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#2238781 - 06/29/20 05:30 PM Is a Note Modification acceptable?
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Joined: Nov 2008
Posts: 1,061
In the mountains
A consumer is requesting a rate reduction on their land loan. The current loan has a fixed rate period then Prime plus 2. We would reduce the fixed rate for the remainder of the fixed rate period and the variable rate period would change to Prime floating. Can we do this on a Note Modification without having to provide any other disclosures?
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#2238782 - 06/29/20 05:53 PM Re: Is a Note Modification acceptable? Likes to Comply
Dan Persfull Online
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Dan Persfull
Joined: Aug 2002
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Bloomington, IN
You need to check with your attorney what documents you would need under state law.

For Reg. Z review the OSI to 1026.20(a)(3). If you are adding a variable rate feature not previously disclosed it would be a refinancing under Reg. Z.

I think adding the "prime floating" feature puts you in that category.
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#2238786 - 06/29/20 06:32 PM Re: Is a Note Modification acceptable? Likes to Comply
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In the mountains
We aren't actually adding "prime floating", we are actually reducing the variable rate by removing the margin completely and now it is just the Prime index which was what it currently on the loan.

Does that make a difference?
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#2238789 - 06/29/20 06:46 PM Re: Is a Note Modification acceptable? Likes to Comply
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rlcarey
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Galveston, TX
If all you are doing is lowering the current interest rate and removing the margin from future rate adjustments and not changing any other variable rate features, then I think this falls under 1026.20(a)(2).
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#2238796 - 06/29/20 08:08 PM Re: Is a Note Modification acceptable? Likes to Comply
Dan Persfull Online
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Dan Persfull
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Bloomington, IN
I would agree with Randy if all you are doing is reducing the rate and not adding any additional variable rate features.
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