Another 45-day Issue - Timing of the First Loan Payment
Posted by Sarah Loats
Does the first scheduled loan payment have to be within 45 days of the loan disbursement date?
This question has come up a bit lately. In short, there are no federal regulations that require a loan payment be made within 45 days. But there still seems to be a lot of confusion surrounding this question.
Under Regulation Z, for closed-end loans, under certain circumstances you may ignore an irregularity in the initial payment period for the purposes of disclosures. Section 226.17(c)(4) states that you may ignore any payment schedule irregularity that results from the irregular first period:
(i) For transactions in which the term is less than 1 year, a first period not more than 6 days shorter or 13 days longer than a regular period;
(ii) For transactions in which the term is at least 1 year and less than 10 years, a first period not more than 11 days shorter or 21 days longer than a regular period; and
(iii) For transactions in which the term is at least 10 years, a first period shorter than or not more than 32 days longer than a regular period.
All this really means, though, is that if the initial first payment period is outside of these tolerances, you can't ignore it in your disclosures. It doesn't mean you can't have an initial payment period outside these tolerances. A 1991 NCUA legal opinion letter touches upon this question.
Note at the end of the letter NCUA mentions state law. Aha, state law. Yes, there may be some state laws out there that speak to this so it probably isn't a bad idea to check that out.