Modification of consumer real estate loans

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    Is it ok to use modifications on consumer real estate loans? If so, other than flood, what else would be reviewed for compliance ?


    This seems to be a common question as of late. Good call on the flood part (make, extend, or renew).

    It really depends on what you are modifying. Are you just extending the maturity of the loan a month or two, or changing the payment date? Or are you doing more extensive changes?

    Are you charging a fee for the modification?


    Are you allowed to use a modification or change in term agreement on a consumer real estate loan that is tied to an index (ARM loan – five year treasury) to lower the rate in the middle of a rate change cycle? It would require lowering the rate, margin and floor. What is your opinion on using this document for this purpose and what restrictions would apply?


    Modifications really are not a compliance issue per say; it is more of a legal question and something I would encourage you to talk about with Bank counsel. Caution should be used when deciding on if a modification should be used or not.

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