Reamortize or Refinance

[FundeK]

Can someone please clarify when it is okay to reamortize a loan and when a refinance is needed?

For some reason I always thought that you could only reamortize to change payment frequency, but now I am being told that I am wrong....Which is very possible.

[Belgarath]

I think the best answer, in this case, is to read 1.72(p)-1, Q&A-20. This will answer your question far more coherently than I could.

[david rigby]

At first I thought it would be inappropriate to ascribe coherency to an IRS reg, but it might fit.

http://ecfr.gpoaccess.gov/cgi/t/text/text-...26/26tab_02.tpl

[FundeK]

Stupid question - I clicked on the link below and I am not sure what I am to look at when I get to this home page.

I did read 1.72(p)-1 (the whole thing) and I don't think it answers my questions.

When a loan is reamortized, there is no "replacement loan" or "replaced loan". The original loan is simply reamortized. Correct?? Our policy to to reamortize only for an unpaid leave of absence or to change the payment frequency.

When a loan is refinance, there is a "replacement loan" and a "replaced loan". This is when 1.72(p)-1 clarifies things. Our policy it to refinace to cure a delinquent loan (if not passed the cure period), to allow a participant to take advantage of a lower interest rate, and to add additional funds to their current loan.

Does this sound accurate?

Two more questions - Do you charge a new loan fee for a refinance? Do you require the participant to sign new paperwork for a reamortization or refinance?