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#1710289 - 06/14/12 02:26 PM Commercial or Consumer Loan?
SWFLBanker Offline
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Joined: May 2012
Posts: 33
If a borrower signs the deed over for his primary residence to his business, and we refiance existing consumer mortgages, both first and second in the business name. Is this a commercial or a consumer loan? The property will still be the business owners primary residence. Do we need for follow all consumer related regulations for these types of loans?

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#1710304 - 06/14/12 02:37 PM Re: Commercial or Consumer Loan? SWFLBanker
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
You'll be exempt from Reg Z as it exempts entity's...but RESPA does not.
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My opinion only. Not legal advice.

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#1710344 - 06/14/12 03:18 PM Re: Commercial or Consumer Loan? SWFLBanker
SWFLBanker Offline
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Joined: May 2012
Posts: 33
Thanks for the reply. Reg. Z requires us to list the purpose of the loan. How would that effect these loans if the business is not operated out of the residence? I'm not sure that we could give these types of loans a business purpose.

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#1710350 - 06/14/12 03:27 PM Re: Commercial or Consumer Loan? SWFLBanker
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,292
Much depends upon what is actually being done. Most businesses do not own the principal's home. What is actually occurring here...will the principal pay rent? If not rented will the benefit of the home being paid for by the business be reported as income? Why are they doing this...does the business need some writeoffs like depreciation on a rental property?

I can't just transfer my home to my business without tax consequences for my business.

You really need to understand the transaction to determine purpose.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1710397 - 06/14/12 04:05 PM Re: Commercial or Consumer Loan? SWFLBanker
SWFLBanker Offline
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Joined: May 2012
Posts: 33
I'm not sure why the business owner would want to do this. I just want to make sure that we follow any consumer regualtions that might apply to this type of loan. I tend to always fall to the side of caution with anything may be questionable. I just keep going back to this is a primary residence for the business owner and it's not a mix use. Thats where I question our ability to provide business as a purpose.

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#1710425 - 06/14/12 04:31 PM Re: Commercial or Consumer Loan? SWFLBanker
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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Posts: 21,292
I always want to know what they are doing because if they are playing fast and loose with tax laws you could have a problem borrower and the bank should not assist them in their shenanigans.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1710469 - 06/14/12 05:28 PM Re: Commercial or Consumer Loan? SWFLBanker
SWFLBanker Offline
Junior Member
Joined: May 2012
Posts: 33
I agree I will make sure that I bring that to the loan officers attention. Thanks again. This is the first time I've posted here, and it really is a great advantage.

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