Q: A borrower passed away, leaving the property to her daughter. The borrower’s outstanding debt remains, and the daughter applied for a loan to pay off the debt. With respect to HMDA requirements, what type of loan is the daughter applying for?
A: This is an equity loan for HMDA purposes. HMDA, § 1003.2(j), defines a “purchase loan,” in part, to mean, credit used, in whole or in part, to purchase a dwelling. Additionally, § 1003.2(p), further defines a “refinance” to mean an obligation replacing another obligation by the same borrower. In this case, the interest in the home passes from the mother to the daughter immediately upon the mother’s death. Therefore, the daughter cannot purchase something that she already owns. Further, because the mother was the borrower on the existing loan, the daughter cannot refinance such loan for HMDA purposes, since the borrowers would not be the same. By exclusion, the HMDA loan purpose here would be an equity loan.
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