b'by by byVictoria Wyatt MelissaNema Geraci LLP Martorella, Esq. Daghbandan, Esq.Geraci LLP Geraci LLPI. AN OVERVIEW OF BUSINESSII. TWO MAJOR EXEMPTIONS PURPOSE LOANS FOR BUSINESS PURPOSE LOANS: TILA AND RESPABusiness purpose loans are nontraditional mortgage loans where a borrower usesMost of the federal legislation governing loan proceeds for a non-consumer purpose.mortgage lending is covered in the TILA1 A non-consumer purpose means any loanand RESPA.2These Acts set mandatory in which the proceeds are NOT primarilystandards, procedures, and disclosures used for personal, family, or householdfor lenders to follow.Specifically, TILA use.There is a common misconceptionrequires disclosure of certain credit terms, that the primary question in making theseand RESPA requires standards for closings loans is whether the property used asand fee/cost disclosures.3Business purpose collateral is owner-occupied.BUT, theloans are exempt from the requirements more important question is whether theimposed by both TILA and RESPA.This loans purpose is truly a business purpose,is because TILA covers consumer credit rather than consumer in nature.Thetransactions which are defined as credit purpose of the loan is the decisive factoroffered or extended to a consumer in whether the loan is exempt from mostprimarily for personal, family, or household federal consumer protection regulations.purposes.4Additionally, TILA and RESPA Simply put, if a loan is correctly classifiedexempt [a]n extension of credit primarily as business purpose, it is subject to farfor a business, commercial or agricultural less regulation at the federal level.purpose.5Most of the operative provisions of the acts are further limited in their Notably, business purpose loans areapplication to dwellings which is defined exempt from requirements mandated inas a residential structure that contains one the Truth in Lending Act (TILA) and theto four units, whether or not that structure Real Estate Settlement Procedures Actis attached to real property.6 (RESPA).However, many mortgage lenders and their counsel fail to understand thatPractically, because business purpose loans other federal consumer protection lawsare exempt from TILA and RESPA, when still apply.This article will provide thelenders make these loans they do not need reader an opportunity to understandto: (i) comply with federal requirements which regulations do and do not apply to business purpose loans.continued on page 8Points of InterestFall 2019Page 7'