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#2085498 - 06/27/16 10:26 PM Need answer asap-Modifying consumer 1-4 fam res
Snowgirl Offline
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Really confused on modifying a consumer residential real estate loan. We have a loan where the consumer originally borrowed $100,000. They have paid it down to $50,000.00 They are in the middle of the term of the loan. So if they now come to us and want to borrow another $100,000, which would make their loan amount $150,000 - $50,000 above what their original loan amount was, can we do this as a modification and do a change in terms agreement? What disclosures are required? We have a loan officer wanting to do this ASAP. Can we do a change in terms agreement, with new TIL disclosure, Flood Notice, and new right of rescission? Help please?

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#2085528 - 06/28/16 01:19 PM Re: Need answer asap-Modifying consumer 1-4 fam res Snowgirl
rlcarey Online
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rlcarey
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Galveston, TX
You need to talk to your attorney, but IMHO, this will totally replace the existing obligation and would be considered a refinance under Reg. Z.
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#2085563 - 06/28/16 02:44 PM Re: Need answer asap-Modifying consumer 1-4 fam res Snowgirl
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
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Bloomington, IN
^^^^^^^
What he said.
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#2085605 - 06/28/16 03:52 PM Re: Need answer asap-Modifying consumer 1-4 fam res Snowgirl
John Burnett Offline
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John Burnett
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Cape Cod
The loan officer is going to have to chill out, and I suggest keeping a compliance-eye on anyone trying to pull something like this "ASAP."

This has to start with an application. Assuming it's a consumer-purpose loan, there has to be an LE and CloD issued, the timing requirements have to be met, and the ATR requirements in 1026.43 will undoubtedly apply. You'll need to check out applicability of HOEPA and HPML, etc., etc., etc.

This doesn't look like it's even remotely eligible for a modification.
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#2085614 - 06/28/16 04:19 PM Re: Need answer asap-Modifying consumer 1-4 fam res Snowgirl
Richard Insley Online
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Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
Will the original appraisal support an extra $50,000? If not, then you need to stop until you get a new appraisal. What if the property doesn't appraise for enough to cover the proposed new advance? What if there are intervening liens? If there is enough value, you're going to need your attorney to prepare and record a new deed of trust.

Obviously your original credit decision wasn't based on the borrower's ability to service $150,000. Is a satisfactory credit application in hand and approved according to your credit policy? Parts of the original application may still be accurate, but why the sudden need for $100,000?

Regulations are a consideration, but first you have to focus on proper underwriting which will protect your asset quality.
Last edited by Richard Insley; 06/28/16 04:22 PM.
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#2086699 - 07/06/16 12:31 AM Re: Need answer asap-Modifying consumer 1-4 fam res Snowgirl
Snowgirl Offline
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Joined: Sep 2003
Posts: 729
I stopped them. Everything above is what I suspected. The appraisal definitely supports the extra money but they were trying to rush it through due to the customer needing the money. Tough luck, no rushing in the mortgage area any more!!! Thanks everyone!

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#2087506 - 07/12/16 01:35 PM Re: Need answer asap-Modifying consumer 1-4 fam res Snowgirl
SWells69 Offline
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Joined: Dec 2015
Posts: 12
We have been debating this as well. Is there any scenario in which you could add money to a loan (besides reasonable fees) and it would not be considered a refinancing? What if the loan has matured and you want to add $20,000 to a note that has been paid down $20,000? Would this meet the replacing the existing obligation terminology of a refinance?

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#2087516 - 07/12/16 02:10 PM Re: Need answer asap-Modifying consumer 1-4 fam res Snowgirl
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
You can't modify a matured loan, so that example would be a definite 'no go'.

We have, on occasion, advanced money via modification (and ROR) to pay property taxes or some small amount...but anything substantial would be done through a refinance of the debt.
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#2087536 - 07/12/16 02:40 PM Re: Need answer asap-Modifying consumer 1-4 fam res Snowgirl
SWells69 Offline
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Joined: Dec 2015
Posts: 12
Thank you!

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