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#2269253 - 04/18/22 03:53 PM TRID or Not?
TeamComply Offline
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Husband and wife are requesting to purchase a property with two single family residences on it which includes 13 acres of land. Borrower is requesting a 1 year interest only loan to purchase property as he is still in the beginning stages of figuring out how he wants to develop the additional acreage. Once development plans are final, he will refinance into permanent financing. Husband works for (and partially owns) a company that manages numerous commercial properties, but this loan would be made in his and his spouse's names, not the business name. Borrower is pledging his current primary residence as collateral, once the other property is purchased he will move into one of the single family residences on the 13 acres. Lender is classifying this as a business purpose loan.

We don't typically do TRID covered loans, but it seems this is a TRID covered loan request. Are there any TRID exemptions this could fall into?

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TRID - TILA/RESPA Integrated Disclosures Rule
#2269261 - 04/18/22 04:03 PM Re: TRID or Not? TeamComply
Dan Persfull Offline
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Borrower is pledging his current primary residence as collateral, once the other property is purchased he will move into one of the single family residences on the 13 acres.

If one of the purchased dwellings will become the borrower's primary residence after the purchase then what is the basis for classifying this as a business purpose loan?
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#2269262 - 04/18/22 04:07 PM Re: TRID or Not? TeamComply
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I believe the lender is using the business purpose reason because this borrower intends to develop the additional acreage on the property.

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#2269272 - 04/18/22 04:34 PM Re: TRID or Not? TeamComply
Dan Persfull Offline
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From 1026.3

3. Factors. In determining whether credit to finance an acquisition—such as securities, antiques, or art—is primarily for business or commercial purposes (as opposed to a consumer purpose), the following factors should be considered:

i. General. A. The relationship of the borrower's primary occupation to the acquisition. The more closely related, the more likely it is to be business purpose.

B. The degree to which the borrower will personally manage the acquisition. The more personal involvement there is, the more likely it is to be business purpose.

C. The ratio of income from the acquisition to the total income of the borrower. The higher the ratio, the more likely it is to be business purpose.

D. The size of the transaction. The larger the transaction, the more likely it is to be business purpose.

E. The borrower's statement of purpose for the loan.
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#2269281 - 04/18/22 05:02 PM Re: TRID or Not? Dan Persfull
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Thanks Dan. So we don't have a leg to stand on in saying this is business credit the way it is currently wanting to be set up?

If this loan were to be booked in the name of the business the husband owns, would that make a difference as far as TRID coverage goes?

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#2269283 - 04/18/22 05:30 PM Re: TRID or Not? TeamComply
Dan Persfull Offline
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Look at (i)A and B.

If you can make an argument they are purchasing the property primarily for business purpose (what are the near future developing plans) then I think you may have the basis to exempt it.
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#2269350 - 04/19/22 05:38 PM Re: TRID or Not? TeamComply
RVFlyboy Offline
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The only challenge I see to that, Dan, is the wife's presence on the loan. It was not mentioned that she has any involvement in the business, so that could be a challenge to this. Not saying it's not doable, just that it may be a challenge.
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#2269391 - 04/20/22 02:34 PM Re: TRID or Not? RVFlyboy
John Burnett Offline
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Originally Posted by RVFlyboy
The only challenge I see to that, Dan, is the wife's presence on the loan. It was not mentioned that she has any involvement in the business, so that could be a challenge to this. Not saying it's not doable, just that it may be a challenge.

In the first post, H & W are requesting the loan. Admittedly, from that point on, a lot of the narrative says "Borrower is ..." or "He is ..." That may just be the way OP writes informally here. I think the loan app is joint based on first sentence in first post. Hopefully, that's documented.
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#2269423 - 04/20/22 08:04 PM Re: TRID or Not? John Burnett
RVFlyboy Offline
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Originally Posted by John Burnett
Originally Posted by RVFlyboy
The only challenge I see to that, Dan, is the wife's presence on the loan. It was not mentioned that she has any involvement in the business, so that could be a challenge to this. Not saying it's not doable, just that it may be a challenge.

In the first post, H & W are requesting the loan. Admittedly, from that point on, a lot of the narrative says "Borrower is ..." or "He is ..." That may just be the way OP writes informally here. I think the loan app is joint based on first sentence in first post. Hopefully, that's documented.
Understood, John. I wasn't trying to get at the issue of whether the spousal signature was appropriate or not. I was simply trying to state the case that the fact that it was an application from a H&W and therefore it might be a bit of a stretch to relate it as a business purpose loan related to H's business activities that the W is not involved in as an owner or manager (at least from what was posted).
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#2269432 - 04/20/22 09:18 PM Re: TRID or Not? TeamComply
John Burnett Offline
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Agreed.
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#2269444 - 04/21/22 01:25 PM Re: TRID or Not? TeamComply
Dan Persfull Offline
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I understand both points but - if they (2 individuals) are applying for joint credit and the purpose of the loan is primarily a business purpose and if one of the applicants meets the criteria to qualify for the business purpose then why would the transaction lose it's business purpose exemption simply because they applied for joint credit?

1026.3 does not state all applicants have to meet the business purpose test. In this case based on the information provided for why they were considering the request as a business purpose I tend to agree they have a basis for excluding it based on the one borrower's primary occupation and .26(3)(i)(a).

Of course a lot of this is speculation because we have no idea what the development plans of the borrowers are. Those development plans would have to be business in nature.
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