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#1080168 - 11/11/08 06:51 PM disclosures required?
Chocaholic Offline
Gold Star
Joined: Aug 2005
Posts: 443
Northwest
We have a Dr who has requested a construction loan to build his personal residence on a lot he owns free and clear. His Attny/CPA has suggested to protect some of his assets from liability (related to practice) that the loan request be made by a "to be formed" LLC. Dr. also wants us to commit to long term take-out with rate etc. to be established at time of home completion which bank is prepared to do .. (long term also to be LLC ownership). Here is where I am confused.. is this a consumer transaction for purposes of Reg. Z & RESPA etc.? For all purposes, this is the construction of a primary residence with long term financing.. so my instinct is to require disclosures... however, the LLC is not a "consumer per se"? So, any thoughts would be much appreciated..
Would it make a difference if long-term is made to Dr.

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Lending Compliance
#1080172 - 11/11/08 06:57 PM Re: disclosures required? Chocaholic
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,025
Bloomington, IN
This is a consumer transaction, however since the loan is/will be made to a non-natural person Reg Z disclosure do not apply, however since the loan is not exempt under the business purpose exemption of Reg. Z it is subject to RESPA disclosures.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1080178 - 11/11/08 07:02 PM Re: disclosures required? Dan Persfull
Chocaholic Offline
Gold Star
Joined: Aug 2005
Posts: 443
Northwest
thank you!

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#1107866 - 01/08/09 08:34 PM Re: disclosures required? Chocaholic
Bullseye Offline
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Bullseye
Joined: Jan 2004
Posts: 968
I have a similar situation and I don't deal in this arena much so I'd appreciate some help. We made a loan to a farm entity - we'll call it "Smith Farms, LLC" to construct Mr & Mrs Smith's dwelling on the farm owned by the LLC (100 acres). The loan amount is $400,000. I feel as though this is a consumer purpose loan, therefore can not use the $1 million business purpose loan exemption in FIRREA to excuse the loan from a certified appraisal. Agree?

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#1107885 - 01/08/09 08:47 PM Re: disclosures required? Bullseye
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I would agree.
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My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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