Reamortize to lower payment-Consumer Loan

A consumer balloon real estate secured loan originated 5.10.2013, will mature 5.5.2018. At origination the loan amount was $258,000, term was 30/5. On 7.25.13, the customer put $128,000 down on the principal balance. The current balance is $115,000. The customer is requesting to lower the payment based on the remaining amortization/term (342/42).

Can this be done without refinancing the loan? If so, what do we need to execute this change?

Under federal laws (TIL, RESPA, HMDA), you could modify the loan without refinancing it. A refinancing occurs when you satisfy/replace/extinguish a loan with a new loan. If you keep the original loan in place but modify the payment/term, you may not be refinancing it.

To execute this, you prepare a modification agreement that attaches to the original note.

Although it's not likely to be a problem, you should also check your state law. Better still, have an attorney draft the modification agreement.

Thanks for the responses...we have an attorney working on the note modification agreement for us.

We are wanting to help a customer by lowering a rate and re-amortizing her payment via a modification agreement rather than refinancing her loan and causing her to incur fees. Is this ok to do as a modification and not a refinance because the loan will remain same loan number? What if we get a new mortgage because the maturity date of the loan has changed?

Is it OK? You would have to ask legal counsel. If it is, it would not be a refinance under Reg. Z.

Ok. Thanks.

The maintenance of a loan number is not relevant to the determination of what Regulation Z defines as a "refinancing."

Also, your actual question "is it OK to do as a modification...?" extends beyond Regulation Z. Investors, insurers, guarantors, and any other third party stakeholders may have a say in any changes you make.