![]() A home equity loan is a credit that is not a purchase, refinance, or construction loan. As we will explain when we discuss the TRID Loan Purpose Hierarchy, a construction loan purpose will only be used when an applicant already owns the land they are building on and they are not refinancing that land with the construction loan. A construction purposes is one where the credit will be used to finance the initial construction of a dwelling (not renovations to an existing dwelling) on a property that secures or will secure the loan. A refinancing is a new transaction requiring new disclosures to the consumer and occurs when an existing obligation that was subject to Regulation Z is satisfied and replaced by a new obligation undertaken by the same consumer.Ĭonstruction Loan Purpose. A refinance is defined as credit that will be used to refinance an existing obligation that is secured by the property that secures or will secure the transaction. Since bare land loans are subject to TRID, this means that a purchase loan will often include either a purchase of bare land or the purchase of a dwelling. A purchase is defined as credit to finance the acquisition of the property that secures or will secure the transaction. In simple terms, each TRID loan purpose can be defined as follows: Regulation Z defines the four purpose options under TRID and the commentary provides examples of each purpose. On the other hand, TRID provides for four slightly different purpose options: 1) purchase, 2) refinance, 3) construction, and 4) home equity loan. For more information on HMDA purposes and the HMDA purpose hierarchy, read this article.) (As this article is focused on the TRID loan purpose hierarchy, we are not going to get into details about the HMDA purpose hierarchy. HMDA provides for four different purchase options: 1) purchase, 2) refinance or cash-out refinance, 3) home improvement, or 4) other. To explain, let’s take a quick look at the purpose options under both HMDA and TRID. purchase, refinance, ect.) are defined differently under each rule. The reason for this difference is that the definitions of purposes (i.e. As TRID and HMDA have different purpose options and different purpose definitions, the same loan may have one purpose under HMDA but that same loan would have a completely different purpose under Regulation Z (and TRID). One of the biggest challenges in understanding TRID loan purposes is to realize there is a difference in purpose definitions under TRID and HMDA. Therefore, it is important for each creditor to fully understand the TRID loan purpose hierarchy and when each TRID loan purpose should be listed on the Loan Estimate. Much of the reason behind this confusion is that the rules actually contradict the loan purpose rules of Regulation C and the Home Mortgage Disclosure Act (HMDA). ![]() ![]() Although TRID rules have been around for a while now, there still seems to be some confusion when it comes to understanding the TRID loan purpose that should be listed on the Loan Estimate (LE).
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