Hello, LOs!
On Thursday, President Joe Biden signed a bill into law, declaring June 19th a federal holiday, effective today, to commemorate the day when the last enslaved African-Americans were informed that they were free. Wonderful news, right? Wrong.
Here's how people in the mortgage industry are handling the surprise holiday. At least, the ones who hadn't yet left for the beach.
One lender told me, "It's a complete nightmare. I'm almost afraid to talk about it. The feds are putting their own regulatory agencies in such a bind. They won't be able to enforce anything around this, and then I'm sure the [Consumer Finance Protection Bureau] is going to come in and say something. Can you imagine them issuing fines for violations? It's a nice idea but the execution was horrific."
LOs across the country told me they initially panicked — "will there even be wire services?" — although it looks like most financial services are still operating. The stock market is still open, as are banks, for the most part. The postal service is still running, and the Federal Reserve isn't on holiday, either.
Early this morning, the Federal Deposit Insurance Corporation fired off a missive to lenders, instructing them to use their own best judgment in deciding whether to remain open.
Some LOs, however, decided to preemptively delay some closings, just in case regulators decide this is the perfect opportunity to crack down on compliance missteps.
"We had a closing scheduled for Monday, and Thursday afternoon I had to spring it on everybody that they made it a federal holiday, so we pushed it back. 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 Saturday. I'm just going to push it,'" said one Louisiana-based LO.
One Florida-based LO told me she doesn't mind a new holiday, but it impacted closings for several loans. And since rate-locks don't depend on business days, but rather calendar days, some of the delayed loans could lose their rates. It's "a little messy," she said.
"I have closings scheduled on Monday, but because there's a federal holiday that squeezed in, I have to close on Tuesday, and the rate might have expired. For those running a massive amount of business, it's a huge problem. It came out of nowhere," she said.
Another immediate question for LOs is how to count the right of rescission. The right of rescission allows refinance, HELOC or home equity loan borrowers to walk away, within three days of closing.
The rule has been around since the 1968 Truth in Lending Act. When a borrower signs a loan, the clock starts ticking. Normally, however, a new federal holiday is not enacted in less than 72 hours.
But what about rescission periods for loans that were signed on Wednesday or Thursday, before the law went into effect? The FDIC's note to lenders is not very reassuring.
"Whether it will affect the rescission period for loans closed earlier this week (before the signing of the law) is uncertain," the compliance note reads. Yikes.
So, LOs, tell me how you're dealing with the brand-new federal holiday. After you come back from your long weekend, perhaps. Send an anonymous note to: gkromrei@housingwire.com
Georgia Kromrei
Senior Mortgage Reporter, HousingWire
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