Did a loan for an individual to purchase a house to resell at a later date. Borrower owns a roofing company and mini-storage. Did Reg Z disclosures (not rental property-not borrowers line of business) Reported rate spread on LAR because it was subject to Z.

Examiners telling me that any home purchase if not principal or secondary residence is business purpose therefore exempt from Z and I should not have reported spread.

Any opinions?

They are wrong! Ask them for a citation to support that claim.

The loan was not made to any of the businesses. It was made to a consumer, for what I would assess is 'personal' purposes and therefore subject to Reg Z.

Wow!!! I wish they WERE right....would sure make things simpler!!!

What they provided me was all the reg z commentary that isn't specific except for rental property being excluded.

They argue that the borrower purchased it for investment purposes intending to make a profit therefore it is business purpose.

Any suggestions on how to defend this? Any help is greatly appreciated!!

It's a personal investment subject to regulation z.....unless the borrower regularly deals in investment property purchase and resale. This is blowing my mind!!!

Agree with swiggles. We would consider that consumer purpose unless they had Schedule C or other evidence of being in the business to buy/sell.

Tell them you used the five factors listed in 226.3(a) - Comment 3 and determined that the loan was not business purpose:

A. The relationship of the borrower's primary occupation to the acquisition. The more closely related, the more likely it is to be business purpose.

The individual is a roofer and runs a mini-storage facility and does not flip houses for a living.

B. The degree to which the borrower will personally manage the acquisition. The more personal involvement there is, the more likely it is to be business purpose.

He might manage the acqusition - so this might be a push.

C. The ratio of income from the acquisition to the total income of the borrower. The higher the ratio, the more likely it is to be business purpose.

How much is he projected to make verses his other income from roofing and mini-storage - probably not significant

D. The size of the transaction. The larger the transaction, the more likely it is to be business purpose.

Not really a factor.

E. The borrower's statement of purpose for the loan.

Probably to buy a house - not that much of a factor.

They really need to find something else to worry about as they are in left field on this one. The Bank could easily determine that this is a personal investment rather than a business purpose transaction.

Don't you love having to train examiners?

I disagree. I say let the examiners run wild with this. Let them spend hours and hours researching every possible nuance of this. Ask for a detailed memo with their position that you can take to senior management. Let them spend more hours and hours expanding their sample and looking for other similar transactions to try to establish a pattern and practice. Let them go to Washington for a full on legal review. Go for it!

Because the more time they waste with this ridiculous issue, the less time they will have to review something really troublesome. Like RESPA.

Good point and noted for use in future strategies

tooo funny!

Made my day.....thanx.

Examiners scheduled to arrive Feb 7th ------I'll make a point to remember your advice!

LOL!!! Love this!!