Skip to content
BOL Conferences
Learn More - Click Here!

Page 1 of 2 1 2
New Reply Thread Options
#1086789 - 11/24/08 04:27 PM Ln to Corp - Reg. Z? RESPA?
Anonymous
Unregistered

Refinance loan to corporation - security is 1-4 family residence (loan is at a different bank) used as a second home by the owners of the business - owners are guaranteeing the loan. Do you agree with my reasoning below?

1. Exempt from Reg. Z - loan to a buisness.

2. Not exempt from RESPA - consumer purpose

3. Not exempt from flood.

4. Not exempt from HMDA.

5. Exempt from formal appraisal - loan under $1 million and to a business. (meets defin. of business loan for appraisal req.)

Thanks for your input!

Return to Top Reply Quote Quick Reply Quick Quote
#1086796 - 11/24/08 04:41 PM Re: Ln to Corp - Reg. Z? RESPA? Anonymous
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
Sounds good to me.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top Reply Quote Quick Reply Quick Quote
#1086805 - 11/24/08 04:50 PM Re: Ln to Corp - Reg. Z? RESPA? rlcarey
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
I also agree.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top Reply Quote Quick Reply Quick Quote
#1096331 - 12/12/08 03:41 PM Re: Ln to Corp - Reg. Z? RESPA? Dan Persfull
Anonymous
Unregistered

Sorry to bring this up again...but a speaker at a seminar yesterday insisted that this type of loan is exempt from RESPA because it's a loan to a business. He said things changed sometime around 2003 so that the business exemption in RESPA completely matches the business exemption in Reg. Z. Comments on that? I still think this loan example is NOT exempt, but he's been doing this much longer than me.

Return to Top Reply Quote Quick Reply Quick Quote
#1096333 - 12/12/08 03:42 PM Re: Ln to Corp - Reg. Z? RESPA? Dan Persfull
Anonymous
Unregistered

Sorry to bring this up again...but a speaker at a seminar yesterday insisted that this type of loan is exempt from RESPA because it's a loan to a business. He said things changed sometime around 2003 so that the business exemption in RESPA completely matches the business exemption in Reg. Z. Comments on that? I still think this loan example is NOT exempt, but he's been doing this much longer than me.

Return to Top Reply Quote Quick Reply Quick Quote
#1096337 - 12/12/08 03:44 PM Re: Ln to Corp - Reg. Z? RESPA? Anonymous
Skittles Online
10K Club
Skittles
Joined: Sep 2002
Posts: 13,965
TN
I agree with the speaker at your seminar and I think that changed in the late 90's.
_________________________
My Opinions Only

Return to Top Reply Quote Quick Reply Quick Quote
#1096340 - 12/12/08 03:46 PM Re: Ln to Corp - Reg. Z? RESPA? Anonymous
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I do not agree with the speaker (and often don't!). RESPA is purpose driven, not entity driven. Althought you have an unusual situation (but not all that uncommon in today's world) being that the loan is to an entity (exempt reg z), but the purpose is personal,so, I would not exempt from RESPA for that reason.

Both RESPA and REG Z specifically exempt business purpose , but only Reg Z goes further to exempt loans to entity's and still relies on business purpose.

My opinion on the below section of RESPA, is that it only pertains to loans for determining whether or not you have a business purpose or not.

(2) Business purpose loans. An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by Regulation Z, 12 CFR 226.3(a)(1). Persons may rely on Regulation Z in determining whether the exemption applies.
Last edited by RR joker; 12/12/08 03:51 PM.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top Reply Quote Quick Reply Quick Quote
#1096378 - 12/12/08 04:13 PM Re: Ln to Corp - Reg. Z? RESPA? Anonymous
CalifDreamin Offline
Diamond Poster
CalifDreamin
Joined: Mar 2002
Posts: 2,262
Far from Calif
I don't agree with the speaker either. ยง3500.5(b) dealing with the exemptions from RESPA says this (emphasis added):

2) Business purpose loans. An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by Regulation Z, 12 CFR 226.3(a)(1). Persons may rely on Regulation Z in determining whether the exemption applies.

That particular section of Reg. Z - 226.3(a)(1) is the business purpose exemption. 226.3(a)(2) is the Reg. Z exemption for loans to a business, and RESPA does not say that you look to that section of Reg. Z to determine if a loan is exempt from RESPA.

Perhaps I'm splitting hairs, but this is consistent with what I've also been told in attorney-led seminars as well.

Any examiners out there that can chime in?
_________________________
The opinions expressed are mine and do not necessarily reflect those of my employer
_._._._._._.
A.S.A.P.
Always
Say
A
Prayer
<><

Return to Top Reply Quote Quick Reply Quick Quote
#1096389 - 12/12/08 04:22 PM Re: Ln to Corp - Reg. Z? RESPA? CalifDreamin
Skittles Online
10K Club
Skittles
Joined: Sep 2002
Posts: 13,965
TN
Hmmmm You may have taught me my lesson for the day. Oh great - I can't even get a lot of our lenders to comply with what we currently do and now I'm going to hit them with 'new' stuff.
_________________________
My Opinions Only

Return to Top Reply Quote Quick Reply Quick Quote
#1096533 - 12/12/08 06:01 PM Re: Ln to Corp - Reg. Z? RESPA? Skittles
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I've never seen a bank give RESPA disclosures to a business entity. RESPA (like Reg Z) was written for consumer protection. In 1995, HUD changed RESPA and basically said only consumer loans are covered.

How can it NOT be a business purpose loan if the loan is to a business?
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top Reply Quote Quick Reply Quick Quote
#1096562 - 12/12/08 06:31 PM Re: Ln to Corp - Reg. Z? RESPA? David Dickinson
Skittles Online
10K Club
Skittles
Joined: Sep 2002
Posts: 13,965
TN
Thanks David. I thought I might be losing my mind, which wouldn't take too long these days.
_________________________
My Opinions Only

Return to Top Reply Quote Quick Reply Quick Quote
#1096568 - 12/12/08 06:34 PM Re: Ln to Corp - Reg. Z? RESPA? Skittles
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
You might still be losing your mind, but you're right in this case. laugh
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top Reply Quote Quick Reply Quick Quote
#1096678 - 12/12/08 08:26 PM Re: Ln to Corp - Reg. Z? RESPA? David Dickinson
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Going back to the original poster...what WAS the actual purpose. You stated it was personal, but didn't say what it actually was...now, just because a second home of an owner is used as collateral, does not make it a consumer purpose, so please explain your situation further.

Example Security: House in name of John Doe, LLC, John Doe signs as owner of the LLC.
Purpose: Obtain money for daughter's education.

There was an extensive discussion on this some time ago which I cannot find...and it changed the way we disclosed...so this thread is contradicting that conclusion, so I'd like to take this further for my own sanity.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top Reply Quote Quick Reply Quick Quote
#1096680 - 12/12/08 08:29 PM Re: Ln to Corp - Reg. Z? RESPA? RR Joker
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I'll go back again and attempt to find that thread. I see where I wrote my examinera the FRB for confirmation on 2-27-08, so perhaps that would be a good place to start.

FWIW, he agreed RESPA would apply in the examples I gave which mirror this thread's question.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top Reply Quote Quick Reply Quick Quote
#1096688 - 12/12/08 08:37 PM Re: Ln to Corp - Reg. Z? RESPA? RR Joker
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
AH HAH! I found it: now let the argument begin again?

here
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top Reply Quote Quick Reply Quick Quote
#1096868 - 12/12/08 10:34 PM Re: Ln to Corp - Reg. Z? RESPA? RR Joker
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
In that string, Randy states:
Quote:
If the borrower is a corporation, regardless of the purpose of the loan, it is organizational credit and is exempt from Regulation Z and RESPA.

I agree with him. If the loan is to a business, everything they do is a business purpose.

The string you linked to is about a Trust. A trust doesn't "DO" business. I think that can be different than a loan to a business. If I own a business and pledge business assets as collateral, the loan could be for personal reasons and covered by Reg Z and RESPA. You're mixing apples and oranges here.
_________________________
David Dickinson
http://www.bankerscompliance.com

Return to Top Reply Quote Quick Reply Quick Quote
#1096981 - 12/13/08 12:46 AM Re: Ln to Corp - Reg. Z? RESPA? David Dickinson
Anonymous
Unregistered

The borrower was the corporation. The loan purpose was to refinance the home of the corporation's president/owner (also had a similar one this week to a corp. to refinance the corporation's president's second home - occupied more than 14 days/year).

Had an attorney seminar about 2 years ago where their materials gave a similar example saying that it was the kind of instance where the loan was exempt from Reg Z but not RESPA (i.e. loan to corp. to purchase personal residence of Corp. President).

Return to Top Reply Quote Quick Reply Quick Quote
#1097002 - 12/13/08 01:32 PM Re: Ln to Corp - Reg. Z? RESPA? Anonymous
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
OK - since my name has been bandied about, I thought that I would chime in. The thread in which I made the statement in which I was quoted was made last February. Since that period of time, I have come to the personal conclusion that Dan was technically correct in his presentation.

The RESPA exemptions only cite "Business purpose loans. An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by Regulation Z, 12 CFR 226.3(a)(1). Persons may rely on Regulation Z in determining whether the exemption applies."

226.3(a)(1) states:"An extension of credit primarily for a business, commercial or agricultural purpose.", which eliminates all loans that are not consumer purpose.

It does not however include 226.3(a)(2): "An extension of credit to other than a natural person, including credit to government agencies or instrumentalities.", which is the organizational credit exemption.

As such, technically, I no longer believe that organizational credit is automatically exempt from RESPA and that the attorney at your seminar is correct. Organizational credit extended for consumer purposes appear to be covered. Whether that was the intent of RESPA or not, it is hard to say, but a strict reading of the regulations leads to no other conclusion. We all know how well HUD writes and interprets RESPA sick , it may be just another one of those oversights.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top Reply Quote Quick Reply Quick Quote
#1097111 - 12/15/08 01:48 PM Re: Ln to Corp - Reg. Z? RESPA? rlcarey
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Thanks,Randy, for chiming in! I 110% agree about what you said about HUD and it's interpretation...I also respect my liason at the FRB who agreed that, unfortunately, and as screwed up as the note/deed structure might be...RESPA would apply if the purpose was personal.

I've always drilled this: RESPA is purpose driven. Reg Z takes into consideration other factors.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top Reply Quote Quick Reply Quick Quote
#1097216 - 12/15/08 03:40 PM Re: Ln to Corp - Reg. Z? RESPA? Anonymous
Mint Julep Offline
Diamond Poster
Mint Julep
Joined: Oct 2007
Posts: 1,152
Tennessee
Originally Posted By: Anonymous
Refinance loan to corporation - security is 1-4 family residence (loan is at a different bank) used as a second home by the owners of the business - owners are guaranteeing the loan. Do you agree with my reasoning below?

1. Exempt from Reg. Z - loan to a buisness.

2. Not exempt from RESPA - consumer purpose

3. Not exempt from flood.

4. Not exempt from HMDA.

5. Exempt from formal appraisal - loan under $1 million and to a business. (meets defin. of business loan for appraisal req.)

Thanks for your input!


I would still like to know the defined purpose of this loan. What was the money used for? If it is a consumer purpose loan, why is it made to a corporation? Why not directly to the consumers who guaranty it, assuming they would be the beneficiary of the loan?
_________________________
Just another self-proclaimed expert ...

Return to Top Reply Quote Quick Reply Quick Quote
#1097226 - 12/15/08 03:48 PM Re: Ln to Corp - Reg. Z? RESPA? Mint Julep
Anonymous
Unregistered

Borrower: Corporation

Guarantor: Owners of corporation

Purpose: Refinance loan that was used to purchase the SFR of the corporation's owner. Loan is at a different bank. None of the funds were actually for the business - just the refinancing of that loan at the other bank.

Security: The SFR of the president.

Why not to the consumers: This is how the customer and the loan officer wanted to structure it (Perhaps a better rate? tax purposes? I'm told just to tell them how to do it and what they need to do, not ask why they are doing it that way.)

Return to Top Reply Quote Quick Reply Quick Quote
#1097413 - 12/15/08 06:41 PM Re: Ln to Corp - Reg. Z? RESPA? Anonymous
Mint Julep Offline
Diamond Poster
Mint Julep
Joined: Oct 2007
Posts: 1,152
Tennessee
In whose name is the property titled? The individuals or the corporation?
_________________________
Just another self-proclaimed expert ...

Return to Top Reply Quote Quick Reply Quick Quote
#1196219 - 06/04/09 08:25 PM Re: Ln to Corp - Reg. Z? RESPA? Anonymous
Anonymous
Unregistered

Loan is not RESPA since not to a natural person but to a corporation so not a consumer purpose loan.

Return to Top Reply Quote Quick Reply Quick Quote
#1196381 - 06/05/09 01:35 AM Re: Ln to Corp - Reg. Z? RESPA? Anonymous
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
Originally Posted By: Anonymous
Loan is not RESPA since not to a natural person but to a corporation so not a consumer purpose loan.


Not necessarily. It could be consumer purpose if the principals of the business are going to live in the property. RESPA exempts: "An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by Regulation Z, 12 CFR 226.3(a)(1)."

The exemption covering extensions of credit to other than a natural person, including credit to government agencies or instrumentalities is found in Reg. Z at 12 CFR 226.3(a)(2).
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top Reply Quote Quick Reply Quick Quote
#1196966 - 06/05/09 08:10 PM Re: Ln to Corp - Reg. Z? RESPA? rlcarey
Anonymous
Unregistered

A corporation can only act for its own purposes and those purposes cannot be for personal, family or household use. If it is borrowing the money (and repaying the loan) it is to advance the goals of the corporation - a business purpose - regardless if one of the benefits is a 2nd home for the shareholders; otherwise it is acting ultra vires. Not subject to Truth in Lending and not subject to RESPA

Return to Top Reply Quote Quick Reply Quick Quote
Page 1 of 2 1 2
Quick Reply:
HTML is disabled
UBBCode is enabled




Moderator:  MagicCity, P*Q, Truffle Royale