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.
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Maybe you just wanna fly the plane yourself. Well good luck pressing take off, then auto pilot, then land.
CRCM