When the Borrower's Home is Owned by a Business
by Mary Beth Guard, BOL Guru
Question: We are seeing more and more primary residences being owned by corporations, I am guessing for some type of income tax purposes. We have a husband and wife who have requested our bank to refinance their home loan, which was for the original purchase of the primary residence, but the home is owned by their corporation. We believe we should go ahead and obtain a written real estate application (how can you complete monitoring info on a corporation?); that RESPA applies; and we should give right of rescission. What are your thoughts?
Answer: For purposes of RESPA and Reg Z, you look at:
-- whether the applicant is an individual;
-- whether the purpose for which the proceeds of the loan is to be used is a personal, family or household purpose.
In addition, for RESPA purposes, the loan would also have to be secured by property on which there is located, or to be located following the making of the loan, a 1- to 4-family dwelling.
The loans you describe fit each of those criteria.
A written application, and a request for monitoring information, is required under Regulation B's Section 202.13 when a creditor receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling. Again, the criteria would appear to be met.
In terms of the monitoring information, you aren't collecting it on the owner of the property -- you are collecting it on the applicant for the loan.
And, of course, if you're subject to HMDA, it doesn't matter who the applicant is. If it is a home purchase, home improvement or refinance (as those terms are defined in Reg C), HMDA's data collection requirements apply.
The original version appeared in the March 2002 edition of the Oklahoma Bankers Association Compliance Informer.
First published on BankersOnline.com 7/8/02
First published on 07/08/2002