I have an opinion from our external compliance vendor that states that if we are giving new money on an interim-construction loan, it is considered a refinance and we have to pay off the old loan and re-disclose for the new loan amount; we are unable to do a modification to just increase the loan amount. After reading some of the posts, I am not sure if that is correct.
1. If we just prepare a modification to extend a maturity date without giving new money, do we not have to disclose the loan fee for the modification on a new LE/CD?
2. If we are giving new money by increasing the original loan amount, we can do that by preparing a modification only and no new disclosures are required (as long as State law allows the modification)?
I have a similar question on this subject. If we have a interim construction that is about to mature and the customer needs additional time to complete construction, can we do a modification to extend the maturity date without any additional disclosures other than the modification agreement? Also we were running a construction special at the time of consummation that is no longer available so the modification would need to adjust the rate from .99% to 4.75%. I am leaning toward having to refinance due to the rate change but would like to hear some of the experts weigh in.
As noted above, it's a legal question, but if you are only modifying the maturity date and/or interest rate, then I do not think that would rise to the level of a refinance.
It all comes down to the definitions within 1026.20(a). Typically an extension of term even with a change in the fixed interest rate is not a refinance.
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