What Marriages and Mortgages Have in Common

April 8, 2016 at 8:36 am 5 comments

Sex sells.  

So in a blatant attempt to keep your interest when discussing an incredibly bland subject, I have a question for you:  what does consummation – in the biblical sense – and a mortgage loan in New York State have in common? Simply put, neither is legally binding until it is consummated.  For marital purposes, that means that the ceremony notwithstanding, the wedding night is what seals the deal.  Unfortunately, for mortgage purposes, when a mortgage loan is consummated is not all that clear, which brings me to the purpose of today’s blog.

Of course we all know that under the new mortgage regulations, members are now entitled to have mortgage disclosures at least three days before a mortgage loan is consummated.  This, of course, means that for purposes of complying with the regulation, it is crucial to know when a mortgage loan is consummated.  The Truth in Lending Law and Regulation Z have always deferred to a state’s definition of when a mortgage loan is consummated.  This makes sense since mortgage loans are contracts and contracts are interpreted pursuant to state law. 

The problem is that New York State has never defined in statute when a mortgage loan is consummated.  In addition, things get even more dicey because an argument can be made that as a matter of case law, a mortgage loan is consummated when a commitment letter is signed and sent to the borrower.  Murphy v. Empire of Am., FSA, 746 F. 2d 931, 934 (2d Circ. 1984).  That would that you have to make sure that closing disclosures are in the member’s hands three days before they receive a commitment letter from your credit union, as opposed to three days before the excited couple closes on their new home. 

Fortunately, the Legislature, at the urging of the Association, and with the support of the banking industry, has a fix on the way.  Legislation was recently introduced, S.7183 (Savino) and A.9746 (Richardson) that would define consummation as the point at which “the applicant for the mortgage loan executes the promissory note and mortgage.”  Since this typically happens at the closing, it should remove any confusion as to when consummation has occurred. 

On that note, have a good weekend, and I expect to see many of you bright eyed and bushy tailed next week for our Annual State Government Affairs get together.


Entry filed under: General, Mortgage Lending, New York State. Tags: .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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