Supplement I to Part 226—Official Staff Interpretations, in relevant part states:
Section 226.20 Subsequent Disclosure Requirements
1. Definition. A refinancing is a new transaction requiring a complete new set of disclosures. Whether a refinancing has occurred is determined by reference to whether the original obligation has been satisfied or extinguished and replaced by a new obligation, based on the parties' contract and applicable law. The refinancing may involve the consolidation of several existing obligations, disbursement of new money to the consumer or on the consumer's behalf, or the rescheduling of payments under an existing obligation. In any form, the new obligation must completely replace the prior one.
3. Variable-rate.
...
ii. Even if it is not accomplished by the cancellation of the old obligation and substitution of a new one, a new transaction subject to new disclosures results if the creditor either:
A. Increases the rate based on a variable-rate feature that was not previously disclosed; or
B. Adds a variable-rate feature to the obligation. A creditor does not add a variable-rate feature by changing the index of a variable-rate transaction to a comparable index, whether the change replaces the existing index or substitutes an index for one that no longer exists.
So it looks like for Reg Z subsequent disclosure purposes, it does not matter whether the obligation has been satisfied or not. Just the addition of a variable-rate feature triggers it. What I was trying to figure out, is whether an addition of the variable rate feature really does replace the old note with a new one or just modifies the terms of the old note (regardless of what disclosures we need to hand out). In case of the former, the mortgage securing the obligation would need to be released. In case of the latter, it would not. I will look at state law, thank you Dan!
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