Banking Law §6-I and GRBB Part 41
October 27 , 2005 10:53 AM
To: [ ]
From: Alan Weinberg
Subject Request for Clarification of Part 41 regulations
Dear [ ]:
"Thank you for your inquiry of September 30, 2005 to Sara Kelsey requesting clarification of the applicable timing requirements under revised Part 41.1(e)(6)(iii). Your inquiry was referred to me for a response.
The language about which you sought clarification is part of one measure of whether a loan constitutes a high cost home loan" under the Part 41 regulations. Under this language, up to and including two bona fide discount points may be excluded from the "total points and fees" computation where the loan's interest rate that is to be discounted is not greater than one percent above the yield on United States Treasury securities having comparable periods of maturity to the loan maturity measured as of the fifteenth day of the month immediately preceding the month in which the application is received.
Your question focuses on the last two words of the quoted language, 'is received." We agree that the language is indefinite inasmuch as more than one person or entity could receive the application and it is not totally clear which date of receipt ought to apply. For example, a broker and a lender could each receive the same application on consecutive days, but during two separate months. In this instance, the yield on the applicable treasury securities could differ in the preceding months. In such a situation, it is possible that depending upon the day of receipt that is applied, in one case, the bona fide discount points might be included in the total points and fees calculation and the loan deemed a "high cost home loan," but not in the other case.
We agree with you that the words 'by the lender" ought to be read into the language quoted above. You point out that this language is expressly included in Part 41.1 (e)(6)(i) and we note that it appears in Part 41.1(e)(6)(ii), too. Reading in the words "by the lender" will achieve consistency under the regulation and the applicable treasury rates will be the same for all applications received by lenders on a particular day.
Furthermore, we appreciate your desire for a clarification of the date on which a lender can be deemed to have received an application when it is first received by a broker or other third party. In the case of a true broker, the date would be the one on which the lender physically receives the application In the case of another third party, however, the issue would appear to be fact sensitive. We note that where an application is received by an agent of the lender, for example, receipt by the agent may imputed to the lender based upon the application of principles from the law of agency.