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#2150395 - 10/18/17 09:17 PM Regulation Z "Family Purpose" Definition
Banker75 Offline
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Joined: Oct 2015
Posts: 93
Can someone provide some clarification on what constitutes "family purpose" under Regulation Z? There is much discussion around my office on what is considered family purposes. For example, we have a loan request for a customer to refinance a condo, in which his daughter and her friends live in and pay rent back to the customer. The loan is non-owner occupied so to me this would be a business purpose loan; however, I have a lender that disagrees due to the fact of the daughter living there. He believes it would be consider consumer purpose. Any thoughts?

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#2150396 - 10/18/17 09:26 PM Re: Regulation Z "Family Purpose" Definition Banker75
rlcarey Offline
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Galveston, TX
If you have a documented rental payment history and it is at market rates, you have non-owner occupied rental property. Who the renters might be is not relevant. If it is just a statement by the owner or they are accepting $100 a month rent, then you have to judge if it is really for the benefit of the daughter - then as in all other circumstances, when in doubt disclose.

The down side is always related to choosing not to disclose.
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#2150436 - 10/19/17 01:36 PM Re: Regulation Z "Family Purpose" Definition Banker75
Banker75 Offline
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Joined: Oct 2015
Posts: 93
Thank you for your response!

Can you provide an example of a loan for "family" purposes as defined by Regulation Z? Personal and household is self explanatory; however, there is confusion amongst the employees of what constitutes "family". Does that make sense?

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#2150437 - 10/19/17 01:42 PM Re: Regulation Z "Family Purpose" Definition Banker75
RR Joker Offline
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The Swamp
Basically, it just means 'consumer' purpose in nature.

Often times, a parent may buy a condo for their child to live in while off to school. Those are typically not considered 'rental' properties and are for a 'family' purpose.

In the case above, there is actually rent being paid and you likely could consider that bona fide rental property, especially if the parent would be renting it anyway, regardless of who happens to be the renter.
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#2150465 - 10/19/17 02:41 PM Re: Regulation Z "Family Purpose" Definition Banker75
Richard Insley Offline
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Richard Insley
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Toano, VA
It helps if you think about this in broader terms than just housing-related credit. Maybe I'm getting a loan to pay off a parent's, child's, or other family member's debts, taxes, medical expenses, or other living costs. Or, maybe I need to borrow the cash necessary to post bail for Uncle Joe. Or, maybe Uncle Joe is starting a business and I have the "opportunity" to invest at the ground level. In all of these cases, I wouldn't borrow unless the ultimate beneficiary is a family member.
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#2150477 - 10/19/17 03:03 PM Re: Regulation Z "Family Purpose" Definition Banker75
Banker75 Offline
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Joined: Oct 2015
Posts: 93
That makes sense. Thank you so much for taking the time to respond and to explain it further for me!!!

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#2150929 - 10/24/17 01:48 PM Re: Regulation Z "Family Purpose" Definition Banker75
swiggles Offline
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.....just my two cents. At my prior bank, we considered ALL loans for a property to be occupied by a family member. to be consumer purpose. This takes away the guesswork, the analysis, the necessary file documentation support, etc, etc. My guess is that the lenders soon learned that if a family member was to occupy the property, not to put that fact in the file anywhere.
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#2150933 - 10/24/17 02:02 PM Re: Regulation Z "Family Purpose" Definition swiggles
Richard Insley Offline
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Richard Insley
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Toano, VA
Originally Posted By swiggles
we considered ALL loans for a property to be occupied by a family member. to be consumer purpose.
Regardless of what might be right or wrong after all the hairs are split, this is the safest and CHEAPEST way to go.
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