How critical is it if there is a rate spread on the LAR for business loans.

It's a reporting error. If there's only one, not critical. If there are several, critical.

What if there is rental property involved....that is owned by a business?

Rate Spread is for "consumers" & all business purpose loans should be N/A.

Rate spread is for loans that are originated and subject to Reg Z. Business purpose loans are not subject to Reg Z.

How would you define business purpose? In a very common situation at our institution...an individual obtains a loan for an investment property to fix up and resell. Would you consider this a business purpose? or personal since it is a personal investment?

You have the facts of your borrower and only you can make the determination whether it's a business or consumer purpose by reviewing 226.3 and its Commentary to see how your borrower's transaction fits the criteria. For one borrower it could be a personal investment therefore subject to Reg. Z, for another borrower it could be a business purpose loan and not subject to Reg. Z.

Good goly moses, sorry for asking such a stupid question, but this week I think I've gone total brain dead!!! So Dan are you saying that if it is a "personal Real Estate" Investment and not coded in our bank as a "Business" loan investment that it would be subject to Reg Z, therefore making it subject to a Rate Spread?
Thanks a heap for all your advice

A personal investment is not a business purpose loan, therefore it is subject to Reg. Z.

Personal real estate investments ARE NOT exempt from Reg. Z., however the acquisition, maintenance and rehabilitation of non-owner occupied RENTAL PROPERTY is exempt.


If the loan is subject to Reg Z then the HMDA rate spread is applicable.