Truth in Lending (Regulation Z); Impact of the 2021 Juneteenth Holiday on Certain Closed-End Mortgage Requirements
| Published date | 12 August 2021 |
| Citation | 86 FR 44267 |
| Record Number | 2021-17050 |
| Section | Rules and Regulations |
| Court | Consumer Financial Protection Bureau |
Federal Register, Volume 86 Issue 153 (Thursday, August 12, 2021)
[Federal Register Volume 86, Number 153 (Thursday, August 12, 2021)]
[Rules and Regulations]
[Pages 44267-44270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17050]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1026
Truth in Lending (Regulation Z); Impact of the 2021 Juneteenth
Holiday on Certain Closed-End Mortgage Requirements
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Interpretive rule.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
issuing this interpretive rule to provide guidance on certain
Regulation Z timing requirements related to rescission of closed-end
mortgages and the TILA-RESPA Integrated Disclosures (TRID). These
timing requirements are based on a definition of ``business day'' that
excludes days that are designated as legal public holidays under
Federal law. The interpretive rule explains these timing requirements
in light of recent legislation that designated ``Juneteenth National
Independence Day, June 19'' (Juneteenth) as a Federal legal public
holiday. It clarifies that, if the relevant closed-end rescission or
TRID time period began on or before June 17, 2021, then June 19, 2021,
was considered a business day, but nothing prohibits creditors from
providing longer time periods. Therefore, it would also be compliant
for creditors to have considered June 19, 2021, a Federal holiday for
purposes of these provisions.
DATES: This interpretive rule is effective on August 12, 2021.
FOR FURTHER INFORMATION CONTACT: Pedro De Oliveira, Lanique Eubanks,
Jaclyn Maier, or Priscilla Walton-Fein, Senior Counsels, Office of
Regulations, at 202-435-7700. If you require this document in an
alternative electronic format, please contact
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
On June 17, 2021, the President signed legislation that amended 5
U.S.C. 6103(a) to add ``Juneteenth National Independence Day, June 19''
(Juneteenth) to the list of Federal legal public holidays (Federal
holidays).\1\ Various regulatory provisions cross-reference or
otherwise refer to the Federal holidays listed in 5 U.S.C. 6103(a),
including the Regulation Z definition of ``business day.'' In
Regulation Z, ``business day'' is defined in Sec. 1026.2(a)(6)
generally to mean ``a day on which the creditor's offices are open to
the public for carrying on substantially all of its business
functions.'' However, for purposes of certain specified Regulation Z
provisions, Sec. 1026.2(a)(6) defines business day to mean: ``[A]ll
calendar days except Sundays and the legal public holidays specified in
5 U.S.C. 6103(a), such as 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.''
\2\ This is referred to herein as the ``specific business day''
definition.
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\1\ Juneteenth National Independence Day Act, Public Law 117-17,
135 Stat. 287 (2021).
\2\ Comment 2(a)(6)-2 further provides that four Federal
holidays are identified in 5 U.S.C. 6103(a) by a specific date: New
Year's Day, January 1; Independence Day, July 4; Veterans Day,
November 11; and Christmas Day, December 25. The comment states that
when one of these holidays falls on a Saturday, Federal offices and
other entities might observe the holiday on the preceding Friday
but, nonetheless, the observed holiday is a business day for
purposes of the specific business day definition. Like the four
Federal holidays listed in comment 2(a)(6)-2, Juneteenth is
identified in 5 U.S.C. 6103(a) by a specific date. For 2021, Federal
offices observed the Juneteenth holiday on Friday, June 18, 2021.
For purposes of the specific business day definition, June 18, 2021,
was a business day.
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The legislation that made Juneteenth a Federal holiday took effect
immediately.\3\ Therefore, June 19 became a Federal holiday on June 17,
2021. By virtue of the cross-reference to 5 U.S.C. 6103(a) in Sec.
1026.2(a)(6), the days that are considered Federal holidays under the
specific business day definition in Regulation Z also changed on June
17, 2021. The Bureau understands that this presented interpretive
questions and compliance challenges for the mortgage industry because
the Juneteenth holiday occurred only two days after the date of the law
change. Based on industry inquiries and outreach to the Bureau
following the June 17, 2021, amendment to 5 U.S.C. 6103(a), the Bureau
understands these issues were particularly acute for transactions that
either (1) closed on or before June 17, 2021, but for which consumers'
rescission periods had not yet expired or (2) were close to the
[[Page 44268]]
planned closing date on June 17, 2021, and subject to certain
disclosure timing requirements of the TRID provisions of Regulation Z.
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\3\ The law took effect when it was signed by the President on
June 17, 2021. See, e.g., United States v. Casson, 434 F.2d 415
(D.C. Cir. 1970) (indicating that a law that is effective on
enactment goes into effect at the exact time that the President
signs it).
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This interpretive rule provides guidance on the 2021 Juneteenth
holiday and the specific business day definition in these two
situations.\4\
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\4\ The Bureau is adopting this interpretation effective on the
date of publication in the Federal Register. The interpretive rule
explains the Bureau's view of the legal requirements that were
applicable around the time of the Juneteenth holiday in June 2021.
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II. Discussion
Guidance on Determining the Applicable Specific Business Day Definition
The specific business day definition applies to various timing
requirements in Regulation Z, including rescission of closed-end
mortgages and some TRID provisions.\5\ Regulation Z does not specify
which version of the specific business day definition applies to these
provisions when the definition changes during the relevant time
period--the version of the definition in effect when the relevant time
period begins, or the new version of the definition that takes effect
before the relevant time period ends. The Bureau is issuing this
interpretive rule to clarify that the version of the specific business
day definition that applies to these provisions is the version of the
definition in effect when the relevant time period begins.\6\
Accordingly, in the context of the 2021 Juneteenth Federal holiday and
the affected closed-end rescission and TRID provisions, if the relevant
time period began on or before June 17, 2021, then June 19, 2021, is a
business day for purposes of the specific business day definition. If
the relevant time period began after June 17, 2021, then June 19, 2021,
is a Federal holiday for purposes of the specific business day
definition.
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\5\ With respect to rescission, the affected regulatory
provisions are Sec. 1026.23(a)(3)(i) and (b)(1)(v). With respect to
TRID, the affected regulatory provisions are Sec.
1026.19(e)(1)(iii)(B), (e)(1)(iv), (e)(2)(i)(A), (e)(4)(ii), and
(f)(1)(ii) and (iii). Other provisions of Regulation Z rely on the
specific business day definition and therefore also were affected by
the legislation. Those provisions are outside the scope of this
interpretive rule.
\6\ The Bureau understands that the law amending 5 U.S.C.
6103(a) to add Juneteenth to the list of Federal holidays was signed
by the President shortly after 4 p.m. EST on June 17, 2021. See
Press Release, The White House, Remarks by President Biden at
Signing of the Juneteenth National Independence Day Act (June 17,
2021), https://www.whitehouse.gov/briefing-room/speeches-remarks/2021/06/17/remarks-by-president-biden-at-signing-of-the-juneteenth-national-independence-day-act/. While the law took effect
immediately, the Bureau is clarifying that the version of the
specific business day definition in effect prior to June 17, 2021,
applies where the relevant time period began at any time on June 17,
2021. The requirements discussed in this interpretive rule generally
apply with respect to the day that a particular event occurred, not
the time of day. Accordingly, the Bureau believes it is more
consistent with these provisions not to distinguish among actions
taken at different times on June 17, 2021. Treating all actions
taken on June 17, 2021, the same in the context of these provisions
also serves the purposes of the regulation, by providing certainty
to creditors and uniformity in the application of the specific
business day definition across the mortgage market.
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The Bureau concludes that this reading is consistent with the
purposes of the specific business day definition, which are to provide
certainty and uniformity to the timing requirements.\7\ When the
Federal Reserve Board (Board) established the specific business day
definition, it explained that creditors and consumers need certainty as
to the length of the rescission period; otherwise, they risk a delay in
the loan funding date to account for an extension of the rescission
period.\8\ Similarly, in issuing the TRID requirements, the Bureau
explained that creditors and consumers need certainty as to the length
of the waiting and other time periods required under the TRID
provisions in order to establish a closing date and reduce the
potential for unexpected closing delays.\9\ Interpreting these
provisions to require use of an amended specific business day
definition that takes effect only after the relevant time period begins
would undermine that certainty, as it may require a change in the
timing of loan funding, closing, and other dates that are dependent on
the definition.
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\7\ See, e.g., 74 FR 23289, 23294 (May 19, 2009) (applying the
specific business day definition to the seven-business-day waiting
period prior to consummation after receipt of required disclosures,
explaining that (1) doing so makes it easier for creditors to
determine how to meet timing requirements, especially where the
creditor has multiple offices not open on the same days; (2) the
standard for determining when a waiting period ends will be the same
for all creditors; and (3) whether a creditor's offices are open or
closed will not affect the time that a consumer has to receive and
review disclosures).
\8\ The Board explained that it adopted the two-tier definition
because transactions subject to the right of rescission need a more
definite and uniform business day definition. See 46 FR 20848, 20850
(Apr. 7, 1981). Regulatory authority for this provision was later
transferred to the Bureau. See Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111-203, section 1061, 124 Stat.
1376, 2036 (2010) (transferring to the Bureau the ``consumer
financial protection functions'' previously vested in certain other
Federal agencies, including the Board).
\9\ The Bureau applied the specific business day definition to
various TRID timing provisions to facilitate compliance for industry
and to reduce the potential for closing delays. See 78 FR 79730,
79770, 79837, 79851 (Dec. 31, 2013).
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The Bureau notes that the affected closed-end rescission and TRID
provisions do not prohibit creditors from providing longer time
periods. Therefore, as discussed further below, it would also be
compliant for creditors to have considered June 19, 2021, a Federal
holiday for purposes of these provisions.
Application to Specific Rescission Provisions
As noted above, the Bureau is clarifying that the version of the
specific business day definition that applies to the provisions
discussed in this interpretive rule is the version of the definition in
effect when the relevant time period begins. This section discusses how
that guidance applies to closed-end rescission provisions that
reference the specific business day definition.
Section 1026.23(a)(3)(i) provides that, for closed-end transactions
covered by the right of rescission, the consumer may exercise the right
to rescind until midnight of the third business day following the last
of (1) delivery of all material disclosures; \10\ (2) consummation of
the loan; \11\ and (3) delivery of the notice of the right to rescind
to each consumer entitled to rescind.\12\ Pursuant to Sec.
1026.23(b)(1)(v), the notice must include the date the rescission
period expires.
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\10\ The material disclosures are the required disclosures of
the annual percentage rate, the finance charge, the amount financed,
the total of payments, the payment schedule, and the disclosures and
limitations referred to in Sec. Sec. 1026.32(c) and (d) and
1026.43(g). See 12 CFR 1026.23(a)(3)(ii).
\11\ ``Consummation'' is defined in Sec. 1026.2(a)(13) as the
time that a consumer becomes contractually obligated on the credit
transaction. Per comment 2(a)(13)-1, when a contractual obligation
is created is determined by State law.
\12\ A creditor is required to provide two copies of the notice
of the right to rescind to each consumer entitled to rescind (one
copy to each if the notice is delivered in electronic form in
accordance with the consumer consent and other applicable provisions
of the E-Sign Act). The notice must be on a separate piece of paper
but may appear with other information such as the itemization of the
amount financed. The creditor may deliver the notice after the
transaction is consummated, but the rescission period will not begin
to run until the notice is given. See 12 CFR 1026.23(b)(1) and
comments 23(b)(1)-2 and -4.
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For purposes of Sec. 1026.23(a)(3)(i), the rescission period is
determined based on the version of the specific business day definition
in effect when the rescission period begins. Similarly, for purposes of
Sec. 1026.23(b)(1)(v), the rescission period expiration date disclosed
on the notice of the right to rescind is determined based on the
version of the specific business day definition in effect when the
rescission period begins. Therefore, if the rescission period began on
or before June 17, 2021, for purposes of determining the rescission
period and
[[Page 44269]]
the disclosed rescission period expiration date, Saturday, June 19,
2021, is a business day notwithstanding the addition of Juneteenth as a
Federal holiday. For example, assume the rescission period began on
Wednesday, June 16, 2021. Consistent with the version of the specific
business day definition in effect when the rescission period began, the
creditor disclosed June 19, 2021, as the rescission period expiration
date on the notice of the right to rescind. Because the rescission
period began on or before June 17, 2021, Saturday, June 19, 2021, is a
business day for purposes of determining the rescission period and the
disclosed rescission period expiration date. In this example, the
rescission period expired on Saturday, June 19, 2021; the original
rescission period expiration date did not change as a result of the
addition of Juneteenth as a Federal holiday. The Bureau notes, however,
that for purposes of compliance with Sec. 1026.23(a)(3)(i) and
(b)(1)(v), a creditor may provide a longer rescission period.
Application to Specific TRID Provisions
As noted above, the Bureau is clarifying that the version of the
specific business day definition that applies to the provisions
discussed in this interpretive rule is the version in effect when the
relevant time period begins. This section discusses how that guidance
applies to TRID provisions that reference the specific business day
definition.
Delivery of Loan Estimate prior to consummation. Section
1026.19(e)(1)(iii)(B) provides that creditors generally must deliver or
place in the mail the Loan Estimate to consumers no later than seven
business days before consummation of the transaction.\13\ Consistent
with the guidance described above, the Bureau concludes that the seven-
business-day waiting period in Sec. 1026.19(e)(1)(iii)(B) is
determined based on the version of the specific business day definition
in effect on the date the creditor delivers the Loan Estimate or places
it in the mail. For example, if a creditor delivered or placed the Loan
Estimate in the mail on Monday, June 14, 2021, the creditor complied
with Sec. 1026.19(e)(1)(iii)(B) if consummation occurred on or after
Tuesday, June 22, 2021, because the Loan Estimate was delivered or
mailed seven business days (including June 19, 2021) before
consummation. The Bureau notes, however, that it would also be
compliant for creditors to have considered June 19, 2021, a Federal
holiday for purposes of Sec. 1026.19(e)(1)(iii)(B) because creditors
may provide the Loan Estimate earlier than seven business days before
consummation.
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\13\ The seven-business-day waiting period begins when the
creditor delivers the Loan Estimate or places it in the mail, not
when the consumer receives or is considered to have received the
Loan Estimate. Comment 19(e)(1)(iii)-2.
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Mailbox rules. Section 1026.19(e)(1)(iv), (e)(4)(ii), and
(f)(1)(iii) provide that if the Loan Estimate or Closing Disclosure, as
applicable, is not provided to the consumer in person, the consumer is
considered to have received the Loan Estimate or Closing Disclosure
three business days after it is delivered or placed in the mail when
determining compliance with the disclosure timing requirements in those
sections.\14\ These are referred to herein as ``mailbox rules.'' The
Bureau concludes that, for purposes of Sec. 1026.19(e)(1)(iv),
(e)(4)(ii), and (f)(1)(iii), the three-business-day period is
determined based on the version of the specific business day definition
in effect on the date the creditor delivers the disclosures or places
them in the mail.\15\ For example, if a creditor did not provide the
Loan Estimate or Closing Disclosure to the consumer in person but
delivered or placed it in the mail on Thursday, June 17, 2021, the
consumer is considered to have received the Loan Estimate or Closing
Disclosure on Monday, June 21, 2021. It would also be compliant for
creditors to have considered June 19, 2021, a Federal holiday for
purposes of the mailbox rules in Sec. 1026.19(e)(1)(iv), (e)(4)(ii),
and (f)(1)(iii).
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\14\ In such circumstances, the creditor may, alternatively,
rely on evidence that the consumer received the disclosures earlier.
Comments 19(e)(1)(iv)-1 and -2 provide that if the Loan Estimate is
not provided to the consumer in person (such as by mail or email),
the creditor may, alternatively, rely on evidence that the consumer
received the Loan Estimate earlier than three business days after it
is delivered or placed in the mail. See also comments 19(e)(4)(ii)-1
and 19(f)(1)(iii) 1 and -2.
\15\ Relatedly, Sec. 1026.19(e)(2)(i)(A) provides that neither
a creditor nor any other person may impose a fee on a consumer in
connection with the consumer's application for a mortgage
transaction before the consumer has, among other things, received
the Loan Estimate. While Sec. 1026.19(e)(2)(i)(A) does not refer to
business days when referencing the consumer receiving the Loan
Estimate, Sec. 1026.2(a)(6) lists the specific business day
definition as applying to Sec. 1026.19(e)(2)(i)(A). The same
interpretation that applies to the mailbox rules for purposes of
determining the receipt of disclosures also applies to Sec.
1026.19(e)(2)(i)(A).
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Receipt of revised Loan Estimate and Closing Disclosure prior to
consummation. Section 1026.19(e)(4)(ii) provides, in part, that the
consumer must receive any revised Loan Estimate no later than four
business days prior to consummation.\16\ Section 1026.19(f)(1)(ii)(A)
provides that the creditor must ensure that the consumer receives the
Closing Disclosure no later than three business days before
consummation. Unlike Sec. 1026.19(e)(1)(iii)(B), the Sec.
1026.19(e)(4)(ii) and (f)(1)(ii)(A) timing requirements begin when the
disclosures are received by the consumer and not when they are
delivered or placed in the mail. However, as noted above, Sec.
1026.19(e)(4)(ii) and (f)(1)(iii) provide that if the revised Loan
Estimate or Closing Disclosure is not provided to the consumer in
person, the consumer is considered to have received the revised Loan
Estimate or Closing Disclosure three business days after it is
delivered or placed in the mail.
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\16\ This provision also prohibits a creditor from delivering a
revised Loan Estimate on or after the date on which the creditor
provides the Closing Disclosure. 12 CFR 1026.19(e)(4)(ii).
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Thus, the Bureau concludes that the four- and three-business-day
timing requirements in Sec. 1026.19(e)(4)(ii) and (f)(1)(ii)(A),
respectively, are determined based on the version of the specific
business day definition in effect on the date the creditor either
provides the required disclosures to the consumer in person or, if not
provided in person, the date the creditor delivers or places the
required disclosures in the mail. For example, if a creditor provided
the Closing Disclosure to the consumer in person on Thursday, June 17,
2021, the creditor complied with Sec. 1026.19(f)(1)(ii)(A) if
consummation occurred on or after Monday, June 21, 2021, because the
Closing Disclosure was delivered in person no later than three business
days (including June 19, 2021) before consummation. The Bureau notes,
however, that it would also be compliant for creditors to have
considered June 19, 2021, a Federal holiday for purposes of Sec.
1026.19(e)(4)(ii) and (f)(1)(ii)(A) because creditors may provide the
revised Loan Estimate or Closing Disclosure earlier than required.
III. Regulatory Matters
This is an interpretive rule issued under the Bureau's authority to
interpret Regulation Z, including under section 1022(b)(1) of the Dodd-
Frank Act, which authorizes guidance as may be necessary or appropriate
to enable the Bureau to administer and carry out the purposes and
objectives of Federal consumer financial laws.\17\
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\17\ 12 U.S.C. 5512(b)(1).
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By operation of section 130(f) of the Truth in Lending Act (TILA),
no provision of TILA sections 130, 108(b), 108(c), 108(e), or 112
imposing any liability applies to any act done or
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omitted in good faith in conformity with this interpretive rule,
notwithstanding that after such act or omission has occurred, the
interpretive rule is amended, rescinded, or determined by judicial or
other authority to be invalid for any reason.\18\
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\18\ 15 U.S.C. 1640(f); see also 12 U.S.C. 2617(b), 12 CFR
1024.4 (similar protection conferred by the Real Estate Settlement
Procedures Act from certain liability).
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As an interpretive rule, this rule is exempt from the notice-and-
comment rulemaking requirements of the Administrative Procedure
Act.\19\ Because no notice of proposed rulemaking is required, the
Regulatory Flexibility Act does not require an initial or final
regulatory flexibility analysis.\20\ The Bureau has determined that
this interpretive rule does not impose any new or revise any existing
recordkeeping, reporting, or disclosure requirements on covered
entities or members of the public that would be collections of
information requiring Office of Management and Budget (OMB) approval
under the Paperwork Reduction Act.\21\
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\19\ 5 U.S.C. 553(b).
\20\ 5 U.S.C. 603(a), 604(a).
\21\ 44 U.S.C. 3501 et seq.
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Pursuant to the Congressional Review Act,\22\ the Bureau will
submit a report containing this interpretive rule and other required
information to the United States Senate, the United States House of
Representatives, and the Comptroller General of the United States prior
to the rule's published effective date. The Office of Information and
Regulatory Affairs has designated this interpretive rule as not a
``major rule'' as defined by 5 U.S.C. 804(2).
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\22\ 5 U.S.C. 801 et seq.
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IV. Signing Authority
The Acting Director of the Bureau, David Uejio, having reviewed and
approved this document, is delegating the authority to electronically
sign this document to Laura Galban, a Bureau Federal Register Liaison,
for purposes of publication in the Federal Register.
Dated: August 5, 2021.
Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2021-17050 Filed 8-11-21; 8:45 am]
BILLING CODE 4810-AM-P
