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#2160529 - 01/16/18 05:03 PM Servicing Rules for commercial turned consumer ??
LK Offline
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We have a customer who has 2 1-4 family secured loans with us that are both delinquent. Loan A was originally closed as a consumer loan because it was our customer's primary dwelling. Loan B was closed as a commercial loan as it was an investment property. Customer now rents out the property attached to loan A and lives in the property attached to loan B. Do we provide consumer mortgage servicing rules to Loan B now that it is her primary dwelling or do we continue to treat it as a commercial loan exempt from the mortgage servicing rules because that was how it was originated?

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Mortgage Servicing Rules
#2160534 - 01/16/18 05:09 PM Re: Servicing Rules for commercial turned consumer ?? LK
rlcarey Online
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rlcarey
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Galveston, TX
Loan B was closed as a commercial loan as it was an investment property.

The regulations do not define "investment property". Did you mean a rental property??
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#2160614 - 01/16/18 08:34 PM Re: Servicing Rules for commercial turned consumer ?? rlcarey
LK Offline
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Yes, sorry it was treated as a rental property.

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#2160818 - 01/17/18 10:38 PM Re: Servicing Rules for commercial turned consumer ?? LK
LK Offline
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I also realized I failed to mention that both Loan A & Loan B are now in default. Our Legal is advising us that we go off of the purpose as of consummation and since Loan B's original purpose was commercial, we do not need to follow the mortgage servicing rules (i.e. loss mitigation/foreclosure rules specifically). Additionally, by that same logic, Loan A would then not be covered under the 1024.39 & 1024.41 because the collateral is no longer our customer's primary dwelling.

This just doesn't seem quite right to me, I would think that based on the facts and circumstances we should afford the mortgage rule requirements of 1024.39 & 1024.41 to Loan B because it is her primary dwelling. Maybe I'm wrong but I sure would appreciate any info you can provide.

Thank you!

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#2160819 - 01/17/18 10:48 PM Re: Servicing Rules for commercial turned consumer ?? LK
rlcarey Online
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rlcarey
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Galveston, TX
Go with your Legal advice. Whether or not a loan is covered by the regulation is determined at the time the loan is made. An originated commercial loan does not morph into a consumer loan because of a change in the use of the property.
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#2160855 - 01/18/18 02:13 PM Re: Servicing Rules for commercial turned consumer ?? LK
LK Offline
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Thank you Randy! Very much appreciate the advice.

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#2160876 - 01/18/18 03:39 PM Re: Servicing Rules for commercial turned consumer ?? rlcarey
John Burnett Offline
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John Burnett
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Originally Posted By rlcarey
Go with your Legal advice. Whether or not a loan is covered by the regulation is determined at the time the loan is made. An originated commercial loan does not morph into a consumer loan because of a change in the use of the property.


Assuming, of course, that the decision was valid to treat it as a commercial loan in the first place.
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