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#2151757 - 10/31/17 02:56 PM Home Equity for Business Purpose
George Offline
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Borrower owns home free and clear. Using proceeds to start a gym. Even though we are taking his primary as collateral on the loan, this wouldn't be considered HPML, right? I am not sure if Home Equity trumps business purpose.

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Lending Compliance
#2151769 - 10/31/17 03:33 PM Re: Home Equity for Business Purpose George
John Burnett Offline
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John Burnett
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Cape Cod
Consider that, other than a couple of limited provisions relating to business credit cards, the criterion that an extension of credit be for personal, family or household purposes is the key to whether any part of Regulation Z applies.

If it is a loan for a business purpose, the regulation doesn't apply, and therefore the HELOC provisions of the regulation don't apply, there is no rescission right, HPML isn't an issue, ..... unless your state has a law stating otherwise.
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#2151772 - 10/31/17 03:51 PM Re: Home Equity for Business Purpose George
George Offline
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Thank you, John, I appreciate it sir!

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#2152140 - 11/02/17 06:11 PM Re: Home Equity for Business Purpose George
George Offline
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Posts: 364
I have a follow up on this: if we collected for escrow at closing under the impression that escrow was required and the borrower (in this case) ultimately decides that they do not wish to keep escrow, then do we need to still set up the escrow and follow the escrow closing rules before refunding the borrower their money?

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#2152161 - 11/02/17 06:50 PM Re: Home Equity for Business Purpose George
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
If the loan is for a business purpose it is exempt from Reg. Z and RESPA.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2152199 - 11/02/17 09:12 PM Re: Home Equity for Business Purpose George
George Offline
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Thank you, Dan, I appreciate your help. Let me expand on my original post:

The loan is closed, and we did collect for escrow because my LO/ALA was told that we HAD to escrow for this loan due to state law and chose not to verify that information with me.

So, to clarify, since we did in fact collect money to be held in escrow, do we HAVE to set it up while trying to figure out if the borrower wants to keep escrow? If so, then we must follow the rules regarding timing of closing an escrow to refund their money?

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#2152232 - 11/03/17 01:12 PM Re: Home Equity for Business Purpose George
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
If the loan is not subject to the regulation then it is exempt from all sections of the regulation, with the exception of some credit card requirements under Reg. Z.

How you handle an escrow not subject to the Federal regulation is a matter of state law, if applicable, and/or an agreement between your FI and the borrower.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2152247 - 11/03/17 01:43 PM Re: Home Equity for Business Purpose George
Richard Insley Offline
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Richard Insley
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Toano, VA
Originally Posted By George
my LO/ALA was told...due to state law
Is it possible that the root of this question is actually an investor requirement which your employee has confused with a legal requirement (state or federal)?
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#2152324 - 11/03/17 08:14 PM Re: Home Equity for Business Purpose George
George Offline
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Dan, perfect, thank you sir!

Richard, I'm not sure I fully understand your question. We are a portfolio lender, so we don't have any investor influence; if that is what you mean??

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#2152338 - 11/04/17 12:03 AM Re: Home Equity for Business Purpose George
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
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Toano, VA
Yes, that's all I had in mind. Employees pick things up along the way to their current jobs. If they need to be corrected or retrained, it can be helpful to pinpoint the source of misinformation.
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