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Actions when Balloon Note Matures
by John Burnett, BOL Guru
Guru Bios
Question:We have numerous mortgage loans that were originally set-up for 3 years at 6.75% fixed with a balloon payment due at the end of the 3 years. When the balloon matures, can we modify these loans to a 3/1 ARM? Would this transaction be considered a refinance? Do RESPA early/final disclosures apply?
Answer: Under Reg. Z (Commentary to 226.20) the conversion of a fixed rate loan (where no previous variable rate disclosures were given) to an ARM/variable rate loan constitutes a refinancing and new disclosures would be required.
First published on BankersOnline.com 6/06/05
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