Business Loans and Disclosures
Answer by Andy Zavoina, BOL Guru Guru Bio
Question: I'm working on a loan for a customer which has the customer's residence and 232 acres as collateral. This is for a business purpose. Do I have to have a residential loan application and a notice of right to receive a copy of an appraisal? Also, do I need the right to rescission, since the loan's purpose is for business?
Answer: Your loan policy will dictate what type of application you need for certain loan types. Your investors may also, if you are selling this. But the regulations do not require an application under a particular format.
Reg. B and Reg. Z are your key concerns. If this is clearly a "business purpose" loan, then Reg. Z will not apply. That removes the need for a rescission notice.
Unlike Reg. Z's strict consumer purpose applicability, Reg. B will apply. It is for consumer, commercial and real estate loans. The appraisal notice under 202.14 will apply, so there is the need for a notice or routine delivery of the appraisal.
The standard Uniform Residential Loan Application contains the government monitoring information and is very complete as to regulatory requirements under Reg. B and the OCC's 12 CFR 27. Neither Reg. B nor part 27 require an "application" per se, but rather government monitoring information. (Part 27 imposes additional requirements not affecting the question here.) This GMI is collected under 202.13. But it applies to a natural person. Your business purpose loan may be to a natural person or another type of entity. So this information, on an acceptable form which includes a URLA, may or may not be required. You need to see who the borrower is.
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