From commercial loan to consumer loan

We have a customer where we made him a commercial loan for a non-owner occupied rental property. He has since sold his residence and has moved into this rental property and assumed it as his personal residence. The loan is now up for extention/modification and we are trying to find a way to convert this from a commercial loan to a consumer loan while keeping the same rate. Is this possible, or should we just re-write the whole loan?

How you convert the loan is between you and your legal counsel. If it results in being classified as a refinance under 1026.20, full disclosures will be required.

I agree with rlcarey, but it will probably be easier and cleaner to just redo the entire loan.

Would a Right of Rescission be required when re-working the loan from commercial to consumer? Just re-working existing balance - no new money involved?

I would apply rescission because it was not originally given.

Re pricing, if the bank is trying to keep a higher commercial rate on a now consumer purpose loan, consider fair lending. If the borrower qualifies for your consumer product and rate, on what basis would you justify charging a higher (or lower if that is the unlikely case) rate?

Thanks Kaybee. I was also leaning toward giving the ROR. We are pricing as consumer.