I’m very confused on this situation. We have an existing loan that is a TRID (1-4 Family ) on our books.
The loan is a 5/5 ARM.
The customer has requested for it to be a 10/1 ARM. The loan amount will not change, we will not advance any additional money. The maturity date will not change.
Is this a situation that can be done with a modification and give the customer a 10/1 ARM Disclosure, a loan Estimate, an a closing disclosure alone with the modification.
Do we have to pay off the existing loan? I was hoping to be able to do this with a modification and the new disclosures.
Regulation Z requires new disclosures when an existing loan is refinanced. A refinancing occurs when an existing obligation is satisfied and replaced by a new obligation undertaken by the same consumer. Using a modification agreement changes the terms of the agreement, but does not satisfy and replace the existing obligation. For something as complicated as what you are proposing, we suggest handing the transaction as a refinance using a new note and providing new disclosures. However, the change can be handling as a modification. While new disclosures are not required in a modification, we suggest that the borrower receive a 10/1 ARM Disclosure, a loan Estimate, an a closing disclosure along with the modification.