Skip to content
BOL Conferences
Thread Options
#2278298 - 11/29/22 04:55 PM New Funds, Increased Rate, Disclosure?
Norman Paperman Offline
Diamond Poster
Norman Paperman
Joined: Aug 2012
Posts: 1,700
48.934476, -114.343735
We have a consumer construction loan that is requesting additional funds to complete the project. The LO is going to advance new funds, but wants to increase the rate on the new funds advanced. Do you BOLers interpret the below as I do in saying that we need to issue new disclosures, even though we are not satisfying or replacing the original obligation?



3. Variable-rate. i. If a variable-rate feature was properly disclosed under the regulation, a rate change in accord with those disclosures is not a refinancing. For example, no new disclosures are required when the variable-rate feature is invoked on a renewable balloon-payment mortgage that was previously disclosed as a variable-rate transaction.

ii. Even if it is not accomplished by the cancellation of the old obligation and substitution of a new one, a new transaction subject to new disclosures results if the creditor either:

A. Increases the rate based on a variable-rate feature that was not previously disclosed; or

B. Adds a variable-rate feature to the obligation. A creditor does not add a variable-rate feature by changing the index of a variable-rate transaction to a comparable index, whether the change replaces the existing index or substitutes an index for one that no longer exists.



iii. If either of the events in paragraph 20(a)–3.ii.A or ii.B occurs in a transaction secured by a principal dwelling with a term longer than one year, the disclosures required under §1026.19(b) also must be given at that time.
_________________________
Maybe you just wanna fly the plane yourself. Well good luck pressing take off, then auto pilot, then land.


CRCM

Return to Top
TRID - TILA/RESPA Integrated Disclosures Rule
#2278299 - 11/29/22 05:10 PM Re: New Funds, Increased Rate, Disclosure? Norman Paperman
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
What variable rate feature are you implementing to increase the rate?
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2278300 - 11/29/22 05:19 PM Re: New Funds, Increased Rate, Disclosure? Norman Paperman
Norman Paperman Offline
Diamond Poster
Norman Paperman
Joined: Aug 2012
Posts: 1,700
48.934476, -114.343735
I guess I'm focusing on 3. ii. A

While we did disclose a variable rate feature under the original agreement, this modification will both extend new money and increase the rate. The increased rate was not a variable rate feature that was previously disclosed.
_________________________
Maybe you just wanna fly the plane yourself. Well good luck pressing take off, then auto pilot, then land.


CRCM

Return to Top
#2278302 - 11/29/22 06:14 PM Re: New Funds, Increased Rate, Disclosure? Norman Paperman
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 83,227
Galveston, TX
Well, if you are changing a variable rate feature, like changing the margin or resetting the times at which the rate will adjust, then yes, it would be a refinance. You really have not provided much in the way of details.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2278328 - 11/29/22 10:41 PM Re: New Funds, Increased Rate, Disclosure? Norman Paperman
Andy_Z Offline
10K Club
Andy_Z
Joined: Oct 2000
Posts: 27,748
On the Net
So is the intent here to modify the existing loan and change the rate from this date forward on all advances?

I originally interpreted that a variable rate was in the deal, but I see it was not. You can't add a variable rate where there wasn't one and call it a modification if that is teh intent.
Last edited by Andy_Z; 11/29/22 10:49 PM.
_________________________
AndyZ CRCM
My opinions are not necessarily my employers.
R+R-R=R+R
Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell

Return to Top
#2278342 - 11/30/22 04:30 PM Re: New Funds, Increased Rate, Disclosure? Norman Paperman
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
The LO is going to advance new funds, but wants to increase the rate on the new funds advanced.

So the rate increase will only apply to the new advances. The current rate applies to the existing balance. To be honest I'm not sure if that would fall under a modification or how you would disclose it.

Can your core system handle the split rate calculations?
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top