Commentary to 103(b) "Renewals that do not request ;additional credit amounts - .....an applicant's request to refinance would be reportable. A refinancing occurs when an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower."

So, if when a loan has matured and we "renew" it by having a new note executed (same note number same amount or the balance left on the note), will those be reportable? It appears to me, that they will be. We're extending the maturity, so to speak, but the old promissory note is satisfied and replaced by a new promissory note. Everything about it "could" change, including the rate.

What you describe would be interpreted as a refinance that is reportable under 1071.

That's what I was afraid of. But it makes sense because the bank has the ability to re-underwrite, change the rate, etc.

I went through a 1071 seminar on Monday and yes it is reportable if you report. However, if you are looking at the 100 loan originations per year threshold, it does not count there. They only count once you pass the 100 loan threshold.

Thank you, Scott....we FAR surpass that number!!

Just checking in on this topic - has anyone else run into issues regarding the definition of a refinance? We apparently replace the existing note with a new note on our "renewals" of commercial lines of credit. We're calling them renewals, but it appears to me that this is really a refi under 1071even though no other terms are changed and we keep the same note number.


Also, for determining compliance tier date, I understood refis DO count, but not renewals, and mods.

Thanks

Correct, those are refinances if you are having them sign all new notes and they count.

What you say is a bit confusing.. You say that you replace the existing note with a new note (which would be a refinance) but then you say you keep the same note number. So you just copy the original note number onto an entirely new note?

Be careful if you are extending revolving lines of credit secured by UCC filings because a new note would disrupt the continuity of the security interest and could result in lien holders getting priority over your security interest.

Thank you!

That is how it was described to me and, in comparing a new note to the previous note on one that "renewed" recently, that is certainly what it looked like.

Outside of the security interest issue Len mentioned, using the same loan number is purely just a loan servicing accounting issue. Whether it is a renewal/extension or a new loan is based on whether or not the original obligation was replaced. A new note replaces the original obligation. The assignment of a loan number is irrelevant.

One of the interesting 1071 questions regards "refinancings". I cannot find any reference that limits originations and refinancings of a note originated in the same year to the once-per-year rule that applies to CRA. I've written the Bureau to see what they say, but I could not find any such limit. Has anyone found that referenced in the rule or the official interpretation of the rule?

Just to clarify. When we renew a loan, we have the customer sign a Promissory Note, subheaded "Renewal Note." So this is a refinance for reporting, should we meet the threshold, but it would not be counted to determine if we need to report?

The title of the document means nothing as we have no idea what it says or does.

You need to ask your legal counsel if what you are doing replaces the original legal obligation under State law. Most banks, if not replacing the original obligation, would just process a modification to extend the existing terms in the original note and not execute an entirely new note.

Thank you.

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Len - I can't see or find anything that addresses such a limit.

I have sent the Bureau this question. I believe there is no limit, unless stated (like in CRA), and I cannot find any limit in the Rule or the Official Interpretation.

I got my answer from a Bureau attorney - there will be no one-per-year limit to reporting a loan, no matter how many times it is refinanced in a calendar year. This is what I expected since no explicit limitation was written into the rule nor the official interpretation.

Thanks for following up Len