If a loan closed as a 3+1 ARM and the officer wants to change it to a 5+1 ARM to be compliant with a grant program requirement, can this be done on a change in terms form? Or, do we need all new discloures, including note and mortgage, basically a whole new closing)?

The 5 + 1 features of the variable rate program have not been previously disclosed. The addition of any variable rate features not previously disclosed constitutes a refinancing under 1026.20.

Dan,
In reviewing Reg Z section 1026.20, it seems to exclude from the term refinance a rate reduction with a corresponding payment reduction. If we modify from a fixed to a variable rate and reduce the rate and the payment, what disclosures do we need?

All of them, as Dan said: The addition of any variable rate features not previously disclosed constitutes a refinancing under 1026.20.