I think before the rules changed (pre 2018), 'refinancing' had to include a mortgage or lien from a FI. Not sure I am remembering that correctly but I do remember some conversations about if there was a private mortgage involved, was it actually a refinance.

At any rate, I don't see anything in the current rule that would exempt a private mortgage, so I am double checking myself with the experts.

I have very limited information, as this application was denied quickly for DTI, but in looking at the application, it says the property is 'owner financed'. The credit bureau does not show any current mortgage loans, which would indicate that if there is a mortgage on the property, it is a private mortgage. The stated purpose of the loan is a cash out refinance.

I am calling this a refinance, not other. Does anyone disagree, and if so, why?

If they stated on the application that they were applying for a refinancing, then I am not sure why you would question it.

It has more to do with the private mortgage. As I stated, under the old rules there might have been something different when a private mortgage was involved, but I don't see anything in the current rules that would seem to treat a private mortgage any differently from any other mortgage.

Just wanted to make sure I'm not missing anything.

1003.2(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.

Not sure what there is to miss.

Maybe you are confusing that with the TRID definition of refinancing.

1026.37(a)(9)(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.”

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.

Since a lot of private financing would not be subject to Subpart C of Regulation Z, it might not be a refinancing under TRID.

Possibly, but I thought in 2014, 2015, 2016 when we were dealing with a private mortgage, there was something in the reg about a 'federally related loan' or something like that, that called into question if the bank was refinancing a private mortgage, since a private mortgage wouldn't be a federally related loan, it wouldn't be HMDA.

It was a while ago and under current regs, no, I don't see anything that would differentiate between a mortgage from an FI or a private mortgage, so I was going with refinance. Since it was denied so quickly the Bank didn't even get to the point of is there an actual mortgage recorded somewhere or is it just a contract/agreement that was signed and nothing was actually recorded. I would assume it was recorded, but you know what assume does. . . .

Thank you.

You have to determine if the "private mortgage" is an extension of credit.

Official Interpretation
2(d) Closed-end Mortgage Loan
1. Dwelling-secured. Section 1003.2(d) defines a closed-end mortgage loan as an extension of credit that is secured by a lien on a dwelling and that is not an open-end line of credit under § 1003.2(o). Thus, for example, a loan to purchase a dwelling and secured only by a personal guarantee is not a closed-end mortgage loan because it is not dwelling-secured.

2. Extension of credit. Under § 1003.2(d), a dwelling-secured loan is not a closed-end mortgage loan unless it involves an extension of credit. For example, some transactions completed pursuant to installment sales contracts, such as some land contracts, depending on the facts and circumstances, may or may not involve extensions of credit rendering the transactions closed-end mortgage loans. In general, extension of credit under § 1003.2(d) refers to the granting of credit only pursuant to a new debt obligation. Thus, except as described in comments 2(d)-2.i and .ii, if a transaction modifies, renews, extends, or amends the terms of an existing debt obligation, but the existing debt obligation is not satisfied and replaced, the transaction is not a closed-end mortgage loan under § 1003.2(d) because there has been no new extension of credit. The phrase extension of credit thus is defined differently under Regulation C than under Regulation B, 12 CFR part 1002.

Official Interpretation
2(o) Open-End Line of Credit
1. General. Section 1003.2(o) defines an open-end line of credit as an extension of credit that is secured by a lien on a dwelling and that is an open-end credit plan as defined in Regulation Z, 12 CFR 1026.2(a)(20), but without regard to whether the credit is consumer credit, as defined in § 1026.2(a)(12), is extended by a creditor, as defined in § 1026.2(a)(17), or is extended to a consumer, as defined in § 1026.2(a)(11). Aside from these distinctions, institutions may rely on 12 CFR 1026.2(a)(20) and its related commentary in determining whether a transaction is an open-end line of credit under § 1003.2(o). For example, assume a business-purpose transaction that is exempt from Regulation Z pursuant to § 1026.3(a)(1) but that otherwise is open-end credit under Regulation Z § 1026.2(a)(20). The business-purpose transaction is an open-end line of credit under Regulation C, provided the other requirements of § 1003.2(o) are met. Similarly, assume a transaction in which the person extending open-end credit is a financial institution under § 1003.2(g) but is not a creditor under Regulation Z, § 1026.2(a)(17). In this example, the transaction is an open-end line of credit under Regulation C, provided the other requirements of § 1003.2(o) are met.

2. Extension of credit. Extension of credit has the same meaning under § 1003.2(o) as under § 1003.2(d) and comment 2(d)-2. Thus, for example, a renewal of an open-end line of credit is not an extension of credit under § 1003.2(o) and is not covered by Regulation C unless the existing debt obligation is satisfied and replaced. Likewise, under § 1003.2(o), each draw on an open-end line of credit is not an extension of credit.

Thank you Dan. And I wish I had more answers. It was denied within 3 days so we don't know if there was a lien on the property (dwelling secured) or what type of agreement was between the applicant and whoever was doing the owner financing. It may have been a rent to own for all we know. But the loan was to make full payment and eliminate this other note. I guess all we can do is go with the information we got.

At this point, I am just hoping this loan doesn't get pulled into a testing sample.