Could someone please help me understand 203.2k, REG C. OUr bank uses two terms to do what I basically feel is the same thing. We renew loans and refinance loans. We do not do modification agreements, period...
When we "refinance" a loan we will change the identifying note number to another note number,our transaction history system indicates ie #10 is zero balance on our system; #11 is the new #. Internally, we know the balance that was on #10 is now on #11.Same mortgage, borrower, etc.

Renewal of a note is when, ie a non-dwelling secured home improvement loan is maturing and we agree to extend the maturity for another year.... internally we maintain the same note #10 and on our system it indicates the note is now maturing a year later...

In both these examples we always get a new note signed by the borrower.

My question is, is there really a difference in our situation on refinance vs renewal?

Please any help would be greatly appreciated.

we are a Ga. bank and finally know we do not have to follow the relationback rule (new money)..

Thanks.

A refinancing is when a new note satisfies and replaces the existing note.

A renewal is a continuation/modification of the original note.

How you manage your account numbering is of no consequence.

If you renew a loan (using a new note) it is my advice to make certain the new note references that it is a renewal of note # X dated X and maintain the original note. If you destroy the original note, or provide a copy to the borrower marked paid by renewal, your new note now has become a refinance because it has satisfied and replaced the existing note.

Please, please forgive my ignorance but when you use the term satisfies, in my bank's situation, then you are saying we have satisifed the existing obligation under our refinance process because we reflect a zero balance on the original note? Thanks for responding, too..

We keep all the original notes and we do not mark them in any way. On both the refinance situation and the renewal situation we reference this note refin/renew account #/note # etc.

The first note to the borrower is zeroed out = satisfied.

The new note is a refinance because it replaces the old note.

If the new note contains any additional money you will need to determine the use of the additional funds to verify the loan is just a refi or whether it's changed to home improvement or possibly even purchase.

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in my bank's situation, then you are saying we have satisfied the existing obligation under our refinance process because we reflect a zero balance on the original note?

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No. How you maintain the internal accounting of the note does not have any consequences on whether it qualifies as a refinancing or a renewal.

As long as your new note (even if it has a different note number) reference that it is a renewal of note # XXXXXX dated XXXX and you maintain the old note # XXXXXX with your loan documentation for new note # XXXXXX you still would have a renewal. Zeroing out on the loan system and transferring it to the new note number does not in itself satisfy and replace old note # XXXXX.

If your new note does not reference the old note, if you destroy the old note, or if you send a copy of the old note to the borrower marked "paid by renewal", the new note has satisfied and replaced the old note and becomes a refinancing.