A lender completed a consumer CD secured loan. The borrower later decided that they would like to use a small parcel of land with a cabin on it as the collateral instead of the CD. The lender completed a modification of loan substituting the collateral and increasing the note rate. We now have a 2nd mortgage on the property. He did complete a Flood Hazard determination report, but should he not have also completed a GFE, HUD, and recission? I'm thinking he should have treated it like a new loan request since he was switching to real estate as collateral not just a subsitution of collateral. Any comments?

If the cabin is the primary residence of the borrower then rescission would apply.