Assume we receive a secured, fixed-rate home improvement loan application in 2018. Borrower will make 60 equal monthly payments and there will be no balloon. The first payment though is not due until 90 days after disbursement, after which the borrower will make 1 payment for the following 60 months.

In this example, what do we report for the loan term on our 2018 LAR?

A) 60 months
B) 61 months
C) 62 months
D) 63 months

My notes say you report the # of months after the loan will mature or terminate.
I vote (D) 63 months.
Time from origination to maturity.

I think the rule is pretty clear that you don't worry about the number of payments but look at when the loan matures (i.e. final payment). If I was auditing this field, I would look for a document that lists the final maturity such as an amortization schedule or the note.

Here is the rule: (25) The scheduled number of months after which the legal obligation will mature or terminate or would have matured or terminated.

If you need it, here is the commentary:

Paragraph 4(a)(25)
1. Amortization and maturity. For a fully amortizing covered loan, the number of months after which the legal obligation matures is the number of months in the amortization schedule, ending with the final payment. Some covered loans do not fully amortize during the maturity term, such as covered loans with a balloon payment; such loans should still be reported using the maturity term rather than the amortization term, even in the case of covered loans that mature before fully amortizing but have reset options. For example, a 30-year fully amortizing covered loan would be reported with a term of “360,” while a five year balloon covered loan would be reported with a loan term of “60.”

2. Non-monthly repayment periods. If a covered loan or application includes a schedule with repayment periods measured in a unit of time other than months, the financial institution should report the covered loan or application term using an equivalent number of whole months without regard for any remainder.

3. Purchased loans. For a covered loan that was purchased, a financial institution reports the number of months after which the legal obligation matures as measured from the covered loan's origination.

4. Open-end line of credit. For an open-end line of credit with a definite term, a financial institution reports the number of months from origination until the account termination date, including both the draw and repayment period.

5. Loan or application without a definite term. For a covered loan or application without a definite term, such as a reverse mortgage, a financial institution complies with § 1003.4(a)(25) by reporting that the requirement is not applicable.

I would like to add to this topic as well. I want to make sure I'm understanding this requirement. What I'm getting hung up on is the part of paragraph 4(a)(25)1 that says "the number of months after which the legal obligation matures is the number of months in the amortization schedule, ending with the final payment" Emphasis on "is the number of months in the amortization schedule"

With that said here is my example:
Loan begins 1/5/2018. Loan matures 1/5/2023. 1st payment listed in the amortization schedule begins 3/5/2018.

Would my loan term be 60 or would it be 59? I ask this because my software has been defaulting the 59. Initially I had been manually changing these to 60. However, after seeing this occur so many times I went back to the commentary and found this paragraph that makes me question if maybe I'm changing these when I shouldn't be. Even though my loan originates on 1/5/2018 and matures 60 months from origination, the number of months in my am schedule are technically 59.

Any help on this topic would be greatly appreciated.

Or you could say that there are 59 payments in your 60-month amortization schedule, because you skipped the first month.

Very good point John. We believe 60 is still the appropriate number to report since the loan is still accruing interest during the month they are not required to pay. I've seen few threads on this and want to make sure I'm still thinking this through correctly because my software has been defaulting the 59. Thankfully I'm able to change the number.

For example, a 30-year fully amortizing covered loan would be reported with a term of “360,” while a five year balloon covered loan would be reported with a loan term of “60.”

The above is from Adam's quote therefore it would be logical to expect to report a 5 year loan as 60.

I asked this of the CFPB a few weeks ago. It took 3 inquiries through their system and 2 phone calls back from them. Here's what I asked and the summary I wrote my Team:

If a loan closes today (5/15) and the first payment is 7/1 and is a 30 year loan, the loan term is 360. Ignore any period of time before the first payment starts. What was throwing us off was the commentary to .4(a)(25) #3 & #4 which state:
3. PURCHASED LOANS.
For a covered loan that was purchased, a financial institution reports the number of months after which the legal obligation matures as measured from the covered loan's origination.

4. OPEN-END LINE OF CREDIT.
For an open-end line of credit with a definite term, a financial institution reports the number of months from origination until the account termination date, including both the draw and repayment period.

The CFPB attorney said you only count from origination date when it is a purchased loan or a LOC. IOW, Comment #3 & 4 don’t change the answer for originated, closed-end loans.
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So the answer to the OP is A) 60.

What about a balloon loan where the note date is 4/15/2019, first payment is due 6/1/19 and final maturity/balloon is 7/1/24? We have been reporting this term as 62.

Thanks in advance.

I agree Red. 6/1/19 to 7/1/24 = 62 months.

Thanks, David!

We do a lot of construction/perm loans where interest is payable for the first year (construction period) and then the loan converts to monthly payments. These are also adjustable rate mortgages where the first interest rate change is 60 months after the first principal/interest payment is due. So for a 30-year mortgage (for the perm), I report 372 for the loan term and 72 months for the first rate change. I hope that is correct because I get a Q Edit in my software.

I don't know for sure without more details, but it sounds like you are correct swiggles.

Our mortgage department was advised by the vendor to reduce the number of web app templates in Encompass and in doing so, they removed the term question to be asked when an LO discusses programs with the applicant under the theory that "without talking to a borrower, we don't know the term, but are applying a template that may not be accurate." The problem that we've just discovered is that a) they didn't talk to us about removing that field, and B) some applications are denied on credit score before an LO discusses programs with the applicant. I don't think reporting "NA" is correct in this case and don't think defaulting to 360 months because the majority are 360 is accurate either. Before we tell them to put the term question back into the templates, are we missing something about reporting "NA"?