Which type of loan requires a Notice of Transfer of Mortgage Loan if sold to a third party?

The correct answer pertains specifically to the type of loan that requires a Notice of Transfer of Mortgage Loan when sold to a third party, which is relevant under the regulations governing mortgage servicing and transfer notifications.

In the case of a purchase loan for a borrower's vacation home, if this loan is sold to a third party, the borrower must receive a Notice of Transfer. This requirement is designed to ensure that borrowers are kept informed about who holds their loan and whom they should contact for servicing their mortgage payments. The notice is important for maintaining transparency and facilitating communication regarding loan servicing.

Loans like home equity lines of credit, refinance loans, or home equity loans also carry certain notification requirements, but the nature of their transfer requirements is distinct. Equity-related products or refinances may not trigger the same notification standards as a purchase loan for a primary or secondary residence. Therefore, recognizing the specifics of loan categories and their corresponding requirements under the Truth in Lending Act aids in understanding the compliance obligations of lenders when managing mortgage loan transfers.