Answer:
The RESPA coverage rules are found in Reg X, Section 3500.5 and the following exemption is found there: "An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by Regulation Z, 12 CFR 226.3(a)(1). Persons may rely on Regulation Z in determining whether the exemption applies."
You should evaluate the proposed loan in light of the factors provided in the Regulation Z Staff Commentary for determining the primary purpose of the transaction. Section 226.3(a)(2) lists the following factors:
- The relationship of the borrower's primary occupation to the acquisition. The more closely related, the more likely it is to be business purpose.
- The degree to which the borrower will personally manage the acquisition. The more personal involvement there is, the more likely it is to be business purpose.
- The ratio of income from the acquisition to the total income of the borrower. The higher the ratio, the more likely it is to be business purpose.
- The size of the transaction. The larger the transaction, the more likely it is to be business purpose.
- The borrower's statement of purpose for the loan.
First published on BankersOnline.com 12/08/08
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