Is that worded to include home-improvement and debt-consolidation loans in government monitoring, or to exclude them? I read it as home-improvement and debt-consolidation loans are not to be monitored.
Correct. Yo should not collect GMI on HI and HE loans.
Is that worded to include home-improvement and debt-consolidation loans in government monitoring, or to exclude them? I read it as home-improvement and debt-consolidation loans are not to be monitored.
This is tricky and I wouldn't get hung up on the primary use. Assume the following:
I buy a house in 2000 for 100,000.
In 2005, my payoff balance is 70,000. I refinance it & also take out 30,000 in equity. Now the loan is 7/10th refinance and 3/10th HE. If you go with a strict read of 1002.13, you are to only collect GMI when the loan is primarily to purchase Collect GMI. This is 70% reinforce, so collect GMI.
In 2010, my payoff balance is 80,000. I refinance it and take out 40,000 in equity (the market value has gone up). Some would say my loan is. 7/10 x 8/12th refinance and 3/10th x 4/12th HE. Is that still primarily a refinance? Some would say you ignore the previous loans and go with the fact that you are refinancing 8/12th, so it's still primarily a refinancing. Either way, collect GMI.
In 2015 . . . do you see where this can get confusing?
I go with the idea that anytime you are refinancing any previous debt, it's a refinancing and you should collect GMI. I do think that if you had a loan where the existing debt was <50% of the new loan, you could argue that it's more HI or HE and you shouldn't collect GMI. I don't see examiners get that picky.