No, we do not believe a loan renewal with an increased fixed interest rate would trigger the TRID disclosures if the original debt is not canceled in connection with the renewal. However, the language that you use in the loan renewal documents must be carefully structured in order to achieve this result.

TRID disclosures are required for existing loans only when they are “refinanced,” which Regulation Z treats as a new transaction. The general rule 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.

Although TRID disclosures are required when a variable-rate feature is added to a loan obligation – even when the original obligation is not being satisfied and replaced – this is not the case when a fixed interest rate is increased. The FDIC Compliance Manual clarifies that a fixed rate increase can be the “the cost of renewal” and does not require new disclosures.

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. A refinancing is a new transaction requiring new disclosures to the consumer.”)

• Official Interpretations, 12 CFR 1026, Paragraph 20(a), Comment 1 (“A refinancing is a new transaction requiring a complete new set of disclosures. Whether a refinancing has occurred is determined by reference to whether the original obligation has been satisfied or extinguished and replaced by a new obligation, based on the parties’ contract and applicable law. . . .”)

• Official Interpretations, 12 CFR 1026, Paragraph 20(a), Comment 3(ii) (“Even if it is not accomplished by the cancellation of the old obligation and substitution of a new one, a new transaction subject to new disclosures results if the creditor either: A. Increases the rate based on a variable-rate feature that was not previously disclosed; or B. Adds a variable-rate feature to the obligation.”)

• FDIC Compliance Manuel, Truth in Lending Act, V-1.39 (“If, at the time a loan is renewed, the rate is increased, the increase is not considered a variable rate feature. It is the cost of renewal, similar to a flat fee, as long as the new rate remains fixed during the remaining life of the loan. If the original debt is not canceled in connection with such a renewal, the regulation does not require new disclosures.”)

• 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.)

• Rodriguez v. Chase Home Finance, LLC, No. 10 C 05876 (N.D. Ill. Sept. 23, 2011) (“Here, Rodriguez’s Modification Agreement states that it ‘will amend and supplement (1) the Mortgage on the Property and (2) the Note secured by the Mortgage. . . .’ In short, because the Modification Agreement merely modifies the previous loan rather than cancelling the loan and creating a new obligation, Rodriguez's modification does not constitute a ‘refinancing.’”)