Real Estate Loan Modification & RESPA

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Question:

If you do a real estate note modification to an existing note, and additional funds are advanced, resulting in a modified loan with a new balance in excess of the outstanding loan balance plus charges for the modification, is this considered a refinance or a modification under Reg Z and RESPA? Are new disclosures necessary, and does rescission apply to money advanced in excess of the outstanding loan balance plus charges related to the modification?

Answer:

It is a modification with rescission rights for the amount of the additional balance. The modification keeping the old note in place and simply making some modifications to amount and payment schedule does not trigger disclosures under TIL or RESPA.

However, that additional amount advanced does trigger rescission as to the new amount. This is contained in 226.23(f) of Regulation Z.

First published on BankersOnline.com 2/11/02