Participant loan refinancing during cure period

[Belgarath]

Is this permissible? Participant takes loan - for short period - say 1 year. Employer never withholds anything. This is discovered just before end of cure period for the first couple of payments. No problems, no matter what, with maximum dollar or 50% limits.

Can a refinance, which starts before the end of the cure period, extinguish the "delinquent" payments, since it is considered as repaying the original loan? (Assuming the period of the replacement loan doesn't extend beyond 5 years from the date of the ORIGINAL loan)

Seems like a loophole. If allowable, one could keep missing the first payments, and refinance every time and ending up with what amounts to a "balloon" payment at the end.

[Lou S.]

Is this permissible? Participant takes loan - for short period - say 1 year. Employer never withholds anything. This is discovered just before end of cure period for the first couple of payments. No problems, no matter what, with maximum dollar or 50% limits.

Can a refinance, which starts before the end of the cure period, extinguish the "delinquent" payments, since it is considered as repaying the original loan? (Assuming the period of the replacement loan doesn't extend beyond 5 years from the date of the ORIGINAL loan)

Seems like a loophole. If allowable, one could keep missing the first payments, and refinance every time and ending up with what amounts to a "balloon" payment at the end.

I think you are fine curing the loan the first time it is discovered "and putting in procedures to avoid it happening again". I think you have not cured it if you repeat the pattern on a regular basis.

[Belgarath]

Thanks. That's the exact conclusion we reached yesterday when discussing this.

[Bird]

I don't see a refi as being the same thing as making a payment. I guess you might do it once as an informal self correction but I agree that you shouldn't make a pattern of it.