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#1806274 - 04/18/13 09:48 PM From commercial loan to consumer loan
NegGhostrider Offline
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NegGhostrider
Joined: Mar 2011
Posts: 93
We have a customer where we made him a commercial loan for a non-owner occupied rental property. He has since sold his residence and has moved into this rental property and assumed it as his personal residence. The loan is now up for extention/modification and we are trying to find a way to convert this from a commercial loan to a consumer loan while keeping the same rate. Is this possible, or should we just re-write the whole loan?

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Lending Compliance
#1806289 - 04/18/13 10:10 PM Re: From commercial loan to consumer loan NegGhostrider
rlcarey Offline
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rlcarey
Joined: Jul 2001
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Galveston, TX
How you convert the loan is between you and your legal counsel. If it results in being classified as a refinance under 1026.20, full disclosures will be required.
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#1806295 - 04/18/13 11:55 PM Re: From commercial loan to consumer loan NegGhostrider
West Coast Comp Offline
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West Coast Comp
Joined: Jun 2010
Posts: 350
Lost in the rain.
I agree with rlcarey, but it will probably be easier and cleaner to just redo the entire loan.
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#1844687 - 08/21/13 08:58 PM Re: From commercial loan to consumer loan NegGhostrider
Rdy2Retire Offline
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Joined: Dec 2004
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GA Mountains
Would a Right of Rescission be required when re-working the loan from commercial to consumer? Just re-working existing balance - no new money involved?

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#1844706 - 08/21/13 09:10 PM Re: From commercial loan to consumer loan NegGhostrider
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
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I would apply rescission because it was not originally given.

Re pricing, if the bank is trying to keep a higher commercial rate on a now consumer purpose loan, consider fair lending. If the borrower qualifies for your consumer product and rate, on what basis would you justify charging a higher (or lower if that is the unlikely case) rate?
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#1844918 - 08/22/13 03:17 PM Re: From commercial loan to consumer loan NegGhostrider
Rdy2Retire Offline
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Joined: Dec 2004
Posts: 117
GA Mountains
Thanks Kaybee. I was also leaning toward giving the ROR. We are pricing as consumer.

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