We believe that you may modify this loan without treating the transaction as a refinancing, and whether your bank chooses to structure this transaction as a modification or as a refinancing is a business decision. If your bank wishes to structure this transaction as a modification (which would not require new set of Regulation Z disclosures), the language that you use in the loan modification documents must be carefully structured in order to achieve this result.

The general rule under Regulation Z is that a “refinancing” occurs only when an existing obligation is “satisfied and replaced” by a new transaction, which is determined by the language in the parties’ contract, as well as applicable state law.

There are a few court decisions that indicate how to structure a transaction as a modification as opposed to a refinancing. The difference will depend on the specific language that you use in the documentation to modify the loan. For example, one federal court in Illinois reviewed the language of a modification agreement and determined that it did not constitute a refinancing because the modification agreement specifically stated that it was merely amending and supplementing the original loan agreement and not satisfying or releasing the existing obligation.

For resources related to our guidance, please see:

• Regulation Z, 12 CFR 1026.20(a) (A “refinancing” occurs when “an existing obligation that was subject to this subpart is satisfied and replaced by a new obligation undertaken by the same consumer.”)

• Rodriguez v. Chase Home Finance, LLC, No. 10 C 05876 (N.D. Ill. Sept. 23, 2011) (Determining that a modification agreement that expressly stated it would “amend and supplement” the original mortgage and note and would not constitute a “satisfaction or release” of the original obligations was not a refinancing.)