Commercial Loan Subject to Reg Z & RESPA?

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Question:

Our customers requested a commercial loan to remodel the upstairs of their commercial building into a living area. This living area is and will continue to be the owner's primary residence. Approximately 60% of the building is their business and 40% is their residence. The collateral is this commercial building. Would this loan be subject to Reg Z and right of rescission, as the funds are being used to remodel their primary residence? Would this loan be subject to RESPA? It appears this should be a consumer loan versus a commercial based on the purpose. Any thoughts here?

Answer:

Answer by Jim Bedsole: In my opinion this loan would be subject to Reg Z as the primary purpose of the loan is consumer purpose. I don't believe it would be subject to RESPA, though, as it is not secured by a 1-4 family dwelling. It is secured by a commercial building that happens to have part of it as a dwelling.

Answer:

Answer by Dan Persfull: I agree. Reg Z is purpose driven, not collateral driven. The purpose of this loan appears to be for personal, family or household purposes.

First published on BankersOnline.com 6/11/07