Deed in LLC - Borrower/Sole member lives in house

Posted By: jlroberts

Deed in LLC - Borrower/Sole member lives in house - 06/18/14 09:25 PM

Senerio - Property in the name of a LLC. LLC signed mortgage and borrower signed the Note personally (he lives in the property). Loan documents were done as in Investment Property using a Cognovit Note. I think I have two problems - 1) the loan was for a consumer purpose, therefore in Ohio, a Cognovit Note would have been prohibited and 2) we should have given the borrower a ROR.

Any thoughts?
Posted By: bgehres

Re: Deed in LLC - Borrower/Sole member lives in house - 07/12/14 12:17 PM

If your only borrower is the owner of the LLC (natural person) and not the LLC itself, I think that's a problem with the judgement clause. See ORC 2323.13(E)1 - it defines consumer.

Since the LLC is the owner and not considered a consumer, rescission wouldn't be applicable. We have a lot of loans where the house is deeded to the borrower's trust and have had no issues not giving rescission since the owner is not a natural person.