by Randy Carey:
How you accomplish this is a legal question and not one of compliance. This transaction will however be a refinance under 1026.20(a) regardless of how it is accomplished.
by Richard Insley:
I don't mean to split hairs, but the terms "converted", "modification", and "refinance" have no particular meaning in Regulation Z...because they are not defined. The term "refinancing" IS defined (Section 1026.20(a)) and, as Randy indicates, a "refinancing" is an event that triggers all new TIL disclosures. In addition to the general rule about contract satisfaction/replacement, a "refinancing" also results from the addition of a previously undisclosed variable rate feature (see OI #3 under Section 1026.20(a)).
How you achieve the new contract terms is a matter of state contract law...and a topic for discussion with the bank's attorney.