Assume a residential structure (single family home) is used solely for business purpose. The owner would like to refinance the existing mortgage loan secured by the structure. Do the Reg. B appraisal notice and early delivery timing requirements apply? That is, does the use of the property matter or would the transaction be covered because the structure was designed as a residence?

Since it's used as a business, it's not a home.

I wouldn't apply the Reg B Appraisal requirements to the application.

Well, since you are calling your structure a "residential structure" I wanted to add a few citations for consideration.

Remember, the appraisal delivery rule applies to a dwelling, which is defined in 1002.14(b)(2) as a "residential structure that contains one to four units whether or not that structure is attached to real property. The term includes, but is not limited to, an individual condominium or cooperative unit, and a mobile or other manufactured home."

Unfortunately, the 2013 final rule isn't extremely clear on what they mean by "residential structure," as all it says is this: The definition of “dwelling” in § 1002.14(c) requires that the unit be a “residential structure”, but does not require that it be “owner-occupied.” As a result, the requirements of the final rule can apply to transactions involving one-to-four-unit residential structures that may be business or commercial in nature, including for investment purposes. Beyond this, whether a transaction meets the definition will depend on the facts and circumstances. Because transaction structures can vary widely, the Bureau does not believe it would be efficient or appropriate to try to address all such variations in the text of the rule or the commentary.

Without all of the "facts and circumstances" I'm not sure we can fully determine whether the structure is a "residential structure" that would be subject to the rules. Therefore, if you think your structure is a "residential structure," the conservative approach would be to comply with 1002.14.

I'd give it in this situation to be safe, but I also don't think it would apply as the structure is no longer "residential" or a "dwelling" if it's not being used as housing. That said, an examiner might disagree, especially if the appraisal is on a 1004 or your files refer to the structure as "residential."

I have wondered why we get so many questions on this topic. Is it because there is really such angst over whether to provide the disclosure and appraisal copy? Or is it because lenders often forget the disclosure and/or the appraisal copy when it is required, and they are trying to justify their compliance lapse?

After all, it's not that costly to provide either the disclosure or the copy, is it?