June 17th President Biden signed into law Juneteenth a wonderful new federal holiday. Juneteenth celebrates the end of slavery. The unintended consequences of an important decision could have been avoided by giving lenders a week or more of a head’s up.
Lenders offer
mortgage rate locks in increments of days. Borrowers who have a loan in process
or signed will now need to add an extra day extension when they counted upon or
planned to close in the coming week. Lenders count Saturdays when the given Saturday
is not a federal holiday.
Federal holiday relates to mortgage deadlines that count Saturday as a business day. Juneteenth National Independence Day creates a problem
under the Truth in Lending Act (TILA) and Regulation Z because there was no
time to plan.
Under TILA and Regulation Z,
there are two definitions of “business day.” One definition is “a day on
which the creditor’s offices are open to the public for carrying on
substantially all of its business functions.” There is a specific
definition for certain purposes, including the waiting periods that apply to
the TRID rule disclosures and right of rescission, the date that private
education loan disclosures mailed to the consumer are deemed to be received,
and the date that the right to cancel a private education loan expires.
Under the specific definition, a “business day” is “all calendar days except
Sundays and the legal public holidays specified in U.S.C. 6103(a).
Saturday June 19, 2021 is now not counted as a business day.
The CFBP sent an email out nationwide
to lenders as to how they might deal with refinance files which are in
progress, signed and expect to close Monday, Tuesday June 21 and June 22.
Since there was no advance
warning to plan, this creates hardship for mortgage borrowers, our company
issued a decision to extend any rate locks that may or might expire during
those days. This is a large financial commitment to our clients, as rate extensions
normally cost .125% of the loan amount for seven days. The cost is a real and a
giant commitment to our borrowers.
I hope other lenders follow suit.
There may be a chance for a once
in a lifetime exception to write a hardship letter as to needing the cash
proceeds from a refinance for a surgery or such and blame it on the surprise
announcement of a new federal holiday.
CFBP emailed a press statement Friday: “The CFPB recognizes that lenders did
not have sufficient time before the holiday to adjust closing timelines and
will take that fact into account in any guidance it ultimately issues. Any
guidance would be issued after consultation with the other...regulators...to
ensure consistency of interpretation for all regulated entities.” This sounds like they may grant wiggle room but since there is no time to plan over the weekend, lenders want to be certain they are following the law.
If you have questions, please call me (949) 784-9699
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