The loan terms sound like a plain-vanilla teaser-priced ARM. Now that the teaser period is almost over, the borrower asks you to remove the VR language from the original note and (probably) adjust the fixed interest rate that will apply for the rest of the term of the loan.
Whether or not you have a Reg. Z "refinancing" depends on the steps you take to make the changes. If you leave the original note in place and handle the changes via a modification agreement, then it is not a "refinancing." If, instead, you cancel the original note and get the borrower(s) to sign a new one containing the revised terms, then Reg. Z calls it a "refinancing" and requires all new disclosures.
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...gone fishing.