This article first appeared in the Lending Life newsletter on June 18. register here to be received every day of the week.
President Joe Biden passed a bill on Thursday, declaring June 19, or June 17, a federal holiday. Biden’s Order commemorates the date the last enslaved African Americans were told they were free. Wonderful news, isn’t it? Wrong.
Reached Friday, many professionals in the mortgage industry were working to limit the damage – delaying closings, pushing back notices and modifying loans. Others had already left for the beach.
“It’s a complete nightmare,” said one lender. “I’m almost afraid to talk about it. The authorities are putting their own regulatory agencies in such a bind. They won’t be able to apply anything about it, and I’m sure the [Consumer Finance Protection Bureau] will come in and say something. Can you imagine them fining for infractions? It’s a good idea, but the execution was horrible.
Loan officers across the country panicked at first – “Will there even be wire services?” – although it seems that most financial systems are still functioning. The stock exchanges are still open, as are the banks, for the most part. the US Postal Service is still running and the Federal Reserve is also not the public holiday of June 15th.
Early this morning the Federal Deposit Insurance Corporation sent a missive to the lenders, asking them to use their own judgment in deciding whether to stay open.
Some loan officers, however, have decided to preemptively delay some closures, just in case regulators decide this is the perfect opportunity to crack down on compliance missteps. No one wants extra attention from the newly reinvigorated CFPB.
“We had a scheduled shutdown for Monday, and Thursday afternoon I had to let everyone know they made it a federal holiday, so we pushed it back,” a loan officer said. based in Louisiana. “As soon as I saw the email I said, ‘Well I’m not going to wait for the verdict because that means you can’t count on Saturday. I’ll just push it. ‘”
An Orlando, Florida-based loan officer said she didn’t mind the new June vacation, but it impacted the closing of several loans. If the closings are delayed, the loan officer said, it could impact the rate freeze, the deal that allows the borrower to lock in an interest rate for a period of time.
Oddly enough, rate freezes are not dependent on business days, but calendar days, so they could expire due to the federal holiday of June 17.
It’s “a little complicated,” said the Orlando loan officer. “I have closings scheduled for Monday, but since there’s a federal holiday coming up, I have to close on Tuesday, and the rate may have expired. For those who run a huge amount of business, this is a huge problem. It came out of nowhere, ”she said.
Another immediate question for loan officers is how to count the right of termination in light of the June 15th holiday. The right to terminate allows refinancing, HELOC, or home equity loan borrowers to leave within three days of closing.
The rule has been around since the 1968 Truth in Lending Act. When a borrower signs a loan, time is of the essence. Normally, however, a new federal holiday is not enacted in less than 72 hours.
What about the termination deadlines for loans signed on Wednesday or Thursday, before the law comes into force? The FDIC’s rating to lenders is not very reassuring.
Reads the compliance note: “It is not certain that this will affect the cancellation period for loans closed earlier this week (before the law is signed). “