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#2271674 - 06/15/22 02:58 PM Renewal or Refinance
JoAnne S Offline
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Joined: Aug 2020
Posts: 8
We have a Home Equity Line of Credit that was on the books of a a bank that we merged with. Loan officer has "renewal" on Loan Worksheet. However, because the line had the previous bank's account number structure, we paid it off and issued a new line with our account number structure. Would this be considered a refinance or because we truly are just renewing the line, not HMDA reportable?

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#2271677 - 06/15/22 03:06 PM Re: Renewal or Refinance JoAnne S
raitchjay Offline
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Joined: Oct 2009
Posts: 8,838
OK
Sounds like it meets the definition of a refinance to me.

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).

ii. A new open-end line of credit that satisfies and replaces an existing closed-end mortgage loan is a refinancing under § 1003.2(p).

iii. Except as described in comment 2(p)-2, a new debt obligation that renews or modifies the terms of, but that does not satisfy and replace, an existing debt obligation, is not a refinancing under § 1003.2(p).
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#2271734 - 06/15/22 09:56 PM Re: Renewal or Refinance JoAnne S
COMPL101TX Offline
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Joined: Apr 2018
Posts: 98
I would not base my decision on having paid off the line on your system to issue a new loan number. I would review the Promissory Note to determine if it references the prior Note. Oftentimes, a renewal will have language stating that the Note is in renewal and not in novation of the prior Note - or similar language.

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#2271776 - 06/16/22 06:21 PM Re: Renewal or Refinance JoAnne S
Truffle Royale Offline

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Joined: Jul 2003
Posts: 17,357
because the line had the previous bank's account number structure, we paid it off and issued a new line with our account number structure

If 'we' is the bank and the borrowers didn't reapply and requalify, this is just a number change and not a refinance.

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#2271778 - 06/16/22 06:41 PM Re: Renewal or Refinance JoAnne S
MainStreeter Offline
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Joined: Jun 2014
Posts: 54
Didn't they make it a refinance by 'satisfying & replacing' the previous account? the HMDA definition of a refinance doesn't speak to how the borrowers applied, qualified, etc.... if it's a dwelling secured loan to the same borrower and this loan paid off and replaced the old one, wouldn't it meet the HMDA definition? maybe not a refinance in the traditional sense... but in the HMDA sense.

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#2271791 - 06/16/22 07:18 PM Re: Renewal or Refinance JoAnne S
rlcarey Offline
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Joined: Jul 2001
Posts: 79,935
Galveston, TX
They need to explain what they mean by "renewal". They replaced it with a totally new HELOC agreement? They modified the existing agreement before the original loan matured? As previously said, it matters not what you did on your system. What did you do with the legal obligation?
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