Thread Options
|
#2042105 - 10/02/15 02:24 PM
Comm Loan secured by Guarantor's Primary Res.
|
Platinum Poster
Joined: Sep 2007
Posts: 604
Mississippi, USA
|
Does TRID apply to a business purpose loan in a business name and the guarantor's primary residence is used for collateral?
_________________________
Lela Purvis, CRCM/CCBCO/CBAP
|
Return to Top
|
|
|
|
#2042126 - 10/02/15 02:52 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
Platinum Poster
Joined: Sep 2007
Posts: 604
Mississippi, USA
|
What about the "Special Rule for Commercial Purpose Loans†that TRID applies when commercial purpose loan and owner occupies property for more than 14 days…
_________________________
Lela Purvis, CRCM/CCBCO/CBAP
|
Return to Top
|
|
|
|
#2042135 - 10/02/15 03:04 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
Diamond Poster
Joined: May 2013
Posts: 1,069
Compliance Land
|
I think what you are talking about is in the commentary to 1026.3(a) and is in regards to specifically whether a property can be considered a non-owner occupied rental property or not.
Your example above would not be subject to Reg Z for two reasons. 1. It is business purpose and 2. because it is to a business
a) Business, commercial, agricultural, or organizational credit. (1) An extension of credit primarily for a business, commercial or agricultural purpose.
(2) An extension of credit to other than a natural person, including credit to government agencies or instrumentalities.
_________________________
How long until retirement??
|
Return to Top
|
|
|
|
#2042141 - 10/02/15 03:10 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
Platinum Poster
Joined: Sep 2007
Posts: 604
Mississippi, USA
|
So, if I have a business purpose loan made to a consumer secured by a 1-4 family dwelling (primary, secondary, rental, condo, etc.) that is occupied by the owner more than 14 days in the coming year, TRID applies?
_________________________
Lela Purvis, CRCM/CCBCO/CBAP
|
Return to Top
|
|
|
|
#2042143 - 10/02/15 03:11 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
10K Club
Joined: Dec 2000
Posts: 21,293
|
NO! TRID and any part of Z or RESPA or other consumer purpose only rules will never apply to a business purpose loan. (That leaves out flood, Reg B, etc. because I said consumer purpose only.) That rule relates to whether a property can be considered a non-owner occupied rental property and therefore a loan for a purpose related to that property is automatically considered business purpose. If the owners will occupy it for more than 14 days, the treatment under IRS rules changes and potentially changes under Z unless it is exempt under other exemption tests. Do not confuse loan purpose with that exemption rule. If the bank makes a business purpose loan, it does not matter what the collateral is...it could be their house, a rental property, or kitty litter. The loan remains business purpose and is not subject to Regulation Z and thus not subject to the integrated disclosures or to any part of Z or RESPA. Start with determining if the loan is business or consumer purpose. I did a webinar in July on just that topic. https://www.bankersonline.com/bankerstor...56dg0ag1rnrabf7_________________________
|
Return to Top
|
|
|
|
#2042177 - 10/02/15 04:15 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
Platinum Poster
Joined: Sep 2007
Posts: 604
Mississippi, USA
|
I am so sorry that this is not clicking!
In one of our MANY training classes for TRID we were given the example of a business purchasing a condo and the owners (natural persons) occupied it for more than 14 days would cause the loan to be considered a consumer loan.
1026.3 -- Exempt transactions. (a) Business, commercial, agricultural, or organizational credit. (1) An extension of credit primarily for a business, commercial or agricultural purpose.
(2) An extension of credit to other than a natural person, including credit to government agencies or instrumentalities.
Official Interpretation 4. Non-owner-occupied rental property. Credit extended to acquire, improve, or maintain rental property (regardless of the number of housing units) that is not owner-occupied is deemed to be for business purposes. This includes, for example, the acquisition of a warehouse that will be leased or a single-family house that will be rented to another person to live in. If the owner expects to occupy the property for more than 14 days during the coming year, the property cannot be considered non-owner-occupied and this special rule will not apply. For example, a beach house that the owner will occupy for a month in the coming summer and rent out the rest of the year is owner occupied and is not governed by this special rule. ( See comment 3(a)–5, however, for rules relating to owner-occupied rental property.)
_________________________
Lela Purvis, CRCM/CCBCO/CBAP
|
Return to Top
|
|
|
|
#2042215 - 10/02/15 05:40 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
Platinum Poster
Joined: Sep 2007
Posts: 604
Mississippi, USA
|
Final question...does anything change if the loan is made to an individual, not a business, but the purpose is a business purpose?
_________________________
Lela Purvis, CRCM/CCBCO/CBAP
|
Return to Top
|
|
|
|
#2042221 - 10/02/15 06:01 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
|
Business purpose trumps Regulation Z regardless of who the borrower is. But you have to analyze what the money is to be used for to determine whether it's business or personal purpose.
_________________________
John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
|
Return to Top
|
|
|
|
#2042227 - 10/02/15 06:07 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
|
TRID and Right of Rescission and HPML and ATR/QM are all parts of Regulation Z. If a loan is not covered by Reg Z because of an exemption in section 1026.3, it's exempt from TRID and Right of Rescission and HPML and .......
This is not new. It has been that way since Reg Z was a baby, way back in the middle of the 20th century.
That's why you ALWAYS start with determining the purpose and the borrower. Once you have them under control, you check for Reg Z applicability. And if you determine it's not subject to Reg Z, you don't have to worry about primary vs. vacation homes, whether it's a dwelling, and all that other splitting of hairs and pigeon-holing you need to comply with all the moving parts in Reg Z.
But PLEASE don't start your analysis with any reference to "investment property."
_________________________
John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
|
Return to Top
|
|
|
|
#2043433 - 10/08/15 07:54 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
|
Loans to non-natural persons are exempt from Reg. Z. See 1026.3(a)(2).
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
|
Return to Top
|
|
|
|
#2043895 - 10/13/15 04:08 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
|
If the primary borrower is a partnership, the organizational credit exemption under 1026.3 makes it exempt from Reg Z, notwithstanding the consumer purpose of the loan.
If the organizational credit exemption did not apply, the consumer purpose would make it subject to Reg Z. And TRID doesn't concern itself with the nature of the real estate that secures the loan. It doesn't care that the owners don't live in it or whether anyone lives there. Re-read the following. If the loan is subject to Reg Z, the words in red determine whether TRID applies.
(i).... In a closed-end consumer credit transaction secured by real property, other than a reverse mortgage subject to § 1026.33, the creditor shall provide the consumer with good faith estimates of the disclosures in § 1026.37.
1, Is it a consumer credit transaction? 2. Is it closed-end credit? 3. Is it secured by real estate (of any kind)?
If the answer is YES to those three questions, it is a TRID loan.
_________________________
John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
|
Return to Top
|
|
|
|
#2043896 - 10/13/15 04:09 PM
Re: Comm Loan secured by Guarantor's Primary Res.
Libby M.
|
10K Club
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
|
See 1026.2(a)(11) and its Commentary for the definition of a consumer.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
|
Return to Top
|
|
|
|
|
|