Business or Personal loan?

adjuster jack:

I think there is still a couple of unanswered questions that might shed some light.

1 - Was the home to be deeded to you as an individual or was it to be deeded to your LLC?

2 - Was the home to be used as your primary residence (living in it all the time) or a secondary residence (live in it for part of the year but don't rent out) or a rental/investment?

4 - What do the previously mentioned (other properties) have to do with it?

What happened to "3 -"?   :-))

harrylime:

What happened to "3 -"?   :-))

Wanted to see if anybody was paying attention.

Yes the home was to be deeded to me personally.

Yes it is my primary and only non rental home.

It was crossed with other properties that the seller owned- So the bank, wanted to make a larger loan and used that as an excuse. It was not crossed with the 2 properties tht the bank had me buy.

jusj:

Yes the home was to be deeded to me personally.

Yes it is my primary and only non rental home.

OK.

jusj:

It was crossed with other properties that the seller owned- So the bank, wanted to make a larger loan and used that as an excuse. It was not crossed with the 2 properties tht the bank had me buy.

Wait. I'm still confused.

Did you take out one loan to buy all three properties?

Or did you take out one loan to buy your home and did not buy the other two properties?

They call it a blanket loan- 

jusj:

They call it a blanket loan- 

OK. So, with one loan you bought three houses and all three houses are the security for the one loan and two of the houses are rental/investment properties.

That tells me that it could very likely be construed as a business loan which would not afford you the "protection" that consumer borrowers get.

Your fallback position would be the terms and conditions of your contract.

And I see another potential problem.

In order for the escrow company to record a corrected deed of trust, the corrected deed of trust must be approved and executed by the lender.

Suppose the lender looks at it and realizes that now they have two guarantors on the loan, the individual and the LLC and decides it likes it that way and refuses to allow the removal of the LLC from the loan?

I suggest that you carefully and thoroughly review your copies of all of the documents that related to the transaction: purchase contract, loan application, loan contract, escrow instructions, anything and everything that you might have signed that might explain how the LLC got into this in the first place. Might not have been a mistake in the first place.

The problem is.. and actually there is a total of 5 homes because they had me roll 2 other loans into this one as well, this is what I HAD to do in order to take control of my home. Basically it was a way for this bank to sell a higher loan whiile hoping to avoid the headaches of regulations and compliancy issues.I had already been living in  my home and performed quite a bit of work in my home. To me its about the same as extortion. NOOOO nobody put a gun to my head but it was MY HOME.

From what I understand of a guarantor, a guarantor protects a bank from any anti defeciency laws, and it is supposed to  an additional security which probably means additional person. A guarantor of ones own loan? Maybe but it defeats the purpose of anti deficiency laws.

The LLC is on the loan as the borrowerb as well as my individual person. The LLC however was the sole grantor, my person was the sole guarantor. I , individually was the sole buyer on the purchase contract.

jusj:

3.Factors. In determining whether credit to finance an acquisition...Is primarily for business or commercial purpose (as opposed to  consumer purpose), the following factors should be considered. a.....b.....c......d..... The borrowers statement of purpose for the loan.

Would this pertain to my situation? Or is this for something different?

That is from official Federal Reserve staff interpretation of the Truth-in-Lending Act (TILA) and the related Federal Reserve Regulation Z, which provides detailed rules for TILA. Unlike TILA and Regulation Z, however, the staff interpretations are not law. They are simply the Federal Reserve’s interpretation. However, creditors relying in good faith on those interpretations will be protected against action by the Federal Reserve. 

All that said, certainly a statement of the borrower’s intent (particularly a written statement) would be one factor that court would would take into account. But the statement doesn't by itself control whether the transaction is a consumer credit transaction. The court will look at all the facts and circumstances. For example, if a borrower signs a statement of intent that the loan is for a business purpose, a lender could rely upon that unless it has knowledge of other facts that would clearly indicate that it was really a consumer loan. On the flip side of that, if the lender gets a signed statement from the borrower of a consumer purpose, the the lender ought to assume that's the case unless it has facts that clearly indicate that the loan was for a business purpose. Otherwise, it may violate TILA by failing to provide the consumer with the disclosures and other benefits of the Act.

jusj:

The problem is.. and actually there is a total of 5 homes because they had me roll 2 other loans into this one as well, this is what I HAD to do in order to take control of my home. Basically it was a way for this bank to sell a higher loan whiile hoping to avoid the headaches of regulations and compliancy issues.I had already been living in  my home and performed quite a bit of work in my home. To me its about the same as extortion.

No, it's a million miles removed from extortion.

You wanted money from the bank. The bank set the terms and conditions. You accepted the terms and conditions to get the money. If you didn't like the terms and conditions, you could have walked away from the deal and not taken the money.

jusj:

nobody put a gun to my head

That's right.

jusj:

it was MY HOME

Whatever compelled you to go along with the bank's terms and conditions came from inside you.

Again, what's your goal here?

I suspect that you are stuck with the deal you made and it's unlikely that the lender will allow it to be chanaged.

jusj:

The LLC is on the loan as the borrowerb as well as my individual person. The LLC however was the sole grantor, my person was the sole guarantor. I , individually was the sole buyer on the purchase contract.

Then what the lender would want is (1) both you and the LLC to execute the loan note; (2) for you to guarantee your LLC’s obligation on the loan; and (3) for you to execute a deed of trust.

jusj:

From what I understand of a guarantor, a guarantor protects a bank from any anti defeciency laws, and it is supposed to  an additional security which probably means additional person. A guarantor of ones own loan? Maybe but it defeats the purpose of anti deficiency laws.

A guarantor is always one person guaranteeing the debt of another. Here, the lender would want YOU to guarantee the LLC’s obligation under the loan. Why? Because you own the LLC and you could potentially liquidate the LLC, sell it to someone else who might liquidate it, etc., leaving it with nothing and thus leaving the bank with no way to collect on the LLC’s obligation on the loan. So if you read the loan documents carefully, I think you’ll see you are guaranteeing the LLC’s obligation, not your own. Sure, it may seem like overkill when you are already directly liable on the loan, but this covers the bank for certain contingencies that could come up (remote as those might be).

Note that if the home is in Missouri, my information indicates that Missouri, like most states, does not have an anti-deficiency statute, so that would not be a factor here.

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      Emails:

      Lender to me

The loan is crossed to the properties at 3705 Oregon and 7000 Michigan. 

  As I mentioned, our issue is going to be letting a property go for $60k that appraised for $150k, given the payment history and real estate taxes.  If there is a way for him to get those issues addressed, we would be in a better position for this to happen

       From my lender to seller:
Justplaying around with your possible deal with Jay to see how we can work it out.  I don’t have loan approval, but here is what I was working with.Jay buys 7500 Pennsylvania, 6600 Pennsylvania, and 7000 Minnesota for approximately $294k (current appraised values).  He borrows $239k from the bank, which covers the payoffs on the three properties ($216k) plus an additional $23k (to be used for your past due payments and real estate taxes).  The two of you can work out a structure for the $55k difference in the purchase price and bank loan (i.e. seller financing).  That addresses a potential LTV issue on my end.

     Your remaining loans will be consolidated into a master note in which the properties are cross-collateralized. 

·         Real estate taxes will be brought current with the transaction and will be escrowed going forward.

·         We will need to take a second D/T on Davis to get our LTV back in line. 

·         Need to find a way to make sure loans stay current going forward (i.e. lockbox rent checks?) so this is long-term solution

Myself to my lender, day before closing.
I hope that it is understood that I did not necessarily want the other 2 properties. I felt in order for me to take control of my property it would help if Lou had a few off of his hands, and I also thought it would be a good thing to do for the bank. Ive worked a lot of hours in my property to gain the equity that it has and intended to get a LOC against to help my business run smoothly. The way this deal is structured i dont think ill be able to go anywhere else to do that. Do you think you can do a LOC for me?
Thanks

My lenders Response.

I understand that you are doing this transaction to make it work for everyone.  Let’s get this deal closed and let the dust settle, and then we’ll look at a small line of credit.

Jack i hear what you are saying and many and maybe even most may agree with you but the fact of the matter is that there are certain protections that, I have in regards to my residence. And I believe something pertains to my situation but I just havent pinned it yet. Nonetheless thank you for your input.

Oh and its not a million mile awy from extortion. I didnt want to borrow that much- I had to in order to protect my home.

jusj:

And I believe something pertains to my situation but I just havent pinned it yet.

I'm not clear on what your problem is with the loan deal, other than you obviously didn't like that the bank insisted on making this a loan package for several properties rather than just a transaction for the home itself. What is it that you are trying to do now? Looking for a way out of the loan obligation? That might mean you lose the home, assuming there is an out for you here. 

Yes, there are some protections that you have with respect to mortgage loans for your principal residence, but whether any of them will help you depends on the details of the transaction and what you want to achieve here. As I'm not clear what it is want from this, it's hard to say if there's any help for you here.

So far, about the only trouble you seem to have identified in the transaction is that deed of trust was evidently done wrong. That's more of a worry for the lender, and is typically easily fixed.