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#2197940 - 11/09/18 04:26 PM Purpose Help
Carolina Blue Offline
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Carolina Blue
Joined: Jul 2005
Posts: 960
Lost in a regulatory fog
I'm lost in the trees and need some help seeing the forest.

Our applicant has a 2016 loan which was to purchase raw land. The loan is from the seller and the tax card shows there is a recorded lien. After that applicant used cash and credit cards to build his residence. He now applied with us to payoff the seller lien, credit cards, and recoup the construction costs.

We denied the application so I don't have title work or a copy of the recorded seller deed. Should I assume it included improvements to the property so the private loan would have been dwelling secured and treat our application as a refinance? Or should I assume it was land only, and therefore our application was not a refinance? If so, then funds were only used to recoup costs, so I'd report as Other, right?

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#2197967 - 11/09/18 06:57 PM Re: Purpose Help Carolina Blue
Truffle Royale Offline

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Joined: Jul 2003
Posts: 17,395
It's definitely not a refinance because you're missing the dwelling prong on the original loan.

I'd be more inclined to treat this as the equivalent of the permanent takeout of a construction loan and call it a purchase.

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#2197969 - 11/09/18 07:04 PM Re: Purpose Help Carolina Blue
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
A refinance replaces an existing, dwelling-secured debt obligation by the same borrower.

Just because the dwelling was not there when the original loan was made does not mean that this debt obligation is not now dwelling secured.

Having a security instrument on land that does not include existing or future improvements is both unusual and problematic in the case of foreclosure.
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