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#999287 - 07/18/08 06:24 PM RESPA Exemption?
bls Offline
100 Club
Joined: Oct 2005
Posts: 138
Alabama
We have a loan in which the borrower is purchasing a one-to-four family residential property to resale. He is not renting the property out, but is basically buying it as an investment to sell at a future date. He is not a real estate agent or otherwise normally dealing in real estate. Is this loan considered a business loan and thus exempted from RESPA? I know that rental units have some fun caveats to deal with, but this is the first time that a non-realtor has purchased a one-to-four family residential property for ultimate resale.

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Lending Compliance
#999352 - 07/18/08 06:53 PM Re: RESPA Exemption? bls
Ray_ Offline
Platinum Poster
Joined: Aug 2006
Posts: 879
Dallas, TX
Buying a property for investment is a business purpose and a loan secured by improved property (non-commercial building) for business purpose is not covered by RESPA. But it's not exempt from HMDA and flood.

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#999408 - 07/18/08 07:15 PM Re: RESPA Exemption? Ray_
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,958
Bloomington, IN
Reg. Z exempts the acquisition, maintenance or rehabilitation of non-owner occupied RENTAL property.

If I buy property for a personal investment, as in the case of the loan in question, then it is a consumer purpose loan and subject to all the required consumer disclosures, including RESPA.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#999449 - 07/18/08 07:32 PM Re: RESPA Exemption? Dan Persfull
Ray_ Offline
Platinum Poster
Joined: Aug 2006
Posts: 879
Dallas, TX
Then maybe our compliance guide is incorrect. It's not a homestead purchase, not a second home purchase, not a rental property. The only category it fits in is "any loan secured by improved property (non-commercial building) for business purpose."

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#999762 - 07/19/08 01:27 AM Re: RESPA Exemption? Ray_
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,958
Bloomington, IN
I can't speak to the validity of your compliance guide without seeing it. But the mentioned loan is a personal investment, not a business investment, therefore it is a consumer purpose loan subject to Reg. Z and RESPA.

RESPA exempts business purpose loans in accordance with 226.3(a)(1) and this loan does not meet that exemption.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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