Borrower currently has a 30-year loan with a 5/1 ARM feature. Borrower is nearing the end of the initial 5-year period, and wishes to start the 5/1 period over so his rate will not change for another 5 years. We can modify his loan by having him sign an amended loan Note - but do we also need to provide new T/L ARM disclosures? What if he wanted to modify it to a 7/1 ARM from his current 5/1?

The loan term is not being extended, simply modifying the rate terms.

If your "amended note" satisfies and replaces the existing loan note you very well could have a refinancing under 1026.20.

If the existing note is not being satisfied and replaced then modifications do not require new disclosures. Consult the bank's attorney if you are unsure if your amended note is a new note or a modification of the existing note.

If you convert it to a 7/1 ARM then you are adding an adjustable rate feature that was not previously disclosed. This would be a refinancing under 1026.20 and would require new disclosures.

Thanks Dan for your info!

I agree, but also think the scenario Indy describes is probably a "refinancing", too. It's not cut & dried, but Section 1026.20(a), OI #3 says: "if a variable-rate feature was properly disclosed under the regulation, a rate change in accord with those disclosures is not a refinancing." We'll assume the original 5/1 was properly disclosed when the loan originated--but the change that's being considered now is NOT in accord with the original 5/1 disclosures. Additionally, the original loan was a 5/1 30-year loan and the modified loan would be a 5/1 25-year loan. If the deal is already done, I would argue (defensively) that a 5/1 is a 5/1. If you're still deciding what to do, however, I'd call this a "refinancing" out of an abundance of caution.

Great point as well - thanks Richard.