Parents Pledging Home

Son is purchasing vacant acreage and parents are pledging their home as collateral for the loan but they are not on the loan. Does occupancy and HOEPA status relate to the collateral?

(6) Whether the property identified in paragraph (a)(9) of this section is or will be used by the applicant or borrower as a principal residence, as a second residence, or as an investment property.

If the parents are not borrowers then then they are not a consumer for the purposes of HOEPA.

1026.32
(a) Coverage. (1) The requirements of this section apply to a high-cost mortgage, which is any consumer credit transaction that is secured by the consumer's principal dwelling, other than as provided in paragraph (a)(2) of this section, and in which:

1026.2
(11) Consumer means a cardholder or natural person to whom consumer credit is offered or extended. However, for purposes of rescission under §§ 1026.15 and 1026.23, the term also includes a natural person in whose principal dwelling a security interest is or will be retained or acquired, if that person’s ownership interest in the dwelling is or will be subject to the security interest. For purposes of §§ 1026.20(c) through (e), 1026.36(c), 1026.39, and 1026.41, the term includes a confirmed successor in interest.

So, son fails to pay and the bank kicks the mom and dad out on the streets - that will make a great headlines. Banks that allow third party pledges of primary dwellings really need to reexamine their lending policies.

On the surface it would seem so. We also have the 100 acres that he is purchasing as collateral, which is valued at over $300k. The parents pledged their home in lieu of his down payment because he is a doctor working in Ukraine and the adjoining property became available for a fast close. On any other day, Randy, I would agree with you.