Impact on mortgage and consumer lenders

On June 17, 2021, President Biden enacted Senate Bill 475, making “June” a federal holiday. Because June 19e (tomorrow) falls on a Saturday this year, the day will be observed by federal government offices on June 18, 2021 (today).

This new law, revising the list of federal holidays in the US Code, will affect the operations of consumer credit lenders. It is important that lenders review their processes to determine the impact of this new leave on their operations.

The Loan Truth Act and Regulation Z provide two different definitions of “business day”: “general business days” and “specific business days”, and these business day definitions are applied differently with respect to certain requirements. .

A “general business day” is defined as a day on which the offices of the creditor are open to the public to perform substantially all of their business functions. 12 CFR § 1026.2 (a) (6). Behind-the-scenes operations that are not open to the public do not fall under this definition. Commentary on Regulation Z notes that activities which indicate that the creditor is open to almost all of its business functions include the availability of staff to effect loan disbursements and to process inquiries about credit transactions. Commentary 1 to § 1026.2 (a) (6).

A “specific business day” is defined to mean all calendar days except Sundays and statutory holidays specified in 5 USC § 6103 (a), which include New Years Day, Martin Luther’s birthday King, Jr., Washington Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day; and now “Juneteenth”. 12 CFR § 1026.2 (a) (6). The Commentary to Regulation Z states that when one of the federal holidays specified in 5 USC § 6103 (a) (June of this year, for example) falls on a Saturday, federal offices and other entities may observe the holiday. the previous Friday (June 18). In cases where the most precise rule applies (for example, cancellation, waiting periods before consumption), the observed public holiday (in the example, June 17) is a working day, but the public holiday actual (June 18) will not be a business day.

Therefore, for more specific reasons (e.g. cancellation, waiting times before consumption), Friday is a working day and Saturday is not, which means that in some situations the creditor may need to add one more business day (for example the cancellation may need to stay open for one more day, or consumption may need to be scheduled a day later) than initially required for these purposes. For general business day purposes, the fact that Fridays and Saturdays are business days is dependent on the Company’s offices being open to the public to perform substantially all of its business functions.

The Mortgage Bankers Association has asked the CFPB and banking regulators for urgent advice on how creditors should deal with these issues. The MBA provided suggestions to the CFPB yesterday that would have provided narrow exceptions for this year only to the “working days” counting rules in Regulation Z and TRID referenced above which would hopefully minimize disruption to the market, but the CFPB should not respond today. The MBA speculated that the CFPB may issue clarifications or FAQs next week. In the meantime, it will be essential for creditors to take this new leave into account as much as possible.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.Revue nationale de droit, volume XI, number 169


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