If a mom and dad purchase home for child that is non owner occupied, is that exempt from Reg Z and RESPA since it's non owner occupied? It's not rental property, but it's non o/o.

Reg Z exempts non o/o rental property. See 1026.3 and its Commentary.

Yes, when I read the applicable section and commentary in Reg Z, it made me think it IS covered. Then I started doubting myself. Did some research on the threads and came across this one: http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=198045 It caused me to go back to the commentary again, and now I'm just confused. Again, it's an "investment" for the borrowers, but seems consumer purpose to me, but it's non o/o - since they aren't "renting" it to the kids, it seems it IS covered by Reg. Z, then in reading that thread, I started to think I was way off base.

If they are not charging rent to the children using the home, it is not rental property, IMO. It is a home they own that they allow someone to use.

Anon, the thread you linked is from almost 8 years ago. The basics of 1026.3 have not changed. You stated in your post this is not rental property therefore it would not be exempt under 1026.3. "Investment" property could be for personal or business reasons therefore it is important one doesn't (as many do) interchange it and rental to mean the same.

As Kathleen stated, unless there is a rental agreement between the parents and the kids then it's not rental property.

Just to kick this can a little more ... Dan, what's your reaction if there is a rental agreement but it's for much less than market price? The IRS would see red flags there, although it has nothing to do with this discussion.

Would a below-market rental be enough of a gray area that you'd recommend treating it as a consumer transaction subject to Z and RESPA?

John, I would have to research the IRS rules to give you an "informed" opinion but I don't think their rules would come into play in determining if the loan is a consumer or business purpose for the purposes of Reg. Z. I think they would be more concerned with the borrower being able to claim certain business and rental deductions on their return.

FWIW, anytime we have a situation where a relative is purchasing a home for another relative we treat it as a loan for family, household or personal use and disclose it as a consumer loan unless there is signed lease agreement between the parties, these are few and far between. In those rare cases we will treat it as a rental. We had one situation where there was a contract for deed between the parties. In this case we classified it as a personal investment for the borrower and treated it as a consumer loan.

There are several different scenarios that could be discussed but in the long run if the parents are purchasing the property for their kid then I would opine 9 out 10 times it's going to be a consumer purpose loan.

Agreed. Thanks, Dan.

I treat these loans exactly as Dan as described as well.