Loan Renewal - New Reg Z Rules Applicable?

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Question:

We made a construction loan last year. Physical construction is completed and we wanted to renew the loan as a construction (or bridge) loan until the borrower could move to the secondary market for his permanent financing. Are we subject to the new early disclosures and seven day waiting period to renew the loan for ninety days? Are we also subject to the new Reg Z caps/constraints for this short term extension?

Answer:

You need to look to Reg Z 226.20 and its Commentary to see if what you want to do would be a refinancing. If you modify the existing obligation without replacing it, then the transaction will most likely not qualify as a refinancing.

First published on BankersOnline.com 5/31/10