Three Year Balloon Mortgage

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Question:

On a three year mortgage with a balloon are the RESPA disclosures of the Good Faith and Mortgage Servicing Disclosure required? On this loan the mortgage is not satisfied, a new note is done with an amendment. I think it is more like an extension not a refinance.

Answer:

Answer from Dan:The satisfaction of the mortgage is not a factor. It's whether the new note satisfies and replaces the exiting note. It appears your new note satisfies and replaces the existing note so you have a refinancing requiring all new disclosures.

Answer:

Answer from Andy:Reg. Z at Section 226.20 explains when subsequent disclosures are required. I agree with Dan that this sounds as though you replaced the Note. Using these rules with balloon payments is a good way to protect your interest rate yields. Abusing them may confuse a balloon with an ARM.

First published on BankersOnline.com 4/13/09