Regulation Z § 1026.36(c)(1) defines a ‘periodic payment’ for a consumer credit transaction secured by a consumers principal dwelling as a payment sufficient to cover principal, interest, and escrow (if applicable) for a given billing cycle.  A payment qualifies as a periodic payment even if the payment does not include amounts required to cover late fees, other fees, or non-escrow payments a servicer has advanced on a consumer’s behalf. An accounting of any partial payments (anything less than a 'periodic payment') held in a suspense or unapplied funds account must be disclosed to consumers on the Periodic Statement. Partial payments held in a suspense or unapplied funds account must be credited to the consumers loan account once sufficient funds have accumulated to total a 'periodic payment'.

In Servicing Director, a 206 transaction code is used to apply P&I and escrow on a loan which has an other funds or reserve payment, but the borrower sends in only enough for P&I and escrow. A 206 transaction does not include other funds or reserve payments. It was added because the Regulation Z defines a 'periodic payment' as P&I and escrow. If a periodic payment is received, it must be posted and the due date advanced in order to comply with Regulation Z's requirement that a periodic payment should be credited to the consumers loan account as of the date of receipt (with some exceptions). In other words, if the loan has other funds payment or reserve payment, but the borrower does not send it in, if they send enough for P&I and escrows, the servicer must post the payment and advance the due date. If a loan does not have an other funds payment nor reserve payment, the periodic payment (206) would work like a regular payment in Payment Processing and like Installment in Advance Payment Rules.

Environment:

ArticleNumber:

000053684