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#2229456 - 01/22/20 10:11 PM Occupancy Conundrum
bOaty Offline
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This one is a first for us.

Our borrowers are an LLC (applicant) and a person (Co-applicant), they are buying a 6 unit apartment building and the co-applicant will be living in one of the units. Our write up says that the borrower is a 75% borrower and the person is a 25% borrower.

What would the occupancy be?
Are there any consumer purpose loan implications with this?
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#2229473 - 01/23/20 02:11 PM Re: Occupancy Conundrum bOaty
Dan Persfull Offline
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6. Owner Occupancy. Indicate whether the property to which the loan or loan application relates is to be owner-occupied as a principal residence by entering the applicable Code from the following:

Code 1—Owner-occupied as a principal dwelling

Code 2—Not owner-occupied as a principal dwelling

Code 3—Not applicable

a. For purchased loans, use Code 1 unless the loan documents or application indicate that the property will not be owner-occupied as a principal residence.

b. Use Code 2 for second homes or vacation homes, as well as for rental properties.

c. Use Code 3 if the property to which the loan relates is a multifamily dwelling; is not located in an MSA; or is located in an MSA or an MD in which your institution has neither a home nor a branch office. Alternatively, at your institution's option, you may report the actual occupancy status, using Code 1 or 2 as applicable.
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#2229486 - 01/23/20 04:40 PM Re: Occupancy Conundrum bOaty
bOaty Offline
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Apparently I was overthinking this.

Thank you, Dan.
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#2229487 - 01/23/20 04:45 PM Re: Occupancy Conundrum bOaty
Skittles Offline
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May I ask how you document the co-borrowers as 75%/25%? Curiosity you know.....
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#2229489 - 01/23/20 04:56 PM Re: Occupancy Conundrum bOaty
bOaty Offline
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Right? I don't see it anywhere but the write-up so I don't see how that would be enforceable.
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#2229491 - 01/23/20 05:11 PM Re: Occupancy Conundrum bOaty
bOaty Offline
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Dan, may I ask where you got that information? I have again gone to the FIG, SEG and GIR and don't find anything but the following on investment properties:


Investment property. A property is an investment property if the applicant or borrower
does not occupy the property. For example, if a person purchases a property, does not
occupy the property, and generates income by renting the property, the property is an
investment property. Similarly, if a person purchases a property, does not occupy the
property, and does not generate income by renting the property, but intends to generate
income by selling the property, the property is an investment property. Comment 4(a)(6)-4.

If a corporation purchases a property that is a Dwelling and uses it for the long-term
residence of its employees, the property is an investment property, even if the corporation
considers the property as owned for business purposes rather than investment purposes,
does not generate income by renting the property, and does not intend to generate income
by selling the property. If the property is for transitory use by employees, the property
would not be considered a Dwelling. Comment 4(a)(6)-4.
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#2229492 - 01/23/20 05:13 PM Re: Occupancy Conundrum bOaty
bOaty Offline
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Nevermind, I found it in Appendix A.

Thank you.
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#2229501 - 01/23/20 06:09 PM Re: Occupancy Conundrum bOaty
Skittles Offline
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And I would almost bet your documents state that the co-borrowers are joint and severally liable.
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#2229528 - 01/23/20 07:26 PM Re: Occupancy Conundrum bOaty
Dan Persfull Offline
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May I ask how you document the co-borrowers as 75%/25%?

our write up says that the borrower is a 75% borrower and the person is a 25% borrower.

Assuming they meant borrower and not owner my guess would be the LLC is guaranteeing 75% of the debt and the individual is guaranteeing 25% of the debt using a limited guaranty agreement.
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#2229564 - 01/24/20 01:04 AM Re: Occupancy Conundrum bOaty
bOaty Offline
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That sounds likely. If I wasn't so buried I would go back and check but since that doesn't affect my HMDA reporting I will pass.

Scrub season is upon us!
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#2229577 - 01/24/20 02:41 PM Re: Occupancy Conundrum bOaty
swiggles Offline
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How is the property deeded? Is the "person" and the entity co-owners on the deed?
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#2229642 - 01/24/20 10:51 PM Re: Occupancy Conundrum bOaty
Dan Persfull Offline
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Swiggles if you're asking in relation to occupancy then in this case it wouldn't matter whether the LLC or the individual owned the property. It's a 6 unit apartment building which makes it a multi-family dwelling.
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