Extending a matured consumer real estate note

We have a r/e loan that matured on 5-15 and the consumer is wanting to extend the note for 90 days to decide what he wants to do with his loan. We realize that HPML does not come into effect on this if we extend but were told you could not extend a consumer r/e loan, it must be renewed with all new docs and disclosures. Is this true?

we extend notes like this all the time. I am not aware of anything that prevents you from extending a RE loan on your own books. You are not extinguishing the debt.

We had been extending also until our auditing company told us that you can't extend matured notes. We are very confused and are trying to figure out when this came into play!

You are advised to consult your attorney.

Once a note matures all of its provisions have expired. You either replace it with a new agreement or you exercise its default provisions.

So, for future reference if we extend them before the maturity date (say we have one coming up for maturity on 6-15 and we extend it on 6-9) we would be within compliance?

If you extend or modify before maturity then you are agreeing to change existing terms. Once the note matures the terms no longer exist, other than the default provision, so how can you extend or modify terms that no longer exist?

Thank you for your help!

This really is a legal question and needs to be discussed with the bank's attorney and a standard process put in place. All we can do is respond based upon our experience, but you really need legal advice. Sometimes things can be done by mutual agreement and can vary based upon language in your bank's documents - go to your counsel and get legal advice.

I agree with Dan and Kathleen - this is a legal issue. However, Reg Z does have some specifics when it comes to HELOC's. The Commentary to §226.9(c)(1)#6 specifically states changes to terms of a home equity plan must be ". . . at or before it's scheduled expiration . . ."

I read this to mean Reg Z prohibits extending/renewing/modifying a HELOC after the maturity date. I don't know why the same info isn't in the closed-end side of Reg Z.

Is this type of transaction always "state specific" OR is there something in the Uniform Commercial Code that would address this type of transaction?