HMDA Reporting - Refinance to Buy Out Second Owner

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Question:

HMDA - How do you report a refinance that is for the purpose of buying out a second owner? A typical example is when a couple divorces, and one spouse refinances the existing mortgage to buyout and remove the second spouse from the title and mortgage. This would clearly qualify as a refinance, but would it also qualify as a "purchase" for HMDA reporting purposes, and therefore need to be reported as a purchase? Also, has this issue been formally addressed in regulatory Q and As?

Answer:

To the best of my knowledge this is not addressed in the Q&As. In these cases, the financial institution can report them as a purchase or a refinance. However, they must be consistent in how they are reporting them. We report them as refinances.

One thing to keep in mind. Whether you treat these as a purchase or a refinance for HMDA reporting, Reg Z's right of rescission applies to all of these transactions.

First published on BankersOnline.com 2/13/06