Does Note/Deed of Trust Need to be Satisfied/Replaced?

Answered by:

Question:

For a refinance, does the note and/or deed of trust need to be satisfied and replaced? We have a loan that was paid off with new money added. The loan was assigned a new loan number. However, a modification to the deed of trust was recorded instead of releasing and recording a new lien instrument.

Answer:

If a loan is a refinancing is dependent on if an existing obligation (note/loan agreement) is satisfied and replaced with a new obligation to the same borrower. The satisfaction or non-satisfaction of the mortgage/DOT (security agreement) is not a factor.

http://www.ffiec.gov/hmda/faqreg.htm

Refinancing --- satisfaction of lien. Is the satisfaction of a lien (mortgage) relevant to determining whether an obligation is a reportable refinancing?

Answer: No, the satisfaction of a lien is neither necessary nor sufficient to create a reportable refinancing. The credit obligation must be satisfied and replaced; it is not relevant whether the lien is satisfied and replaced. See 203.2(k)(2). [Editor's note: The current citation is to 12 CFR Part 1003, section 1003.2, definition of Refinancing, paragraph (2).]