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#2273028 - 07/19/22 02:00 PM Loan Renewal/Modification
Carrie Offline
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Joined: Jul 2022
Posts: 2
We are looking to change the process for our renewal/modifications for our Lines of Credit/Consumer Fixed Mortgages. A question was brought up about with the rate enviroment, rates being higher now...can we increase the rate without refinancing the loan into a new note or can we just put in our change in terms the details of changes to the note (rate, payment, and extenstion of maturity date)???

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#2273034 - 07/19/22 02:50 PM Re: Loan Renewal/Modification Carrie
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,637
Galveston, TX
Well, you have a lot of mismatched terms here that you are going to have to specify. Lines of Credit are covered under Subpart B and closed-end credit is covered under Subpart C. They are not treated the same way.
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#2273048 - 07/19/22 04:26 PM Re: Loan Renewal/Modification rlcarey
Carrie Offline
New Poster
Joined: Jul 2022
Posts: 2
Closed End Credit
- Renewal/Modification
- Rates have increased - if we state on our change in terms the new payment, rate and extended maturity date...would we still be in compliance? Or do we need to do a new note??

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#2273053 - 07/19/22 04:40 PM Re: Loan Renewal/Modification Carrie
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,637
Galveston, TX
You cannot issue a change of terms on a closed end loan. The lender and the borrower may execute a signed modification to the existing obligation. Sounds like you really need to sit down with legal counsel.
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#2273131 - 07/20/22 06:23 PM Re: Loan Renewal/Modification rlcarey
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,684
Cape Cod
Originally Posted by rlcarey
You cannot issue a change of terms on a closed end loan. The lender and the borrower may execute a signed modification to the existing obligation. Sounds like you really need to sit down with legal counsel.
Make sure that you and legal counsel have read Reg Z sect. 1026.20(a) and the associated official interpretations (FKA Official Staff Commentary).
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#2273184 - 07/21/22 01:09 PM Re: Loan Renewal/Modification Carrie
Rocky P Offline
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Joined: Jun 2003
Posts: 7,424
Florida
Carrie, welcome to BOL.
A loan whether open end (creditline) or closed end (installment, mortgage loan, etc) is a legal agreement between the bank and the customer. One cannot change it without the concent of all parties. In some cases, there are changes that can be triggered by default collateral, and had already been agreed to.

Legal is necessary like Randy and John mentioned.
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