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We have a closed-end loan that is close to its maturity date. If we renew the loan and treat it as a change in terms before the maturity date, rather than as a refinance, would that trigger the TRID requirements? Also, can we charge a flood certification fee and other, non-APR fees, such as a credit report, appraisal, and title examination fee? – IBA Compliance Connection

IBA Compliance Connection

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We have a closed-end loan that is close to its maturity date. If we renew the loan and treat it as a change in terms before the maturity date, rather than as a refinance, would that trigger the TRID requirements? Also, can we charge a flood certification fee and other, non-APR fees, such as a credit report, appraisal, and title examination fee?

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No, we believe that you may renew a loan without triggering the TRID requirements under Regulation Z — and this is the case whether the renewal is executed before or after the loan’s original maturity date. 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.

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.)