HPML - Business Purpose Term Loan

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Question:

We have a business purpose term loan on a residential property that is being assumed by a new buyer (the tenant). We see that assumptions are HMDA reportable, but do we need to be concerned about the HOEPA spread, suggesting that this is a high priced mortgage?

Answer:

The tenant is purchasing the property as a primary residence by assumption of the debt; therefore, the debt is no longer a business purpose debt. Refer to 226.20(b) and it's Commentary for Reg Z requirements, and also 3500.5(b)(5) for RESPA disclosure requirements. Most likely your assumption will be subject to all new disclosures including HOEPA, HPML, MDIA, etc.

First published on BankersOnline.com 4/26/10