We’re often asked whether making a change to an existing closed-end loan agreement triggers new disclosures. For instance, can you change the rate, extend the term or even change a payment?
Regulation Z generally only requires new disclosures in the case of a refinancing (aka a new note). A refinancing is defined in §1026.20(a) as …an existing obligation... satisfied and replaced by a new obligation undertaken by the same consumer.... In other words, you’re replacing an existing note with an entirely new note. There are, of course, some exceptions outlined in the Regulation as well.
It's important to remember that even if you don’t have to provide new disclosures under Regulation Z, other regulatory requirements can still come into play. For instance, adding a security interest in a consumer’s principal dwelling to an existing loan triggers the right of rescission. Flood insurance is triggered any time you Make, Increase, Renew, Refinance, or Extend (MIRE) a loan. Joint intent is another requirement that is often overlooked.
Published
2024/08/26
