I dug through a bunch of threads on this topic, but none of them seem to be close enough to this situation for me to draw a good conclusion. Please forgive me if it's answered somewhere and my google searches failed me.

Man and his ex-wife bought a house for the ex-wife to live in (they were ex's at the time of purchase). The man never lived there. Now he would like to refinance, buy out the ex-wife's interest, and rent the property out. Does RESPA apply?

Part of me thinks NO because the man is basically buying 1/2 of a property that will be used as a rental property, and he has never used the property as his principal residence. The other part of me wonders since it was the ex-wife's principal dwelling, we can't count the property as a rental yet. Sigh.

Purchase of rental property - exempt from RESPA and TIL.

That's my two cents.

If there were new money and that new money were being used for business purpose, i'd be more apt to exempt. Since the original loan was consumer purpose and there's no language about consumer purpose loans later being re-written for business purpose (but there IS language about business purpose loans later being re-written as consumer purpose), i think you have to default back to the original purpose of your loan, which was consumer purpose.

Actually...wait a sec. I guess there would be new money; the money he's going to pay off his ex with. I think looking at it that way, i agree with swiggles.

Gosh....I don't think I can bear to be shot down twice in one day.

So I look to the future use of the property (as rental) versus what it was used for before?

I think the fact that the purpose of the loan is to purchase (buy out the other owner) what will be non-owner occupied rental property, even though there's an original consumer purpose loan that is being refinanced, would allow the business purpose exemption. Of course, you could also disclose and treat it as consumer purpose; that would be your choice. That's how i'm seeing it.

So if your scenario was different.....guy owns a house where he lives and has bought another house, living in it, and wants to refinance the first house, announcing that it's now rental property, that would still be a consumer purpose loan. The rental property business exemption only applies to the purchase, improvement or maintenance of rental property.....not a refinance.

There is a subtle difference in the words "maintenance" (which you used) and "maintain" (which is in the regulation), as some would consider the refinance of rental property to be part of "maintain". Otherwise, you would be saying that every refinance of a rental house would be covered under the regulation???

It is a new obligation. Each obligation stands on it's own, such is why they talk about business credit later refinanced for personal puposes.

Right...sorry....the word is "maintain." So you think that a personal residence refinanced as rental property could be exempt?

Well, as I said, I think that each transaction stand on it's own. If a business loan can become a consumer loan - why not the other way around? If I buy a principal residence and later move out of it and establish a different principal residence then refinance the first house with cash out, you don't give me the right of rescission.

Thank you so much for all of your responses. I feel like the lender and I can have a good discussion now.

You're joking, right?

This particular lender is on my good side.