Florida Enacts Provisions Regarding Business Purpose Mortgage Loans
The state of Florida has recently enacted House Bill 935, regarding business purpose mortgage loans. The updated provisions are effective as of July 1, 2018.
The crux of this update is a new provision stating that, under Florida law, it is unlawful for any person in a mortgage loan transaction to misrepresent a residential mortgage loan as a business purpose loan.
A “business purpose loan” is a mortgage loan in which the borrower intends to use the proceeds primarily for a business purpose, rather than a personal, family, or household purpose. A common example of a business purpose loan is the purchase of a non-owner occupied investment property.
An example of the type of fraud that this update is targeting is the situation where a borrower’s income is too low to qualify for a mortgage to purchase a primary residence. A borrower may decide to fraudulently apply for a mortgage to purchase the home as an investment property, so that he or she may use rental income to qualify for the loan. This would be a direct violation of the statute, as the borrower would be misrepresenting a residential mortgage loan as a business purpose loan.
The provision states that any person who knowingly violates this chapter commits a felony in the third degree, and any person who violates any provision of this chapter in which the total value of money and property unlawfully obtained exceeds $50,000 and there are five or more victims, commits a felony in the first degree.
Zachary Pearlstein, JD, is a Regulatory Compliance Director with CLA's Mortgage Advisory Division. He joined CLA on January 1, 2014, as part of its acquisition of Bankers Advisory, Inc. Zachary oversees Mortgage Advisory's regulatory compliance team, which focuses on federal and state compliance, fair lending, and the Home Mortgage Disclosure Act (HMDA). He is a graduate of Brandeis University and earned his juris doctor at Suffolk University Law School. He is admitted to the Massachusetts Bar.
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