A lender refinanced a home loan. No new money was intended, however, the payoff of the first loan was less than expected ($48.04). The HUD shows the $48.04 as going to the client (but was actually applied as an interest payment to the new loan). Would this $48.04 be considered new money thus necessitating a right to cancel? I looked at the Reg Z commentary 226.23 and found the following: "In determining whether there is a new advance, a creditor may rely on the amount financed, refinancing costs, and other figures stated in the latest Truth in Lending disclosures provided to the consumer and is not required to use, for example, more precise information that may only become available when the loan is closed."

To the best of my knowledge, every refinance of a primary residence needs a right to cancel. I'm not aware of any differentiation re: "new money".

Actually Reg Z 226.23 does provide for an exemption if the loan is refinanced with the same creditor and no new money is advanced. New money would be any money above the balance and closing costs etc. My concern is this $48.04 was unanticipated "extra", the payoff was wrong and wasn't known until right before closing. Would this be considered new money requiring a right to cancel?

Technically yes. But keep in mind they can only rescind the $48.04 and closing costs. Document, slap the lender (wherever you want) and go on down the road riding out the 3 years.

So the extra money didn't actually go to the customer, but was applied to the new loan? I think you might could make a case for rescission not applying in this case. Other opinions?

That would be a good argument. The only problem is the HUD shows the $48.04 going to the borrower and I assume a check to the borrower. (Hey, I appreciate the extra money, but I think I'll just have you apply it toward the principal of my new loan.) The borrower still received "cash out".

If they didn't cut the check to the borrower, now they have an incorrect settlement statement (although an incorrect settlement statement would the lesser of 2 evils).

From the way the question is worded, it looks to me like the original loan was at another lender?

If that's the case, the entire transaction would be subject to the ROR regardless whether the borrower got cash back or not.

we are the original/existing lender.

then I don't believe you have a problem. I would consider it "incidental" and go on.