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#2247208 - 01/05/21 07:19 PM Refinance or HELOC
Nicole Offline
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Hello, we have a loan where we previous lent the borrower $XX for a loan to remodel a home as a line of credit. There borrower now come back asking for additional funds, do we disclose this as a Refinance (paying off current balance) or a Home Equity LOC for LE and CD product purposes?

Thanks in advance!

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TRID - TILA/RESPA Integrated Disclosures Rule
#2247209 - 01/05/21 07:22 PM Re: Refinance or HELOC Nicole
raitchjay Offline
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Depends.....are you paying off the original loan or not? I see where you say "paying off current balance" but i can't tell if that's a statement of fact or part of your question.
Last edited by raitchjay; 01/05/21 07:23 PM.
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#2247211 - 01/05/21 07:26 PM Re: Refinance or HELOC Nicole
raitchjay Offline
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(And of course, i'm going off the assumption that your security for the new loan is the same piece of land as the 1st loan...presumably, the home being remodeled.)
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#2247212 - 01/05/21 07:27 PM Re: Refinance or HELOC Nicole
Nicole Offline
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yes we are rolling in the current balance with the new loan and yes same piece of land.

Thank you!

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#2247213 - 01/05/21 07:30 PM Re: Refinance or HELOC Nicole
raitchjay Offline
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If you're paying off the original loan with this new loan, then your TRID purpose would be "refinance".

(i) Purchase. If the credit is to finance the acquisition of the property identified in paragraph (a)(6) of this section, the creditor shall disclose that the loan is for a “Purchase.”

(ii) Refinance. If the credit is not for the purpose described in paragraph (a)(9)(i) of this section, and if the credit will be used to refinance an existing obligation, as defined in § 1026.20(a) (but without regard to whether the creditor is the original creditor or a holder or servicer of the original obligation), that is secured by the property identified in paragraph (a)(6) of this section, the creditor shall disclose that the loan is for a “Refinance.”

Here's 1026.20(a):

(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. A refinancing is a new transaction requiring new disclosures to the consumer. The new finance charge shall include any unearned portion of the old finance charge that is not credited to the existing obligation. The following shall not be treated as a refinancing:

(1) A renewal of a single payment obligation with no change in the original terms.

(2) A reduction in the annual percentage rate with a corresponding change in the payment schedule.

(3) An agreement involving a court proceeding.

(4) A change in the payment schedule or a change in collateral requirements as a result of the consumer's default or delinquency, unless the rate is increased, or the new amount financed exceeds the unpaid balance plus earned finance charge and premiums for continuation of insurance of the types described in §1026.4(d).

(5) The renewal of optional insurance purchased by the consumer and added to an existing transaction, if disclosures relating to the initial purchase were provided as required by this subpart.
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#2247217 - 01/05/21 07:41 PM Re: Refinance or HELOC Nicole
Nicole Offline
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thank you!

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#2247222 - 01/05/21 07:53 PM Re: Refinance or HELOC Nicole
rlcarey Online
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Well, not necessarily. Was the original loan actually a line of credit or was it a multiple advance closed end loan. It make a significant difference.
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#2247223 - 01/05/21 07:56 PM Re: Refinance or HELOC Nicole
raitchjay Offline
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Why does it make a difference? Either way, it meets the definition of a TRID refinance, does it not?
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#2247224 - 01/05/21 08:00 PM Re: Refinance or HELOC Nicole
rlcarey Online
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You indicated:

Here's 1026.20(a):

(a) Refinancings. A refinancing occurs when an existing obligation that was subject to this subpart is satisfied and replaced



A true line of credit or HELOC is not subject to Subpart C.

It is one of those TRID quirks.
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#2247225 - 01/05/21 08:00 PM Re: Refinance or HELOC Nicole
raitchjay Offline
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Ahhhhhh......thanks Randy....darn it, i remember you saying that before. I need to make a mental note of that. Doesn't help that my bank doesn't originate HELOCs......
Last edited by raitchjay; 01/05/21 08:03 PM.
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