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#2270738 - 05/20/22 07:57 PM Loan To LLC
parr04 Offline
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Joined: Aug 2004
Posts: 391
oklahoma
We are making a loan to an LLC secured by two residential rental properties.
The proceeds of the loan will be used for equity in a home purchased by the owner of the LLC's son.
The loan is to be paid off once the son's current home sells.
I believe this to be consumer purchase loan subject to TRID requirements.

Am I wrong?

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TRID - TILA/RESPA Integrated Disclosures Rule
#2270741 - 05/20/22 08:23 PM Re: Loan To LLC parr04
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 80,325
Galveston, TX
So, it come down to that the LLC is giving money to the son? Apparently, there is some reasonable business purpose for a corporation to do that? If the loan is to the LLC, is the LLC not able to do anything with the money they want to as long as the bank agrees? I fail to see the consumer purpose in this loan. I do see that people are playing loosely with corporate assets.
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#2270742 - 05/20/22 08:37 PM Re: Loan To LLC parr04
parr04 Offline
Gold Star
Joined: Aug 2004
Posts: 391
oklahoma
I can't argue with your thinking on any point.
Of course I am not the lender in this case but when I see loan proceeds (official check) made payable to closing company for a down payment relating to a primary residence purchase and the loan is secured by dirt I automatically think TRID.

Thanks for you thoughts.

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#2270745 - 05/20/22 08:57 PM Re: Loan To LLC parr04
Andy_Z Offline
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Andy_Z
Joined: Oct 2000
Posts: 27,590
On the Net
If the son was on the loan I'd see a consumer use but in the way it's being done, it's a loan to a business which is not using it for a consumer purpose - directly anyway. One might argue it is making a consumer loan with the funds. I suppose the banker in me shakes my head like Randy (but sans all the hair you don't see in his avatar) but I also see some of our old customers. They formed an LLC because they were told it may preserve personal assets but they run it like a sole prop because, well it's their money!.
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#2270783 - 05/23/22 07:23 PM Re: Loan To LLC parr04
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,862
Cape Cod
I recently got one of those "join us for a gourmet meal at Jill's Diner and learn how to protect your assets from probate and the government" mailers. Enclosed was a list of things I would learn. Item 3 on this particular list was "Why every estate plan should include an LLC."

It's clear that the estate planning industry has latched on to the idea that LLCs are key features for estate planning involving real estate. At least that's the case here in Massachusetts. If I ever decide to go to one of these marketing events, I'll pay attention to the LLC discussion and report back here. So far, a little online research shows that some attorneys are talking about a family trust being the owner of a single-member LLC to operate a business to protect the family from debts of the business and to provide for continuation of the business in the event of the grantor of the trust.

Until then, I'm with Randy. I think it's tenuous.
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