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#2270926 - 05/26/22 03:57 PM Installment Sales Contract-Purchase?
Luv2run Offline
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I have a loan where the contract of sale is an "installment sale" . The borrowers have been living in the property and making payments to the seller. Per the sales agreement, the final payment is due on or before September of this year, and the deed will transfer upon receipt of payment.

I am calling this a PURCHASE for TRID since the deed has not changed hands, and will upon the settlement of the loan.

Anyone else see it otherwise?
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TRID - TILA/RESPA Integrated Disclosures Rule
#2270928 - 05/26/22 04:09 PM Re: Installment Sales Contract-Purchase? Luv2run
rlcarey Online
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rlcarey
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Have they legally obtained any rights to the property? In many States they would have, regardless of the date of the formal transfer of title.
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#2270929 - 05/26/22 04:21 PM Re: Installment Sales Contract-Purchase? Luv2run
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
I think it depends on the following -

1. Does the person holding the contract meet the definition of a creditor - 1026.2(17)
2. If so does the obligation meet the definition of credit - 1026.2(14)
3. In most instances by virtue of the contract the buyer has acquired ownership in the property and the property secures the contract (credit).

1026.37
(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.”

1026.2
ii. Examples of new transactions involving a previously acquired dwelling include the financing of a balloon payment due under a land sale contract and an extension of credit made to a joint owner of property to buy out the other joint owner's interest. In these instances, disclosures are not required under §1026.18(q) (assumability policies). However, the rescission rules of §§1026.15 and 1026.23 do apply to these new transactions.
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#2270933 - 05/26/22 04:49 PM Re: Installment Sales Contract-Purchase? Luv2run
rlcarey Online
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rlcarey
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Under TRID and 1026.37, I would think this is probably a Home Equity Loan, as a land sales contract normally would not meet the definition of an existing obligation under 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.

I highly doubt that a land sales contract from a private individual was subject to Subpart C of Regulation Z.
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#2270935 - 05/26/22 05:05 PM Re: Installment Sales Contract-Purchase? Luv2run
Dan Persfull Offline
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Bloomington, IN
I highly doubt that a land sales contract from a private individual was subject to Subpart C of Regulation Z.

Very true, but there is always the exception.

We stopped servicing land contracts about 15 years ago. However, in a previous position in the mid 80's I worked for a bank that serviced quite a few of these. There were individuals that all they did were purchase houses and sell them on contract. These individuals may have 8-10 contracts per year. - credit extended subject to a finance charge payable in more than 4 installments and extending more than 5 credits per year secured by a dwelling.

In today's world I would say that would be a very rare scenario.

The Home Equity perspective could be a viable alternative.
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#2270961 - 05/26/22 08:52 PM Re: Installment Sales Contract-Purchase? Luv2run
Luv2run Offline
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The seller's are the parents. We have these every now and again where the parents want to sell to the kids but the kids don't have any funds to put down. I will have to look into the "legal rights" aspect with the attorney involved. If they do not, would you then consider this a Purchase?
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#2270962 - 05/26/22 08:57 PM Re: Installment Sales Contract-Purchase? Luv2run
rlcarey Online
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rlcarey
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If they have no current legal rights in the property, then it would be for the purpose of acquisition and thus a purchase.
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#2270975 - 05/27/22 12:32 PM Re: Installment Sales Contract-Purchase? Luv2run
Luv2run Offline
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Posts: 610
Thank you both for your insight. I always appreciate guidance and support from you both.
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