If the borrower is purchasing three or more units, is the purpose treated as business credit and exempt from disclosure under Reg Z?

When a borrower is purchasing three or more units, the transaction is typically viewed as a commercial or business venture rather than a residential one. Regulation Z, under the Truth in Lending Act, primarily applies to consumer credit transactions. As a result, loans for the purchase of three or more residential units are classified as business credit. This classification exempts them from the disclosure requirements mandated by Regulation Z, which are designed to protect consumers in specific credit transactions.

The understanding of this exemption is essential in determining how different types of properties and their corresponding financing arrangements are treated under the law. Business credit transactions do not require the same disclosures as consumer credit transactions, as the protections provided by Regulation Z are not intended for commercial or investment opportunities where the borrower is assumed to have a greater level of financial sophistication and ability to negotiate terms.