Section 1026.43 offers 7 options for verifying the borrower’s ability to repay. The small creditor portfolio option that you are attempting to use requires that you consider the consumer’s debt-to-income ratio at or before consummation according to the rules in Section 1026.43(c)(7). That section does not establish a cutoff ratio. You should follow the guidance in your own policy, so if 55% exceeds the limits established in your bank’s policy and procedures then you cannot make the loan.
Your situation does not involve a new loan, it involves a “renewal.” If your renewal involves a new obligation that satisfies and replaces an existing transaction then you must meet the ATR rules. If you are merely extending the term of the loan with a modification or extension agreement the transaction does not have to meet the ATR rules.