Impact on mortgage and consumer lenders

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On June 17, 2021, President Biden signed into law Senate Bill 475 making June 19th a federal holiday. Because June 19th (Tomorrow) falls on Saturday this year, this day will be celebrated in federal government offices on June 18, 2021 (today).

This new law, revising the list of federal holidays in the US Code, will affect the activities of credit institutions. It is important for lenders to rethink their processes to determine how this new holiday will affect their operations.

The Credit Truth Act and Rule Z contain two different definitions of “business day” – “general business days” and “specific business days”, and these definitions of business days apply differently to certain requirements.

“General Business Day” is defined as the day on which the lender’s offices are open to the public for virtually all of its business functions. 12 CFR § 1026.2 (a) (6). This definition does not include behind-the-scenes operations closed to the public. The Commentary on Rule Z notes that actions that indicate the lender’s openness to virtually all of its business functions include having staff to disburse loans and process credit requests. Commentary 1 to § 1026.2 (a) (6).

“Specific Business Day” means all calendar days other than Sunday and public holidays specified in 5 USC § 6103 (a), which include New Years, Martin Luther King Jr.’s Birthday, Washington’s Birthday, Memorial Day, Independence Day, Independence Day Labor, Columbus Day, Veterans Day, Thanksgiving and Christmas; and now “June twentieth”. 12 CFR § 1026.2 (a) (6). The commentary to Rule Z states that when one of the official public holidays specified in 5 USC § 6103 (a) (for example, June 19 of this year) falls on a Saturday, federal agencies and other organizations may celebrate the holiday on the previous Friday (June 18 ). In cases where a more precise rule applies (for example, termination of the contract, waiting periods before completion), the observed holiday (in the example, June 19) is a business day, but the actual holiday (June 18) will not be a business day.

Therefore, for more specific purposes (e.g. termination of the contract, waiting periods until completion) Friday is a business day and Saturday is not. This means that in certain situations the lender may need to add one more business day (for example, termination of the contract may need to be left open for one more day, or completion may be required a day later) than was originally required for these purposes.… For general business day purposes, whether Friday and Saturday are business days depends on whether the company’s offices are open to the public to perform virtually all of its business functions.

The Mortgage Bankers Association has requested urgent guidance from the CFPB and banking regulators on how lenders should address these issues. The MBA yesterday submitted proposals to the CFPB that would include narrow exceptions for this year only from the Regulation Z and TRID “working days” rules mentioned above, which will hopefully minimize market disruption, but CFPB is not expected to respond today. The MBA suggested that the CFPB may release clarifications or answers to frequently asked questions next week. Meanwhile, it will be imperative for lenders to take this new holiday into account as best they can.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.Review of National Legislation, Volume XI, Number 169

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