchase transaction.

The answer to the question depends on the circumstances of the property transfer, which we don't know.
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#2178920 - 05/21/18 04:18 PM Re: Personal name to Corporate name - Refi? Melissa S
Dan Persfull Offline
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Yes, it does...but I'm not entirely sure how that's any different than changing from personal to corporation or vice versa deals.

In these scenarios the transferors are receiving consideration for transferring (selling) the property to the new owner. Generally it is the assumption of the existing debt owed against the property.
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#2178937 - 05/21/18 04:44 PM Re: Personal name to Corporate name - Refi? Melissa S
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I took "no loan funds will be given to the parent" to mean it was a gift situation....but only the OP can clarify what is actually going on.
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#2178960 - 05/21/18 05:49 PM Re: Personal name to Corporate name - Refi? Melissa S
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Parents own the house out right - no debt owed. It is currently a rental house and will continue to be after title is transferred. Son will pledge as collateral for our loan. Loan proceeds will be used to purchase another rental house but that property will not be identified by loan closing.
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#2178961 - 05/21/18 05:53 PM Re: Personal name to Corporate name - Refi? Melissa S
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Then it does indeed sound like a gift situation. Your HMDA purpose would still be 'purchase' though based on the intent to buy another rent home.
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