business taking out a cash out on equity on an investment property and will use the funds to payoff a loan secured by an investment property at another bank. Would this be a reportable transaction?

From your description this appears to be a refinance and reportable. It sounds like you are replacing one dwelling secured loan with another dwelling secured loan.

the loan is a cash out of free and clear property and funds will payoff a mortgage at another bank. Since the property is free and clear, we are not payoff a mortgage on the property we are taken as collateral. the customer plans to use the money to payoff a loan at another bank, however we are not taking a mortgage on that particular property.

Official Interpretation
2(p) Refinancing
1. General. Section 1003.2(p) defines a refinancing as 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. Except as described in comment 2(p)-2, whether a refinancing has occurred is determined by reference to whether, based on the parties' contract and applicable law, the original debt obligation has been satisfied or replaced by a new debt obligation. Whether the original lien is satisfied is irrelevant. For example:

i. A new closed-end mortgage loan that satisfies and replaces one or more existing closed-end mortgage loans is a refinancing under § 1003.2(p).


This is the definition of refinancing under Regulation C. It does not have to be the same property that is being refinanced.

Skittles is correct - the definition of a refi does not require the property being satisfied and replaced to be the same as the one used for the new loan. What does need to happen is that the prior loan needs to be satisfied and replaced (paid off and done with) and both loans need to be to the same borrower (same entity). If either of this isn't the case, it wouldn't meet the definition of a refi, and would be other - except that other purpose loans are not reportable for business purpose loans like this.

Thank you

How about a brother and sister inheriting a home? He needs to buy her out. No mortgage is being replaced, therefore, there is no refinance. Do I use Other? Or, how about a couple going through a divorce in which the wife was granted the home, but she has to pay off her ex-husband. We are not paying off a mortgage so would I choose Other on this one as well? Thanking you in advance ~

I would report those situations as "other" since there isn't a refinance and since the person getting the loan has prior ownership (assuming this is the case in both of your scenarios). We have debated this topic before and some are in the camp to call this a purchase, but I am not and can explain my position more if needed.

no existing mortgage on either of those situations? What we usually see here is a mortgage in both the parties names and one is buying out the other while refinancing the existing into a loan in their name only. That would be a refinance because (one of) the borrowers remains the borrower.

I agree Truffle, but if there isn't an existing lien to be satisfied and replaced, it would have to be "other" purpose.

Agreed, Adam. I'm just incredulous that there's no existing, especially on the divorce situation. We get maybe one a year max with no existing.

Thank you.