Lowering the Floor on a Loan

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Question:

We have a mortgage on property that was originally investment property. The property is now being used as the borrower's primary residence. We want to only lower the floor on this loan, which is an ARM. Would any disclosures be required?

Answer:

Assuming that the floor was disclosed in the original loan, you can lower it using a modification agreement without re-disclosing. If you are adding a floor, then you are adding a variable rate feature not previously disclosed, and you would have to treat it as a refinancing.

First published on BankersOnline.com 12/06/10