We have a Commercial loan secured by a home. We are getting ready to renew the loan, however it is now consumer purpose. Do we need to provide disclosures?

Yes. And, ROR.

The commentary states:


6. Business credit later refinanced. Business-purpose credit that is exempt from the regulation may later be rewritten for consumer purposes. Such a transaction is consumer credit requiring disclosures only if the existing obligation is satisfied and replaced by a new obligation made for consumer purposes undertaken by the same obligor.

Kathleen, is it best to "move" a loan such as this to the consumer loan side so that moving forward all consumer reg requirements are met or is it okay to keep the loan in the commercial area?

I would transfer the loan to keep it in the correct portfolio and avoid problems.

Great. Thank you.

How about this:

Borrower gets a loan to start a tavern and secures it with a 1-4 family rental. Original note was a three year balloon. At maturity, the note is refinanced with a new note but now the borrower is living in one of the apartments in the 1-4 family property. No new money was given, just a renewal of the previous business purpose loan. Still business purpose??

Yes. Nothing changed as to loan purpose.