The Difference Between Precise & General Business Day
Adam uses this free TRID training Compliance Clip (video) to explain the difference between the precise definition and the general definition of business day. While the definition can be extremely confusing, Adam breaks down the difference and provides a list of when each definition is used under Regulation Z.
Video Transcript
The following is a transcript of this video.
This Compliance Clip is going to talk about the difference between the “precise” and “general” business day definition under regular Regulation Z.
Under Regulation Z, we only have one definition of business day and it is very, very convoluted. Let's take a stab at reading the definition in order to be able to break it down and fully understand it. The definition starts out by saying a “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, period. Now if it stopped right there it would be easy, right? And in fact that is the general definition of a business day. It's a day on which the creditor;s offices are open to the public for carrying on substantially all of its business functions, period. That's the general business day.
But the definition goes on and gives us what we refer to as a precise or specific business day. And it says in this second definition: For purposes of rescission under 1026.15 and 1026.23, and for purposes of 1026.19(a)(1)(ii) and 1026.19(a)(2) and 1026.19 blah, blah, blah. It gives a whole bunch of citations in the definition. It says for those purposes, the term means all calendar days except for Sundays and the legal public holidays specified in 5 USC6103(a). It is a mouthful. The definition of business day is terrible in Regulation Z, right? It is terrible. So what I like to do is break this down piece by piece so we understand what each one applies to and how that applies to us.
To break this down, there's essentially two definitions of business day found in Regulation Z - what we refer to as the general definition, which of course is when the offices of your financial institution are open to the public for carrying on substantially all business functionsl; and the second definition is the precise or specific definition, which includes all calendar days except Sundays and legal holidays like New Year's Day, Christmas Day, Memorial Day, Fourth of July, Veterans Day, Martin Luther King Day, and so forth. You know what the legal holidays are. When the Fed's closed, it's those days. So we've got the general definition and the precise definition.
Let's look at the general definition. A general business day definition includes when the office is open for substantially all business functions. Well, what is ‘substantially all business functions’? I've had this question asked a lot. Is it just accepting deposits? Is it making loans or is it backroom stuff? What is it?
Well, the commentary specifically explains that it includes the availability of personnel to make loan disbursements, to open new accounts and to handle things like credit, transaction inquiries. So the bottom line is it's both front line and back line and back room. What this really comes down to is your initial loan estimate timing requirements, for when you receive an application, you have three business days to provide a loan estimate. That ‘three business days’ falls under the general business day definition.
So the bottom line is, if your loan staff are not in on Saturdays, you don't have to count that when producing the loan estimate. So if you're not there, you don't have to count that as one of your three days, but if you are there, then you would have to count that as one of your three days. And that's where this rule generally applies, is to the initial delivery of the loan estimate. Because again, if your staff are not there, it'd be very difficult to provide the loan estimate within three days. It essentially would only give you two. That's why this definition is written that way.
Now, one thing to note is the general definition could potentially include holidays if you're open on a holiday, because it's any day, except Sundays, any day that you're generally open for business. So if you are open on Veterans Day or Memorial Day or Martin Luther King Day, those two holidays, both Veterans Day and Martin Luther King Day, I see about half of financial institutions are actually open. You guys are suckers for work in those days, right? But half of financial institutions are. And if that's the case, the general definition applies to those holidays - if you're open.
Now, the next definition is challenging the - precise business day definition, because all these citations for Regulation Z are listed. Basically it says, the precise definition, which includes all calendar days, except for Sundays and legal holidays, are included in the precise definition if it's these specific things. So it says these citations are included in the definition of the precise business day definition. Say definition too many times. I hope you follow that, right? But the idea is there's a bunch of citations that apply to the precise definition.
Basically, in other words, to say this differently, if it's not specifically listed in Reg Z as a precise definition, then the general definition would apply for the business day timing requirements.
Let's do this. Let's look at what the citations are and these citations that I'm about to discuss are specifically applicable to the precise business day. And I apologize, this is very complex. So it's actually difficult to teach, even though I practiced this several times. But I, I hope you can follow me. Basically, these following things apply to the precise business day definition, which includes all calendar days except for Sundays and legal holidays.
The first piece is the right of rescission for both open-end credit and closed-end credit. A rescission applies to all calendar days except for Sundays and legal holidays when you're counting rescission. That's been around for a long time, should be a no brainer.
Also included here are reverse mortgages. Most of you don't deal with that. So I'm not going to spend any time on it. But there are some pieces of reverse mortgages that apply to the precise business day definition.
The next clump of pieces apply to the loan estimate. But let's look at what's included in the loan estimate. It says (1) loan estimate timing requirements for the seven day rule; (2) loan estimate timing requirements for assumed delivery by mail; (3) fee restrictions related to the intent to proceed; and (4) loan estimate timing requirements prior to closing. What it does not include is what? The initial loan estimate delivery because the initial loan estimate delivery goes back to what? The general definition of a business day.
So that's how it's written. It's the general definition applies to initial loan estimate. Once that initial loan estimate is provided, then the precise definition applies. So Saturdays may not count, but once you deliver the loan estimate, then it counts for both the loan estimate and the next piece, which is the closing disclosure timing requirements.
Also under the precise definition are a few miscellaneous things like escrow cancellation notices, high cost mortgage disclosures, and private education loan disclosures.
So that is the precise definition. There's a lot there, isn't it? I hope that that made sense.
That’s all I have for you in this clip.