We are making an ag loan for a son to buy out his siblings' interest in the family farm. This loan is not subject to RESPA (over 25 acres) or HMDA (ag loan). It wouldn't be subject to Reg Z as business purpose, but there is a factor that bothers me. The father maintains a life estate on the property. Therefore we are requiring him to sign a mortgage securing the dwelling as collateral. The father will not be on the note. The son has no right to rescind because he doesn't reside on the property, but does the father have a right to rescind, because he is pledging his primary residence as collateral, even though he isn't obligated on the note? Or is this just exempt from Reg Z and rescission all together because it is a business purpose loan?

Reg. Z 226.3 specifically exempts business, commercial, agricultural and organizational credit and ROR is a part of Reg. Z. Since your loan is an agricultural/business purpose loan, I would say it is exempt from Reg. Z and ROR.

A business-purpose loan is totally exempt from Reg. Z's rescission rules.

I would look at the purpose a bit closer. The commentary to 226.3 states a creditor must determine if it is for an exempt purpose. In looking at the purpose consider the source of primary income and if the borrower is intending to operate the farm. It is over 25 acres so someone likely is. But it may be his father and the borrower's interest is merely personal investment on his part. Consider a loan to a doctor to purchase an ice cream store, that would be personal investment and not business purpose. If this transaction is primarily for ag purposes, it is exempt. Just look a little closer.