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Thursday, March 20, 2014

When do “business day” periods apply?

I know that a “business day” is a day when the lender’s offices are open to loan applicants. However, we are always debating here when the “business day” definition should be applied. So, when does the “business day” apply?

Let’s be sure about our definition of “business day.” The term generally refers to a day on which a lender’s offices are open to the public for carrying on substantially all of its business operations. [12 CFR § 226.2(a)(6)] However, for purposes of rescission and most residential loan product originations, the term means all calendar days except Sundays and the legal public holidays, 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. New Year’s Day, Independence Day, Veterans Day, and Christmas Day, fall on specific dates; when their dates fall on a Saturday, federal offices observe them on the preceding Friday, which means that the preceding Friday is a “business day” and the Saturday is not a “business day.” [Official Staff Commentary § 226.2(a)(6)-2]

Generally, there are four cases in which the foregoing definition of “business days” applies. Caution should be exercised here, because there are some nuances to the applicable regulations.

The following constitute the four prevalent instances where “business days” apply:

1. The three business day rescission period, for loans subject to rescission.

2. Closed-end, dwelling-secured loan transactions:
a. Seven business days “waiting period” implemented when initial disclosures are provided and the consummation date.
b. Three business day “waiting period” between when corrected disclosures are received by the consumer and the consummation date.
c. Three business day period after which a consumer is deemed to have received the initial disclosures that were mailed (for purposes of imposing fees) and corrected disclosures that were mailed.
3. Under HOEPA, the three business day “waiting period” between when the special HOEPA disclosures are received by the consumer and the consummation date.

4. In reverse mortgage transactions, the three business day “waiting period” between when reverse mortgage loan disclosures are received by the consumer and either when the consummation date for a closed-end credit transaction may occur or when the first transaction may occur under an open-end credit transaction.

Jonathan Foxx
President & Managing Director
Lenders Compliance Group