We made a loan to an individual secured by an SFR. The SFR was in the name of an LLC (individual is the sole member) but title transferred to the name of the individual with our loan. We documented the loan as a "Refinance" showing the new loan paying off a loan that was to the LLC. Since the borrower (individual) is taking title for the first time in his personal name, we should have disclosed this as a Purchase instead of a Refinance, right? Escrow treated it as a Refinance - no Seller involved, with the loan proceeds paying off the LLC's loan.

Should we send a post-close CD to show this as a Purchase transaction with the LLC shown as Seller? The borrower considers this a Refinance because he has owned the property for awhile through his LLC. The individual does not live in the property but rents it out. (He owns & rents several other properties as well.)

I don't believe that this being a sole member LLC makes any difference - should have been a Purchase??

The individual does not live in the property but rents it out.

Why is there a closing disclosure even involved?

4. Non-owner-occupied rental property. Credit extended to acquire, improve, or maintain rental property (regardless of the number of housing units) that is not owner-occupied is deemed to be for business purposes.

Upon further discussion with the MLO, turns out the individual (our borrower) has been living in this property. The loan was originally a construction loan to the LLC who managed the project. The individual moved in upon completion and is getting a loan in his name to pay off the construction loan in the name of the LLC - and transferring title to the individual name. The LLC is a separate legal entity, so our borrower is purchasing the property, correct? The MLO says that escrow told him that they could not treat the loan as a Purchase because the individual is basically buying the property from himself. Thus, the MLO treated it as a refinance - not a purchase.

Well it is either a purchase or a home equity loan from a TRID perspective - it cannot be a refinance, as the obligation being refinanced has to be to the same borrower. Why did you not just do an assumption?

Good point. Thank you again for the feedback.