In reviewing the disclosure of prepaid interest, I have a question regarding the disclosure of the actual amount borrower-paid at closing on the CD.

I understand the per diem amount is not rounded, based on the commentary to 1026.38(t)(4) which points to the guidance under 1026.37(o)(4)(I)(A) which explicitly says that the per diem amount for the prepaid interest (g)(2)(iii) shall not be rounded.

My question is this:
1. On the CD, are you just truncating to 2 decimal points the per diem amount disclosed or can you disclose beyond 2 decimal points?
2. For the prepaid interest amount paid by borrower at closing, is that amount being rounded or truncated?

For example:
Daily Per Diem amount is $55.4861111 with borrower paying 19 days
On the CD and LE, we disclose $55.48 for the per diem amount, which is unrounded but truncated
Borrower paid at closing based on $55.4861111 x 19 days = $1054.23609.
At this point, can we round that amount and collect $1054.24 or should we truncate and collect $1054.23? I don't see a prohibition against rounding other than in per diem.

Our systems people are asking whether we can disclose the per diem amount to more than 2 decimal points, so it's mathematically closer to the amount we collect. This then raised the question of whether we can round the actual amount we collect since we need whole cents, or if it should be truncated to 2 decimal points.

Under revised paragraph 1 of comment 37(o)(4)(i)(A), we find "The per-diem amount disclosed under § 1026.37(g)(2)(iii) and the monthly amounts for the initial escrow payment at closing disclosed pursuant to § 1026.37(g)(3)(i) through (iii) and (v) do not include partial cents. Dollar amounts are rounded or truncated to the nearest whole cent. For example, under § 1026.37(g)(2)(iii), the creditor discloses per-diem interest of $68.1254 as $68.13 or $68.12."

You can't disclose the per-diem interest to more than two places.

Thank you. So based on that revised paragraph, would it appear to allow us to round the amount to $1054.24 rather than just truncating as it opens up the per diem to being rounded?

Our new document vendor still disagrees and is insisting that the daily per diem interest on the CD should be displayed up to 6 digits if we do not want them to calculate the total per diem interest on a rounded number. They agree the LE should only display 2 decimals but disagree that the CD should reflect only 2 decimal points. Is anyone else having issues with their vendor's interpretation on this?

Tell your document vendor to read the regulation. You can use the six digits in calculating, but paragraph 2 of Comment 38(t)(4) - Rounding says "For guidance regarding the requirements of §1026.38(t)(4), see the commentary to §1026.37(o)(4)."

For whatever it's worth, I raised this question with the CFPB in a message to the Bureau on December 4. I received a call back yesterday (December 12) confirming my responses above. The attorney I spoke with added some additional thoughts. First, the Bureau considers carrying the per-diem amount out past two decimal places to be "information overload," which is anathema as far as they are concerned. He also noted that under comment 38(t)(4)-1 amounts disclosed under 1026.38 and not required to be rounded by 1026.38(t)(4) must be disclosed, consistent with § 1026.2(b)(4) as an exact numerical amount using decimal places where applicable, unless otherwise provided. Section 1026.2(b)(4), comment 2, indicates that numerical amounts must be expressed as dollar amounts unless otherwise indicated. And, he said, dollar amounts are expressed in dollars and cents (two decimal places) unless otherwise directed.