A lender wants a prepayment penalty on a covered loan and discloses it in writing 2 business days before consummation. Does delivery two business days before consummation meet the covered-loan penalty-disclosure timing rule?
Correct Answer
B) Too late: the written disclosure is due at least 3 business days before
A penalty inside the 36 months requires that the consumer was offered an alternative product without one and received a written disclosure at least 3 business days before consummation. Other choices: any time before consummation is not the standard; 7 business days is the federal loan estimate rule; and the condition is not limited to first liens. Source: Cal. Fin. Code § 4973(a)(3)
Why This Is the Correct Answer
A penalty inside the 36 months requires that the consumer was offered an alternative product without one and received a written disclosure at least 3 business days before consummation. Other choices: any time before consummation is not the standard; 7 business days is the federal loan estimate rule; and the condition is not limited to first liens. Source: Cal. Fin. Code § 4973(a)(3)
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