A self-employed borrower applies for a business purpose loan to purchase investment acreage (to be cleared, excavated and eventually sold) and to refinance his primary residence at another bank. The refinance puts the borrower in a better LTV position with the property to be purchased, as we don't do 100% financing. The payoff for his PR, however, is much more than the land purchase. I'm having a hard time seeing how this loan is primarily for a business purpose and exempt from Reg Z. The lender says the borrower will sign a business purpose statement. Arguments for or against this practice?

I agree with you. If we're talking one loan request here, i don't know of any other way to make a business/consumer purpose determination than to look at where the funds are going...and if more of them are going toward a consumer purpose, then that would make the loan request primarily consumer purpose. Never heard of a "business purpose statement" but i wouldn't advise it.....to me, it would just look like the bank is playing games and trying to hoodwink their customers.

I have to add (and i experience this in my shop too, so i'm not pointing fingers).....but why do lenders/people in general care so much about whether a loan is treated as business or consumer purpose? I mean care in the sense of wanting to fight to keep something that's obviously consumer purpose from being treated as what it is. The officers aren't creating the TRID documents and such....and TRID loans don't really have to take any longer than a non-TRID loan to close....and i really don't understand consumers who fight to have their consumer purpose loans treated as business purpose. If i was a loan customer, i would want every loan i got treated as consumer purpose if i could.......if a loan ever had to get litigated, does the consumer really think they'd make out as well on a business purpose loan as they would on a loan that the bank had to do consumer disclosures on? I just really don't get it. Things need to be done correctly and legally and ethically and everyone move on....IMHO.

Good points. Thanks!