InfoBytes Blog
Juneteenth creates compliance challenges for mortgage industry
On June 17, President Biden signed S. 475 establishing June 19, Juneteenth, as a federal holiday. The “Juneteenth National Independence Day Act” amends 5 U.S.C. § 6103(a) which codifies the legal public holidays. Because June 19 falls on a Saturday this year, the holiday will be observed on Friday, June 18.
The establishment of a new federal holiday mere hours before the first observance of that holiday poses novel compliance challenges for the mortgage industry. Notably, both TRID and TILA rescission requirements have important timing standards that reference federal holidays.
TRID
Under TRID, the Loan Estimate must be provided to the consumer at least seven business days prior to consummation, and the Closing Disclosure must be provided to the consumer at least three business days prior to consummation. For purposes of these requirements, “business day” is defined as “all calendar days except Sundays and legal public holidays” as specified in 5 U.S.C. § 6103(a). As the holiday occurs on a Saturday this year, Saturday, June 19 is not a “business day” for purposes of calculating either the 7-business day waiting period after delivery of the Loan Estimate or the 3-business-day waiting period after delivery of the Closing Disclosure. Commentary to Regulation Z also states that, for purposes of rescission and the provision of mortgage disclosures, when a federal holiday falls on a Saturday but is observed on the preceding Friday, the observed holiday is a business day.
Accordingly, for purposes of providing the Loan Estimate at least seven business days prior to closing and the Closing Disclosure at least three business days prior to closing, lenders may not count Saturday, June 19, as a business day, but must count Friday, June 18, as a business day. Absent clarification from the CFPB, lenders are advised to push closings back one day where they were previously counting Saturday (June 19) as a business day. For example, if a Closing Disclosure was received by the consumer on Thursday, June 17, closing may not occur until Tuesday, June 22.
Rescission
A rescission period expires on midnight on the third business day after closing and uses the same definition of business days, which is “all calendar days except Sundays and legal public holidays.” As such, Saturday, June 19 this year is not a “business day” for purposes of the 3-business day rescission period and lenders should ensure that consumers are provided an extra day where the rescission period encompasses June 19, and are made aware of that extension. This raises unique funding and Notice of Right to Cancel disclosure related questions, the answers to which may depend on individual facts and circumstances. Absent further guidance from the CFPB, creditors may wish to delay closing by one day for those transactions where the three-day Closing Disclosure period is relevant, as well as consider providing updated Notices of Right to Cancel with a new rescission period taking into account both the new public holiday and when such new notice is sent.
On June 18, CFPB acting Director Dave Uejio issued a statement recognizing that "some lenders did not have sufficient time after the Federal holiday declaration to consider whether and how to adjust closing timelines" and that "some lenders may delay closings to accommodate the reissuance of disclosures adjusted for the new Federal holiday." Uejio further noted that "TILA and TRID requirements generally protect creditors from liability for bona fide errors and permit redisclosure after closing to correct errors." He added that any guidance ultimately issued by the Bureau "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 to ensure consistency of interpretation for all regulated entities."