I rarely send the Commentary out on a Federal Holiday, but given the tumult surrounding today in the compliance world, thought it would be a good thing. (Couldn’t they have waited until June 19th of 2022?) Things are always changing. Will the 5-day workweek change? I’ve worked places that are four 10-hour days instead of five 8-hour days, and it’s nice. Apparently some have gone to four tens. The industry’s lock volume is always changing to varying degrees. According to FBX, May 2021 mortgage rate-lock volume was nearly flat YoY and down -4% MoM across all channels, while funded volume increased 14% YoY and decreased -16% MoM. In the Retail channel, lock volume increased 2% YoY and decreased -4% MoM, while funded volume was up 9% YoY and down -16% MoM. (FBX sources a statistically significant data set directly from lenders to produce these benchmarks. Drill into this data further here.)
A new holiday… are lenders celebrating?
Of course they’re not, at least not processors and compliance personnel. Probably 25 percent of my emails yesterday involved Juneteenth, half thanking me for publishing what I knew yesterday morning, and the other half throwing disclosure and compliance questions my way. One would think that the end of the world is approaching. And the early silence from the CFPB was deafening to the point where Katten & Temple, LLP attorney Brian Levy sent out a piece titled, “The Juneteenth Fiasco: the CFPB Takes the Day Off.”
Certainly clients of wholesale and correspondent investors notified clients of their policies. Some non-investor notes were “short and sweet.” One attorney unofficially wrote to me saying, “This is not that big a deal. Disclosures issued before the law was signed by the President are valid and transactions consummated prior to the President signing are valid and following rules (as they existed at the time) without a federal holiday included. New disclosures issued tomorrow or after would account for the new law. Of course that still isn’t perfect when it comes to compliance software programmed as certain way as of today, but certainly solves for a logical, consistent approach that honors the law as it existed at the time the documents were created, sent to the borrower and signed.”
The CFPB’s acting Director, Dave Uejio, issued, “The CFPB, along with the other Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) regulators, is aware of concerns regarding implementation of the new Juneteenth Federal holiday, particularly as it relates to mortgage lender compliance with the Truth in Lending Act and TILA-RESPA Integrated Disclosure (TRID) timing requirements. The CFPB recognizes that some lenders did not have sufficient time after the Federal holiday declaration to consider whether and how to adjust closing timelines. The CFPB understands that some lenders may delay closings to accommodate the reissuance of disclosures adjusted for the new Federal holiday. The CFPB notes that the TILA and TRID requirements generally protect creditors from liability for bona fide errors and permit redisclosure after closing to correct errors. Any guidance ultimately issued by the CFPB would take into account the limited implementation period before the holiday and would be issued after consultation with the other FIRREA regulators and the Conference of State Bank Supervisors (CSBS) to ensure consistency of interpretation for all regulated entities.”
“Juneteenth” (June 19th) has been declared by President Biden as a federal holiday with the enactment of Senate Bill 475 (S. 475) . Juneteenth is significant because, on June 19, 1865, Major General Gordon Granger announced in Galveston, Texas, the end of slavery in accordance with President Abraham Lincoln’s 1863 Emancipation Proclamation. Forty-eight states and the District of Columbia already recognize Juneteenth as a holiday. In the mortgage lending world, surprisingly, TILA and Regulation Z recognize different definitions of what constitutes a business day. To further complicate how we view a business day, there are general and specific business days, defined and applied differently with respect to certain requirements.
“General business days” are defined to mean a day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions. “Specific business days,” on the other hand, are defined to mean all calendar days except Sundays and the legal public holidays which include New Year’s Day, the Birthday of Martin Luther King, Jr., Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day; and now “Juneteenth.” This year however, while the holiday is being observed on Friday, June 18th this year (due to June 19th falling on a Saturday), Saturday will be the actual holiday.
For the more precise purposes (e.g., rescission, waiting periods prior to consummation), Friday is a business day and Saturday is not, meaning that in certain situations, the company may need to add one more business day (e.g., rescission may need to remain open for a day longer, or consummation may need to be scheduled a day later) than originally required for these purposes. For the general business day purposes, whether Friday and Saturday are business days depends on whether the company’s offices are open to the public for carrying on substantially all of its business functions.
Wells Fargo told its correspondents that it considers Saturday, June 19, “as the Juneteenth holiday and will exclude this date as a business day for the following, as we would for any other holiday: Loan Estimate and Closing Disclosure waiting periods, Right of rescission timing, Appraisal and valuation acknowledgment timing.
Bankers heard from the ABA. “…the Consumer Financial Protection Bureau has thus far indicated to ABA staff that it has no plans to issue guidance on how the newly enacted Juneteenth holiday—being observed today, June 18—affects the timing of disclosures required for mortgage transactions in process. In addition to continuing its outreach to the CFPB and banking agencies to urge them to issue guidance, ABA is calling on the bureau to issue a public statement explaining to consumers why some mortgage transactions may be delayed or re-calculated.
While welcoming the new federal holiday observing Juneteenth, ABA noted that the sudden enactment, coupled with the lack of guidance by regulators, has generated many questions about the timing of disclosures required under Regulation Z in connection with residential mortgage and student loan transactions. ABA and bankers have expressed concern that regulatory timing requirements may require changes to disclosures and waiting periods that are tied to definitions of “holidays” and “business day”—and that re-calculations may be necessary.
Even though bankers face compliance questions that demand immediate answers, until the CFPB issues guidance, there are no certain answers. ABA recommends that banks consult with counsel to determine the best path forward and, as always, document the circumstances and rationale for all decisions, keeping in mind that Truth in Lending Act violations can give rise not only to enforcement actions, but also to private rights of action.”
loanDepot’s wholesale channel wrote, “this Saturday, June 19, 2021, is considered a legal public holiday. Because it is a legal public holiday, June 19, 2021, cannot be counted as a received day for the LE or CD and cannot be included in the waiting periods for consummation under TRID or rescission for owner-occupied refinances. For rescindable loans that closed and funded with June 19, 2021, as a business day, rescission will need to be reopened. An updated Right to Cancel will be sent with a new rescission period that takes into account both the new public holiday and such new notice is sent.
“For rescindable loans that closed but are not funded with June 19, 2021, as a business day, we will issue a new Right to Cancel with a new rescission period that takes into account both the new public holiday and such new notice is sent. For TRID waiting periods (initial and revised LE/CDs) on loans that have already signed documents with a June 19, 2021, as a business days, but have not funded, we will add one (1) business day and consummation will be scheduled a day later than originally scheduled. Locks on impacted files expiring Monday, June 21, 2021, and not in a docs out status will be auto extended one day.” LD included a matrix showing the new First Allowable Signing Dates based on when the CD is received by the Borrower(s), as well as the new Funding Date based on the date a rescinded loan closes.”
First Community Mortgage told clients, “Juneteenth is to be excluded as a Specific Business Day when counting days to determine waiting period prior to consummation. Closing Disclosures must account for the exclusion of Saturday, June 19th in the timing of determining the closing date. Closing Disclosures already sent including June 19th must be updated to exclude from the waiting period and the closing date adjusted accordingly. For Rescission Timing, Juneteenth is to be excluded as a Specific Business Day to determine rescission period. Closing packages sent including Saturday, June 19th as a rescission day must be updated and signed by the consumer reflecting the new rescission period and funding date. Ensure all rescission timing and waiting periods are adjusted to comply with the requirements of a federal holiday.
Vendor news: mergers and acquisitions continue
Don’t forget that earlier in June Volly, a technology provider for the mortgage and banking industries, announced that it has acquired Home Captain, a technology-enabled real estate platform that shepherds homebuyers through the home buying journey.
Investment Firm, Gridiron Capital, LLC, announced that Class Valuation has acquired SouthEastern. Class Valuation is a leading, technology-enabled appraisal management company (“AMC”) focused on providing regulatory compliant appraisals. Southeastern serves 150+ customers including mortgage lenders, community banks and credit unions. The acquisition will increase Class Valuation’s market density within the southeastern U.S. and create new relationships between Class Valuation and high-quality appraisers in these markets.
ICE Mortgage Technology acquired eVault Technology and will deploy an eVault solution for secure storage of digital mortgages and notes. The eVault technology will be integrated into ICE’s mortgage closing platform, Encompass eClose which enables lenders to electronically facilitate every aspect of the eClosing workflow, from ordering documents to delivering loans to investors – and all steps in between – without ever having to leave Encompass, the industry’s most recognized loan origination system.
Titlegenius, by Radian, is a direct-to-consumer service that provides a simple, transparent, and secure way to order title insurance and closing services online. The first in a series of “genius”-branded services Radian is bringing to market to reimagine the way customers interact with the real estate services market. Read the press release for more information.
Discover how modern appraisal helps capacity issues and supports underrepresented communities by collecting data in a non-biased, standardized format. Download the ClearCapital white paper “Why We’re Heading Into a Golden Age for Appraisal Modernization.”
Republic Bank has selected Fiserv, Inc. as its new strategic technology partner for core processing, payments and digital solutions.
Helping the industry
At the beginning of COVID in March 2020, Ginger Bell, CEO, Edumarketing created a video series called Flatten the Curve not the Spirit. The series featured industry leaders who shared what they were doing to manage through the shut down and inspire their teams. The series has been recognized with two Telly Awards in the categories of Education and Discovery and Talk Show Series. (The Telly Awards annually showcases the best work created within television and across video, for all screens.) Ginger said, “We’d like to congratulate everyone who contributed to the Flatten the Curve Not the Spirit series including Ginger Bell, producer, Erin Murphy, editor, Steve Sims, Jason Frazier, Bill Hart, Eddy Perez, Laura Brandao, Christine Beckwith, Kristin Messerli, Todd Bookspan, Brian Vieaux, Linda Davidson, Cindy Ertman, Nick Nanton Karin Carr, Paul Gigliotti, Tiare Fullerton, Steve Richman, and Katie Lance.” (You can view the entire series at www.flattenthecurvenotthespirit.com.)
There were three men from the Caribbean living together in London: a Trinidadian, a Barbadian and a Jamaican who were all starving because they didn’t have money to buy food. Upon coming close to a posh restaurant, however, they came up with a plan.
The Trinidadian went in first. After being seated he ordered a three-course meal with white wine. When he had finished the meal, the waiter came by with the bill.
“But I paid you!” the Trinidadian shouted.
The waiter was very confused as he could not remember being paid, but as he did not want to cause any trouble…he let the Trini leave.
Five minutes later the Barbadian walked into the restaurant and ordered a five-course meal with red wine. When he was finished eating, the waiter came by to collect the money for food.
“But I paid you!” The Barbadian shouted.
This time the manager came and had to calm down the Bajan, and as he did not want anything to upset the other customers, he let the Bajan go.
Ten minutes later the Jamaican walked in, sat down, lit a cigarette, and ordered the most expensive meal on the menu plus two Red Stripe beers.
After he had finished, the waiter came to collect the money for the meal and before asking for it, the waiter said, “Sir… I have been having a sort of problem all day and I can’t understand it. Other people like you came in earlier and ate and they said that they paid me but I don’t remember getting any money from them, so……..”
Before he could finish, the Jamaican chimed in loudly “Hear mi nuh boss, that ah fi yu problem…jus gimme mi change!”
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