Modifying Maturing Balloon Loans

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Question:

Can maturing balloon loans secured by a primary residence be modified to change the rate and maturity date, with no fee charged to avoid a higher priced mortgage loan category? There would not be a new contract for a renewal or refinance. Do new TIL disclosures have to be given if the rate and maturity date change? On the same type of loan, can we simply extend the due date for another 36 or 60 month balloon, and change nothing else on the note to avoid HPML status?

Answer:

You would have to apply the individual scenarios against 12 CFR 226.20 to determine whether or not your actions qualify as a refinance or not.

First published on BankersOnline.com 2/22/10