Construction Loan – take out by another bank

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    I have a construction loan that is being taken out by another bank.
    The customer has run out of money and needs to borrow more money on the construction loan (we are good with that), my question is:
    I think we should re-disclose the construction loan (due to the increased loan amount and increased balloon payment – rate and term will stay the same).
    The other bank that is doing the perm financing told us all you have to do is modify the promissory note you don’t have to re-disclose.
    I don’t think this is right and I know that Jack has the right answer for me – re-disclose or not?


    The need for a disclosure is determined by how you handle the transaction.

    If you require the borrower to sign a new note, then the transaction is a refinance. A new disclosure is required for a refinance.

    If you keep the same note but modify the terms using a modification agreement, then new disclosures are not required.

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