We have a loan that is secured by a dwelling that was owned free and clear that was used to pay off a purchase of a second home via owner-financing. The second home purchase has a promissory note and was secured by a purchase money mortgage. The owner financing term was 3 months.

I've been asked if we should consider the owner financing as temporary financing, so that the new loan would be reported as a purchase - much like the permanent financing of a bridge loan. I'm not sure we should make that assumption, and it is clear that the change in ownership was made with that original transaction.

Would we report this as a refinancing - since both loans are secured by a dwelling and is to the same borrowers? This is what I think we should probably report it as but I was hoping for some feedback.

Thanks in advance.

I'm assuming "Owner financing" = a land contract. If so, they are not a bank and that transaction is not considered for HMDA.

This isn't verbatim, but our plain English version of the Commentary to §1003.2(d) #2:
A dwelling secured loan or line to pay off a land contract cannot be a refinance and must be reported as a home purchase loan.

This is a little wiggle room in this, but in 99.9% of the cases you should report this as a purchase and not a refinance.

Agree. This is my own go to:

Citations for Land Contracts and non consumer to consumer TRIDS
Home Equity for TRID/Z leasehold rules, but Purchase for HMDA due to rules in 1003.2(d)#2: Under § 1003.2(d), a dwelling-secured loan is not a closed-end mortgage loan unless it involves an extension of credit. Thus, some transactions completed pursuant to installment sales contracts, such as some land contracts, are not closed-end mortgage loans because no credit is extended. For example, if a land contract provides that, upon default, the contract terminates, all previous payments will be treated as rent, and the borrower is under no obligation to make further payments, the transaction is not a closed end mortgage loan.

1026.20(a) Refinancings. A refinancing occurs when an existing obligation that was subject to this subpart is satisfied and replaced by a new obligation undertaken by the same consumer. [at least one common consumer]

I have a slightly different situation, but trying to decide if this loan should be reportable as a refinancing or not reportable.

Borrower owns subject NOO SFR free and clear. Cashout is provided to borrower who states he is using the funds to pay off a loan that was used to purchase a different NOO SFR that is secured by a lien on that second property.

So my loan is cashout on a free and clear property to payoff a lien on a different property, owned by the same borrower. I'm not sure if not reportable - since technically I think we are satisfying but not replacing a lien, since he'll own the second property free and clear afterward? Or should I interpret this more narrowly, as reportable since we're taking a lien on one property and satisfying a lien on another?

It's not about satisfying and replacing a LIEN...it's about satisfying and replacing a LOAN. From what you are describing, it sounds like a reportable refinance to me. But i'm a bit confused about you talking about what the borrower "states". If this loan happened, or is going to happen, don't you know if you're paying off another lender (and your bank would be directly paying off that other lender)?

We are making our borrower a loan secured by a dwelling, and providing him the loan proceeds which he states he will use to pay off a loan secured by a different dwelling. We are not directly paying off the other lender (the borrower is a well qualified real estate investor, he qualifies with the other loan payment, so not an underwriting concern.)

Does that make a difference if we're not directly paying off the other loan? I'm thinking language in the commentary about "relying on the borrowers statements" would allow us to call it a refinance (if indeed the different properties doesn't matter.)

You have a reportable refinancing.

(p) Refinancing means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.

Paragraph 4(a)(3)
1. Purpose—statement of applicant. A financial institution may rely on the oral or written statement of an applicant regarding the proposed use of covered loan proceeds. For example, a lender could use a check-box or a purpose line on a loan application to determine whether the applicant intends to use covered loan proceeds for home improvement purposes. If an applicant provides no statement as to the proposed use of covered loan proceeds and the covered loan is not a home purchase loan, cash-out refinancing, or refinancing, a financial institution reports the covered loan as for a purpose other than home purchase, home improvement, refinancing, or cash-out refinancing for purposes of §1003.4(a)(3).

Thank you Dan, I agree.

So do i.