Suppose you have a spouse buying out the half of their house because of a divorce. There is a balance on the mortgage note at another bank and we are doing the new loan. Is this a refinance or a purchase, since our bank never had the previous mortgage?

Assuming the spouse that is buying out the others interest, the loan is a refinancing. The definition of a residential mortgage transaction in 226.2(24) ...to finance the acquisition or initial construction of that dwelling. Since your customer already has an ownership interest in the real property, it is not a RMT. Hence it is the refinancing of a purchase money mortgage. Section 226.23(f)...the right to rescind does not apply to the following: (1) a residential mortgage transaction.

THe commentary further goes on to explain that: "A residential mortgage transaction finances the acquisition of a consumer's principal dwelling. The term does not include a transaction involving a consumer's principal dwelling if the consumer had previously purchased and acquired some interest to the dwelling, even though the consumer had not acquired full legal title."

A refinancing it is!