[Vicki Kramer]

Hi. I’m posting under this section because there are various regs that apply to mortgage loans. I’m in discussion with FDIC this morning concerning the number of days required in a grace period for a mortgage loan. She said 15 per Reg Z and FDIC Part 590. Are we allowed to give a 10-day grace period for 1st mortgages? I was thinking that that we give a 15-day grace period only for 2nd mortgages and/or mobile home loans. Thanks in advance for your help!

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[jholzknecht]

Vicki,

As a general rule, the grace period for a late charge is determined by the law under which you are lending. Usually that is a state law in the state in which your bank operates.

Also as a general rule, Regulation Z requires the disclosure of the amount of the late charge and the duration of the grace period, but does not limit the amount of the charge, or the duration of the grace period. One exception is a high-cost mortgage loan (HCML), subject to the restrictions contained in § 1026.34(a)(8), which limits the amount of the late charge and requires a 15-day grace period.

You need to determine if the loan is a high-cost mortgage loan as defined in § 1026.32. If so, the loan must have a 15 day grace period. If the loan is not a HCML, then you need to ascertain the state lending statute under which the loan was made and use the late charge grace period prescribed by that law.

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