Client Memo – New Federal Holiday June 19th Update
On Thursday, June 17, 2021, President Joe Biden signed into law the Juneteenth National Independence Day Act. The Act amends 5 U.S.C. Section 6103(a) to include “Juneteenth National Independence Day,” as a federal public holiday.
The Act took effect immediately upon the President’s signing. Therefore, Saturday, June 19, 2021 will be the first annual observation of Juneteenth as a federal public holiday. The Act specifies that Juneteenth holiday will occur annually on June 19th. Juneteenth is a date-specific holiday.
For lenders, this Act means that June 19th will no longer count as a business day for purposes of rescission and for the timing requirements of the delivery of the Loan Estimate and Closing Disclosure prior to closing because the definition of “business day” under Regulation Z for these purposes is defined to be “all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a).” See 12 CFR 1026.2(6) (emphasis added):
Business day means 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 rescission under §§ 1026.15 and 1026.23, and for purposes of §§ 1026.19(a)(1)(ii), 1026.19(a)(2), 1026.19(e)(1)(iii)(B), 1026.19(e)(1)(iv), 1026.19(e)(2)(i)(A), 1026.19(e)(4)(ii), 1026.19(f)(1)(ii), 1026.19(f)(1)(iii), 1026.20(e)(5), 1026.31, and 1026.46(d)(4), the term means all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a).
Juneteenth is a date-specific holiday, which means that for delivery and rescission purposes, only the actual date of the holiday must be excluded from the definition of a business day. Any other date observed by the federal government as a holiday for other purposes, such as pay and leave for federal employees, is not excluded.
An Additional Business Day Must be Added for Impacted Loans That Have Not Closed as of June 17, 2021.
Because the Act took effect upon President Biden’s signature, June 19th is no longer considered a business day for delivery of the LE and CD prior to closing and purposes of rescission. Lenders must therefore NOT include June 19th in the calculation of: (i) the seven-business-day waiting period after delivery of the LE; (ii) the three-business-day waiting period after delivery of the Closing Disclosure; and (iii) the three-business-day rescission period for any loans that have not closed. This presumably includes loans for which the lender has already issued the LE and/or CD.
Lenders should therefore recalculate the earliest possible closing date without including June 19th as a business day with respect to delivery of the LE and CD.
Should the Rescission Period be Recalculated for Closed Loans That Are Still in the Rescission Period?
To our knowledge, the Consumer Financial Protection Bureau (the “CFPB”) has not yet issued any guidance as to how the new public holiday affects loans that have already closed but are still in the rescission period. We will issue an update should the CFPB issue such guidance. Absent an official position from regulators, we recommend that lenders contact its investors to determine any specific investor requirements. We are aware that several key investors have informed lenders that the rescission period must be recalculated for such loans.
The impact of this change in the law is uncertain. Although we believe that certain courts might determine that the Notice of the Right to Rescind (the “Notice”) given for a closing that occurred before President Biden signed the new law was nevertheless valid at the time such Notice was given and therefore complied with the law, other courts, the CFPB or other regulators or investors may conclude that since the law changes this Saturday to a federal holiday, corrected Notices must now be provided to these consumers advising the consumer of this change in the business day calculation due to the new holiday. Therefore, out of an abundance of caution, you may want to provide new Notices with Saturday being counted a non-business day, which would mean that rescindable loans that closed June 16th and June 17th would need to have the rescission period recalculated and corrected Notices be given so as to exclude June 19th as a business day.
If the Lender Recalculates the Rescission Period, a revised Notice of Right to Rescind Must be Sent to Consumers.
If the lender decides to recalculate the rescission period, the lender must provide a revised Notice (reflecting date delivered to consumer). Some lenders may prefer to simply delay the funding of affected loans by one business day (to prevent the loan from funding before the expiration of the three-business-day period from the consummation of the transaction in violation of TILA), but then elect to reopen the rescission period after the fact by giving the consumer a corrected Notice. This approach may allow for a more orderly process and avoid the undue delay of the funding of impacted loans.
Note that applicable law does not require either the Notice or a revised CD (correcting the disbursement date for the loan) to be signed by the consumer. Although a signature is helpful to show delivery, a lender may also rely on other methods to verify delivery provided by statute.
It is important to remember that the rescission period begins to run for three business days from the last of three events: (i) consummation of the transaction; (ii) delivery of all material disclosures to the consumer; and (iii) delivery of the Notice to the consumer.
The Truth in Lending Act requires “clear and conspicuous” notice of the consumer’s right to rescind, and several courts have held that incorrectly disclosing the date the rescission period expires means that the lender has not provided “clear and conspicuous” notice.
A lender should be mindful of this fact when calculating the new rescission period; one additional business day cannot simply be added to the previously-disclosed rescission period and stated on the revised Notice. The new rescission period should be calculated using the date the consumer receives the revised Notice.
If the revised Notice is delivered to the consumer Friday, June 18th, the rescission period commences on Monday, June 21st and will expire at midnight, Wednesday, June 23rd.
If the revised Notice is delivered to the consumer Monday, June 21st, the rescission period will commence on Tuesday, June 22nd and will expire at midnight on Thursday, June 24th.
f you have further questions concerning how the new federal public holiday will affect timing requirements or, have questions regarding the contents of this alert, please let us know.
If you have questions regarding the contents of this alert, please let us know.
Allan Polunsky at Allan.Polunsky@mortgagelaw.com
Jay Beitel at Jay.Beitel@mortgagelaw.com
Marty Green at Marty.Green@mortgagelaw.com
Lauren Polunsky Dreszer at Lauren.Polunsky@mortgagelaw.com
Peter Idziak at Peter.Idziak@mortgagelaw.com
Claire Barber at Claire.Barber@mortgagelaw.com
Andrew Duane at Andrew.Duane@mortgagelaw.com
Tye McWhorter at Tye.McWhorter@mortgagelaw.com
Cody Beitel at Cody.Beitel@mortgagelaw.com
Doug Foster1 at Doug.Foster@mortgagelaw.com
1 Doug Foster is a non-lawyer and is not admitted to practice law in any state.