You will have to forgive me but I am almost finished with my action plans on developing requirements for the Dodd-Frank changes and some questions have arisen that I cannot answer. That said, I have done some research.

Background: Since 2010 we have been required under Reg. Z to credit payments when due.

226.36c: (c) Servicing practices . (1) In connection with a consumer credit transaction secured by a consumer's principal dwelling, no servicer shall—

(i) Fail to credit a payment to the consumer's loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency, or except as provided in paragraph (c)(2) of this section;

The official staff interpretations give us additional information: 3. Date of receipt. The “date of receipt” is the date that the payment instrument or other means of payment reaches the mortgage servicer. For example, payment by check is received when the mortgage servicer receives it, not when the funds are collected. If the consumer elects to have payment made by a third-party payor such as a financial institution, through a preauthorized payment or telephone bill-payment arrangement, payment is received when the mortgage servicer receives the third-party payor's check or other transfer medium, such as an electronic fund transfer.

This is very important to analyze the new rule because it clearly spells out that regardless of your cutoff time, if you are open on Saturday, and receive a payment on Saturday you need to credit the customers account on Saturday.

But the new CFPB Reg. Z does not contain official staff interpretations and is written a little differently:
(c) Servicing practices. (1) In connection with a consumer credit transaction secured by a consumer's principal dwelling, no servicer shall:

(i) Fail to credit a payment to the consumer's loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency, or except as provided in paragraph (c)(2) of this section;

(ii) Impose on the consumer any late fee or delinquency charge in connection with a payment, when the only delinquency is attributable to late fees or delinquency charges assessed on an earlier payment, and the payment is otherwise a full payment for the applicable period and is paid on its due date or within any applicable grace period; or

(iii) Fail to provide, within a reasonable time after receiving a request from the consumer or any person acting on behalf of the consumer, an accurate statement of the total outstanding balance that would be required to satisfy the consumer's obligation in full as of a specified date.

Question: If you receive a payment on Saturday, and you cannot credit the payment until Monday (the system does not allow the transaction to post until Monday), do you need to go backdate the transaction to Friday because of the compilation of simple interest?

Question: If you receive a payment on Saturday, and you cannot credit the payment until Monday (the system does not allow the transaction to post until Monday), do you need to go backdate the transaction to Friday because of the compilation of simple interest?


That is how we are handling it. We also review the account to make sure no late fees were assessed due to the delayed posting.

The key question is whether another two days' interest is "any charge to the consumer." And that language hasn't changed from the FRB wording you quoted to today's CFPB wording. The answer is yes, it's a charge that you can't impose.

For loans that don't assess extra interest based on the date of payment your only concerns would be a late fee or history reporting.

Check out subparagraph (iii) and relevant Commentary on non-conforming payments to see if there might be help there for your institution.

Are you referring to something other than simple interest accruing on the loan?

How are others handling loan payments made via your own bank's Internet Banking system relative to this 'prompt crediting of payments' requirement? We contract with an outside company for our IB product. Any loan payments customers request come to us in a daily ACH file. Do others consider this to fall within the third party payor rule? If so, then it's ok to post those payments when we receive the ACH file regardless of when the customer actually made the onling request.

Also, the IB loan payment cutoff time is 3:30 to allow operations personnel time to intervene in the event a bad ACH file arrives (rare but apparently it happens). They've tried 4:00 but found that being in CST and vendor in EST, vendor staff is gone by the time we discover bad file then we can't post the transactions. Seem reasonable to have a 3:30 cutoff time for IB loan payments? There would be no practical way to identify payments requested from 3:30-5:00, for example, and back date them.

Can you not have built into your note that payments received on days other than a business day will be posted as of the next business day? This way a payment received in the drive-thru or night-drop will be posted next normal processing day.

Refer to 1026.36(c)(1)(iii). A carefully and clearly worded set of payment instructions may provide you with that ability.

Can we add a payment cutoff time via a statement message? We currently do not have a cutoff time stated and since payments go to a PO Box, we would like to set a cutoff time of 2:00 (which is our last trip to the PO Box each day). Our contract says that payments must be received by us consistent with any payment instructions provided with the billing statement. So, can we add these instructions to the statement (boilerplate on back of statement paper) and then do a statement message on the front of the statement to draw their attention to it? Or do we need to more formally notify the borrowers that we are implementing this cutoff time?

I feel like these two items conflict. Assume you rely on the implied guidelines for payments (nothing is disclosed about payment crediting process).

This appears to be saying that you must credit the date the payment reaches your institution. For example, if you received a night-drop payment at 8pm on Tuesday is it saying you would have to credit the payment on Tuesday and not Wednesday (next business day)?

3. Date of receipt. The “date of receipt” is the date that the payment instrument or other means of payment reaches the mortgage servicer. For example, payment by check is received when the mortgage servicer receives it, not when the funds are collected. If the consumer elects to have payment made by a third-party payor such as a financial institution, through a preauthorized payment or telephone bill-payment arrangement, payment is received when the mortgage servicer receives the third-party payor's check or other transfer medium, such as an electronic fund transfer.

This is the same language from the old FRB changes. The 4th Quarter Consumer Compliance Outlook indicated the following: For servicers without payment requirements, this section of the OSC addresses the situations discussed earlier. For example, if a consumer makes a cash payment at a bank branch ATM while the branch is open, or makes a check payment at a bank's supermarket branch while the branch is open, the payment must be credited as of that day, even if it is entered into the system at a later date. But if a consumer makes a check payment at the bank branch ATM when the branch is closed, that payment does not have to be credited as of that day.

3. Implied guidelines for payments. In the absence of specified requirements for making payments, payments may be made at any location where the servicer conducts business; any time during the servicer's normal business hours; and by cash, money order, draft, or other similar instrument in properly negotiable form, or by electronic fund transfer if the servicer and consumer have so agreed.

http://www.philadelphiafed.org/bank-reso...iting-rules.cfm

On our residential loans there is an additional form called "additional provision to loan note XXXXX". It goes on to say that 'Payments received after 5 PM M-F, received on Saturday or on holidays will be posted to the next business day. Loan payments received by mail will be credited to the loan the business day that the bank receives the loan payment'.

Would you think we still would have to back date a payment if received on a Saturday, or any of the above mentioned days if the customer has signed this form?

Loan payments received by mail will be credited to the loan the business day that the bank receives the loan payment'.

Define business day and received by mail. If that means it hits your mailbox, then yes. Also, you better be picking up your PO Box at 11:59PM.

Maybe I am missing something, but do you not think the Official Interpretations for Paragraph 36(c)(1)(i)3 conflicts with Paragraph 36(c)(2)3?

Paragraph 36(c)(1)(i)
3. Date of receipt. The “date of receipt” is the date that the payment instrument or other means of payment reaches the mortgage servicer. For example, payment by check is received when the mortgage servicer receives it, not when the funds are collected. If the consumer elects to have payment made by a third-party payor such as a financial institution, through a preauthorized payment or telephone bill-payment arrangement, payment is received when the mortgage servicer receives the third-party payor's check or other transfer medium, such as an electronic fund transfer.

Paragraph 36(c)(2)
3. Implied guidelines for payments. In the absence of specified requirements for making payments, payments may be made at any location where the servicer conducts business; any time during the servicer's normal business hours; and by cash, money order, draft, or other similar instrument in properly negotiable form, or by electronic fund transfer if the servicer and consumer have so agreed.

Our mail is not checked on Saturdays, so we would receive it on Monday. That works for the mailed in payments, now just concerned about the after 5pm payments.

Like I said, I hope you "define business day".

Thanks rlcarey.

OK. The problem seems to be that the numbering of .36(c) is being changed by the new requirements that will be effective starting in January. Here's the three key commentary paragraphs to revised .36(c)(1)(iii):



Which means that you are able to set reasonable cut-off times for payments at branches (provided you define your business days when you do so if you want to treat Saturdays, Sundays and holidays on which you are open as non-processing days for payments), a reasonable time for receipt of payments at your designated P O Box, or even restrict payments for prompt posting to that P O Box. That gives you up to five calendar days to credit payments received via non-conforming methods.

Thanks John!

I apologize for continuing to ask the same question, but I would really like to get some input from John or rlcarey on my previous posts. We currently rely on the implied guidelines (nothing disclosed) provision, which to my understanding based on previous guidance indicates that you must credit any payment received during normal business hours. For example, a payment received in the night-drop box on Tuesday after business hours would be credited on Wednesday (next business day). As I mentioned in my earlier post,Paragraph 36(c)(1)(i)3 (Date of Receipt) was what appeared to be contradicting the commentary on implied guidelines.

3. Implied guidelines for payments. In the absence of specified requirements for making payments, payments may be made at any location where the servicer conducts business; any time during the servicer's normal business hours; and by cash, money order, draft, or other similar instrument in properly negotiable form, or by electronic fund transfer if the servicer and consumer have so agreed.

The key is "normal business hours", so as long as you removed any payments from the night drop at the close of the business day and posted them that day, you would be OK. I doubt you could just empty the night drop at 8AM and be done if customers can still use the drop during the day and still eet the regulatory requirements.

I agree with Randy. However, if you have an end of day cutoff hour and you don't want to have to effective date or otherwise do special handling for mortgage payments, you should look into establishing some conforming payment requirements as the regulation allows you to. That's particularly true if you encourage payments sent to a P O Box.

JWills - my take on it has always been that, based on the commentary which established a 5:00PM reasonable cut-off time, a payment received after M-F cut-off (including Saturday or holiday) could be posted next business day as disclosed in the loan docs.

To answer your question, based on the info provided, I would not be compelled to backdate a payment received on Saturday.

FYI - our process is to timestamp payments received after our 4:00 daily business day cut-off and 'backdate' to make sure payments made between 4:00 EOD and 6:00 close are credited as of the calendar date received. Too hard to separate 4-5 and 5-6 so we give calendar date credit to all payments received during operating hours.

Trout22, even if the loan was subject to the daily interest? or any late fees? That is a concern of ours. Our Freddie Mac loans would not have the daily interest, but all of our loans could have the late fee situation.

I found out an interesting tid bit from our PO listed for our main office yesterday. They put mail in by 10:00 am and do not put anymore in during the day...so there is no chance of delivery later in the day.

This may not be true of larger post offices, but it may be something to check on if you are in a smaller location.