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#1156244 - 04/02/09 12:31 PM Loan modifications
law Offline
100 Club
Joined: Jan 2006
Posts: 154
I have several questions about loan modifications.
1. Can we modify a loan rate for a period of time and then the rate would go back to what it was before? (ex. lower rate for 3 years on an ARM and at the end of the 3 year period the rate would go back to that ARM product and rate).
2. Is there any special criteria we should use to determine if we want to modify a loan? Can we use the same standards as underwriting?
3. Do we ever have to worry about re-disclosures on a modification? What would trigger?

I know I've asked a lot! Where do I find information about what a bank can do regarding loan modifications??? I have looked to no avail.
Thanks!

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Lending Compliance
#1156253 - 04/02/09 12:46 PM Re: Loan modifications law
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
1. That is a question for your attorney.

2. You should have specific criteria identified as to not fall into a fair lending trap.

3. As long as you do not extinguish the original obligation and replace it with a new one, there would be no new disclosures required.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#1156444 - 04/02/09 03:26 PM Re: Loan modifications rlcarey
Tryin-2-Comply Offline
100 Club
Joined: Apr 2003
Posts: 202
Hills of TN
So, do banks normally modify mortgage loans. For example: cusotmer comes into the bank and requests an additonal $10,000. They have no additional collateral to offer. The home securing their current home mortgage has sufficient equity.

Our procedures are to take a new residential application, new disclosures, everything - and do a new note. Seems very inefficient...but that's what we do.

If we do the modification and include a TIL for the new terms, amounts, etc., and a ROR for the new money...are we in compliance? Is there something more to this? I am being challenged to find a better solution to the process for modificaitons when someone requests new money on their existing debt.

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#1156658 - 04/02/09 05:34 PM Re: Loan modifications Tryin-2-Comply
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
Whether the new obligation replaces the old obligation and triggers new TIL disclosures is going to be a matter left up to State law. This is a question for your attorney. The RofR will be required regardless.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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