MLA applies or no?

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    We are working on a consumer application to finish constructing a shop building on a lot next to their primary residence. Our system requires a MLA if we choose “other RE” but does not if we choose “1-4 family”. It is not a home/residence, only a shop on a lot next to their home. Which would be the better way to go? Thank you!

    • This topic was modified 9 months, 1 week ago by kwatson.
    Brent V

    From MLA expert, Rebekah Leonard:

    Good question! Residential mortgages are fully exempt from MLA coverage, which means any dwelling-secured loan would NOT be subject to MLA requirements. See Exception #2, here: eCFR :: 32 CFR 232.3 — Definitions. :

    (2) Exceptions. Notwithstanding paragraph (f)(1) of this section, consumer credit does not mean:

    (i) A residential mortgage, which is any credit transaction secured by an interest in a dwelling, including a transaction to finance the purchase or initial construction of the dwelling, any refinance transaction, home equity loan or line of credit, or reverse mortgage;

    Also, the CFPB has a great info sheet and handy flow chart, here: cfpb_MLA_hybrid_chart (

    In your situation, so long as your collateral does NOT include the residence, you are exempt from MLA. You can always voluntarily choose to extend MLA rights in such a situation, but you are not required to do so.

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