We've been having some debate on whether or not the following is a TRID loan:

A consumer is wanting to build a pole barn shed on property they currently own. Neither the pole barn, nor the property lot is their primary residence. The pole barn would just be used as storage for the customer. The ground would secure the loan. This is a closed-end transaction that is not a reverse mortgage.

To my understanding, this is indeed a TRID loan because it's a consumer purpose closed-end transaction secured by the real estate. I don't see how a pole barn shed for personal storage would indicate a commercial, business, or agricultural purpose, and I don't believe whether it's a principal residence or not even matters. The reg says, "most closed-end consumer credit transaction secured by real property," with no mention of, "primary residence."

So is this a TRID loan? If not, why? Thanks.

Consumer purpose and secured by DIRT (TRID spelled backwards) and you have a TRID loan.

I'm with you.....TRID coverage is pretty simple. Closed-end consumer credit secured by dirt. Sounds to me like that's what you are looking at here.

Thanks for the responses. I'm with you guys. I thought it was pretty cut-and-dry about it being a TRID loan.

But then after more research this morning, in one of my books from the Real Estate Institute, it says this:

"Business or commercial purpose is further defined by 12 CFR 1026.3.a as "an extension of credit, primarily for a business, commercial, or agricultural use." This could include a non-owner-occupied home when credit is extended to purchase, refinance, or rehabilitate the non-owner occupied property. The test of an owner occupancy or business purpose loan is the number of days that an owner occupies the property. If an owner will occupy the home for more than 14 days, the exemption from TILA regulations for the property is not applicable. For example, if a borrower purchases a cabin in the mountains and will occupy the home during the summer months, the exemption for complying with TILA does not apply."

That paragraph is gives me some doubt about being a TRID loan, which is why I hopped on here.

I don't see anything in that section that should be problematic for this loan and it's TRID determination. That just seems like a generic statement about business and ag. exemptions from Reg. Z, such as loans to purchase, improve, or maintain non-owner occupied rental property.

If the owner occupancy section is troubling you, i wouldn't let it.......that's specifically talking about owner occupancy when it comes to rent homes. It has nothing to do with anything else.

I might own the 7-11 on the corner. I come in and want to borrower $10,000 to take my family to Disney World and pledge the convenient store.

Consumer purpose + DIRT = TRID

The underlying real property really has nothing to do with the decision.

Ok. Thanks again, guys! Just like you said rlcarey, I thought it was as simple as consumer purpose + dirt = TRID, case closed. But the other side in this debate was adamant about it not being TRID, so I wanted to be 1000x sure it was. Thanks!

I'm getting tripped up on purpose. The borrower has an existing loan with us for his cabin and the collateral for that loan is a farm (ag income). The borrower would like to refinance that loan, add funds for farm carry over debt. The lender states the sole purpose to refi is the farm carry over debt but the cabin refi amount is more than the amount of the carry over debt. We would look to purpose (business) and not majority of funds?

Official Interpretation

3(a) Business, Commercial, Agricultural, or Organizational Credit

1. Primary purposes. A creditor must determine in each case if the transaction is primarily for an exempt purpose. If some question exists as to the primary purpose for a credit extension, the creditor is, of course, free to make the disclosures, and the fact that disclosures are made under such circumstances is not controlling on the question of whether the transaction was exempt.

Thank you Randy. We will discuss further with the lender.

Yeah, it's a business decision based on the scenario. But, you could make a valid case that because the refinance amount, which is for consumer purpose, is higher, the consumer purpose predominates. I would say this matters more if the existing loan is at another bank. Majority of funds does play a role in the purpose. It's not just restricted to what the cash-out is used for.