Hello!

New forum member here, and I've been searching endlessly to understand/find past topics on these. I previously worked for a large bank where I only originated Consumer Residential loans. Everything was cut and dry, always TRID and usual disclosures, etc. I didn't have to worry much about compliance except the 3 day rule. Everything was built for me. I moved to smaller, local bank, and I'm lost doing Commercial loans, HMDA, etc. We were previously exempt under HMDA, since we did less than 100. Now we are screwed into reporting.

Anyhow, I've really tried to focus on the actual purpose of the loan. I've seen in other threads where an LLC can't be doing a "consumer-purpose" loan and the arguments for/against. I've gotten myself confused between what is required for TRID, Reg Z, Reg X, RESPA, on and on with all of these rules.

I have an LLC (between h/w) where they purchased an investment property in cash. They have since taken on a lot of credit card debt due to buying that house in cash. They also have other rental properties. They want to cash out from the rental property, and loan will be LLC as borrower (with both of them being Guarantors). While this is personal debt (credit cards in their personal names), the debt is basically due to buying the investment property with cash, originally. It has been owned less than 6-12 months. I'm not specifically sure if the cards were used to improve the property, etc.

I've deemed this exempt from Reg Z (and then TRID) since it is not a natural person. I was treating this as just a regular Commercial note and provided the Appraisal Notice within 3 days of full application, and just a general, in-house cost estimate. Now, I'm getting worried that RESPA or some other disclosures were involved, and I needed to track receipt, etc. What do I do?

In my opinion, my situation is similar to what people may do in the BRRRR situations...purchase a home in cash under an LLC name, do improvements using personal funds, and then want to cash out to pay off personal debt and/or possibly use funds in future to buy another property. What are people doing with these?

Two basic rules.

1. If a loan is made to the LLC, it is exempt from all aspects of Regulation Z, as all organizational credit is exempt under 1026.3(a)(2).

2. If a loan is made to the LLC and somehow the lender decides that the loan is actually for a consumer purpose (let's not start that discussion again as how that can occur), then RESPA does not have an organizational exemption and the loan would be subject to all RESPA rules including receiving a GFE and HUD-1.

Welcome to our Discussion Forums, MLORJB.