We have a customer who has recently divorced and he choose to buy out his wife's half of the mortgage. There was no current lien on the home. But since he bought her out does it still have to be listed on the lar?

GIR D-8 ii - This would be reported as a refinance on your LAR.

Even if the home was already paid for, and none of the new money actually went to the home?

Royale Truffle, I guess I'm confused. He is BUYING out his wife's portion of the house and there is currently NO LIEN on the property.

How is this a refinancing for HMDA?

If the Bank is taking a 1st lien on the house AND the purpose is to BUY out the wife's portion, doesn't this meet the definition of a PURCHASE for HMDA purposes?

A refinance would be where the NEW loan replaces and satisfies an existing loan to the same borrower.

Please help me to understand your answer.

Thanks

The house was already purchased by the husband. Per the original post, there is a current mortgage but not a lien. He is refinancing it to pay a bill (his ex-wife).

Per the GIR section I quoted above,
"...a lender may report data on an application for a refinancing received ...where the new obligation will be, but the existing obligation was not, secured by a lien on a dwelling.

Thank you Ski, I am confused as well. This house was purchased in 1972 and is free and clear of any liens. All money borrowed went directly to the wife.

Truffle, I hate to disagree, but I think the section you're referring to is talking about the transition rules. Prior to 1/1/04, banks had a little more discretion in determining if an application met the refi definition. Currently, both loans must be secured by a lien on a dwelling to be a refi.

I don't report these types of loans, because the borrower already owns the home. However, I think there are other banks that report them as purchases.

Thanks, hmdagal, I did get the wrong section there.

However, the original post and the last post are conflicting. The husband is buying out the wife'sshare of the mortgage but there is no lien? Please elaborate because you don't need a recorded doc to have a dwelling-secured mortgage. All you need is for the mortgage to include the property description.

If indeed it is 'owned free and clear' as the latest post indicated then I ammend my original statement regarding refi.

Sorry, not a mortgage, he is buying out the equity that they have in the home. My opinion is that it does not need to be listed.

I would agree with Ski that your applicant is BUYING the portion of the home he does not already own, and this would be reported as a purchase. Furthermore, even if there were a lien already on the property that would be paid in full with a new mortgage, I would report it as a purchase (see page 12 of GIR, under "Multipurpose Loan").

I would not report this application as it does not meet the definition of a refinance, and since he already owns the home, I wouldn't consider it a purchase. I would not report this application.

I concur with Pepper too....I have been debating this since it was posted...I see all sides, but I agree, it does nto nicely fit into any of the defs.

I would lean toward the last two posts. I wouldn't report the loan.

FWIW, we don't report these either.