Refinance

If a customer refinances their home to pay off credit cards only, does this need to be listed on the LAR. I thought if they refinanced and no money went towards the home it didn't need to be listed.

A refinancing is a loan secured by a dwelling where all or part of the proceeds of the loan will be used to pay off an existing loan by the same borrower secured by a dwelling.

Linkpars, you are thinking pre 1/1/2004. As Banker Bee stated under the current refinancing definition that no longer applies.

http://www.ffiec.gov/hmda/guide.htm

Look at the definition of a refinancing found on page 29 of the GIR, the above link.

I know the meaning but when I was trained I was told that if you refinanced and used the money for purposed other than for the home it did not need to be listed.

From the FAQs: "If an obligation satisfies and replaces another obligation, is the purpose of the replaced obligation relevant to whether the new obligation is a reportable 'refinancing' under Regulation C? Answer: No. The new definition of a reportable refinancing looks only to whether (1) an obligation satisfies and replaces another obligation and (2) each obligation is secured by a dwelling..."

Dan, I did read pg 29 that is why I am posting this question. I confused myself. So you are are saying if a refiance is done and it is secured by the dwelling, no matter what the money is being used for, it needs to be listed.

If you were trained after 1/1/2004 then your trainer misinformed you, or you misunderstood.

An exert from the definition found on page 29 I cited above:

. . . The purpose of the loan being refinanced is not relevant to determining whether the new loan is a refinancing for HMDA purposes. Nor is the borrower’s intended use of any additional cash borrowed . . .

That is correct, however if any part of the proceeds are used for a home purchase or home improvement it would be reported as such instead of as a refinancing.

Linkpars, are you really doing a refinance, or is it a home equity loan with the proceeds going to payoff credit cards? If a refinance is involved (see definition posted by others), then yes it's reportable even if new money was disbursed to pay other bills. If it is a straight home equity loan, and none of the funds were used to purchase, improve, or refinance a dwelling, then it is not HMDA reportable.

Thank you Dan and I was misinformed, I went back to the procedures that I was given when I took over in Compliance.

#12 yes, these are refinances.

If there was no loan to pay off and they were taking the money to pay credit cards then you're right, Linkpars. Whether it was done as a HELOC or a straight first mortgage, it would not be a HMDA reportable loan.