Business purpose loan becomes consumer loan

[Account Closed]

If I lend to a rehabber's LLC for the purpose of a fix and flip, this is truly a business purpose loan, at that point. What if the rehabber after the rehab sells subject-to my existing loan to a owner occupant, does that now become a consumer loan?

[Bill Gulley]

Yes, part of the consumer financing agreement, but you didn't originate it, the rehabber did. If the rehabber moves in, you may have issues. That's why you restrict the loan to commercial, have a call feature, a due on sale clause and have the borrower acknowledge the use of funds. :)