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Commercial Mortgage Rewrite

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A husband and wife own a commercial property and run a business at the location. The business is operated as a DBA/sole proprietorship. The wife works outside of the business and earns the majority of household income. Can a rewrite of the commercial mortgage be considered to the owners with the proceeds being for personal use? Very little of the proceeds would go back into the business.

In most states a business run by a husband and wife or two or more people would be a partnership, not a sole proprietorship. If the rewrite of the mortgage is for personal use then you have a consumer loan and must follow all the applicable consumer regulations. From the Commentary to Reg Z's 226.3:

5. Business credit later refinanced. Business-purpose credit that is exempt from the regulation may later be rewritten for consumer purposes. Such a transaction is consumer credit requiring disclosures only if the existing obligation is satisfied and replaced by a new obligation made for consumer purposes undertaken by the same obligor.

First published on 3/05/07

First published on 03/05/2007

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