Credit Unions I JANUARY 29, 2014

Key Definitions in New Mortgage Disclosures

The Consumer Financial Protection Bureau's new Integrated Mortgage Disclosure requirements impact more than a credit union's disclosures. This article reviews the amended definition of "application" as well as the two definitions of "business day" that apply to the new requirements.

Definition of Application

The final rule adds a definition of "application" in Regulation Z that differs from the existing Regulation X definition (which is currently used to determine the timing for providing the Good Faith Estimate). Specifically, the rule removes the seventh or "catch-all" element to the definition of "application."

Under the new definition, credit unions have an application when they obtain the following six pieces of information:

  1. Consumer's name;
  2. Consumer's income;
  3. Consumer's social security number to obtain a credit report;
  4. Property address;
  5. Estimate of the value of the property; and
  6. Mortgage loan amount sought. 

Receipt of an application triggers the credit union's requirement to provide the consumer with a Loan Estimate within three business days. 

The new definition will require credit unions to review their application process and adjust their information collection process to ensure the credit union obtains all the information it needs to provide a Loan Estimate before or at the same time as the six pieces of information making up the "application."

Definition of Business Day

The new rules contain two definitions of "business day." Which definition applies depends on the underlying regulatory requirement. Thus, it is important for credit unions to understand which definition of “business day” applies to which requirement in order to ensure the timing requirements are satisfied.

General Definition

The general definition of "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." 

As the definition indicates, whether a particular day (e.g., Saturday) is a business day or not depends on each credit union's situation. The existing staff commentary to Regulation Z includes a discussion of the "business function test" and credit unions should review this test to ensure they have made the appropriate determination based on their operations.

Specific Definition

The specific definition of "business day" is "all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a)[.]" 

Importantly, the new definition of business day lists which regulatory requirements use the specific definition. For all other requirements, the general definition applies.

As credit unions work through the new mortgage disclosure requirements, it is extremely important to understand these key definitions and how they impact your implementation plans.