Texas Administrative Code › Title 7 - BANKING AND SECURITIES › Part 5 - OFFICE OF CONSUMER CREDIT COMMISSIONER › Chapter 83 - REGULATED LENDERS AND CREDIT ACCESS BUSINESSES › Subchapter A - RULES FOR REGULATED LENDERS › Division 7 - INTEREST AND OTHER CHARGES ON SECONDARY MORTGAGE LOANS › Section 83.704 - Deferment

Current through Reg. 49, No. 28; July 12, 2024
(a) Definition. A
					 deferment means the payment of an additional interest charge to defer the
					 payment date of a scheduled payment on a contract. A deferment charge
					 prescribed by this section may occur in a loan transaction that employs either
					 the precomputed or the scheduled installment earnings methods of calculation. A
					 separate deferment charge is not applicable to a loan transaction that employs
					 the true daily earnings method since an extension of time would be calculated
					 on elapsed daily charges, and the parties may agree to modify the terms of the
					 transaction as long as the modification conforms to the requirements of Texas
					 Finance Code, Chapter 342, Subchapter G.
(b) Bilateral or mutual deferment. A borrower
					 and a lender may mutually agree to defer any scheduled installment. There is no
					 limit on the number of bilateral deferments that can be made during the time
					 that a loan contract is in effect. Bilateral or mutual deferments must be
					 agreed upon in writing.
(c)
					 Deferment notice. Each deferment must be recorded on the account record at the
					 time the deferment is made. A written notice containing the conditions of the
					 deferment must be provided to the borrower. The deferment notice must include
					 the name of the lender, the name of the borrower, the loan number, the date of
					 the deferment, the installment or installments being deferred, the deferment
					 period, the amount of the deferment charge, the balance on the account, and the
					 date and amount of the next installment due. The notice must be signed by the
					 borrower to indicate the borrower's agreement to a bilateral
					 deferment.
(d) Computation of
					 deferment charge for regular transaction. Each deferment charge on a regular
					 loan transaction must be computed in accordance with the method prescribed by
					 the loan contract. If the loan contract does not provide for a deferment
					 charge, then no deferment charge may be assessed or collected. A lender may
					 employ any of the prescribed computational methods described in this subsection
					 so long as the computational method employed is consistently utilized
					 throughout the term of the loan. An authorized lender may calculate the
					 deferment charge using the balance method or the date method.
(1) Balance method. The balance method is
					 used to determine the difference between the refund of unearned interest as of
					 the due date of the last entirely paid installment and the due date of the next
					 succeeding unpaid installment.
(A)
					 Calculation for deferment before first installment. The interest for the
					 deferment may be no more than the difference between the refund that would be
					 required for prepayment in full on the first installment due date, if it were
					 one month from the date of the loan, and the total interest charged on the
					 loan, exclusive of any charge for any additional odd days or an administrative
					 fee. The deferment charge for the first installment is essentially the charge
					 for the first month of interest.
(B) Calculation for deferment after first
					 installment. The first step in determining the deferment charge using the
					 balance method for any installment after the first installment is to determine
					 the deferment period.
(i) "Deferment period."
					 The deferment period is the period from the last entirely paid installment to
					 the "next succeeding unpaid installment." The deferment period will constitute
					 the deferment of the "first entirely unpaid installment."
(ii) Determination of "last entirely paid
					 installment." In order to determine the "last entirely paid installment," first
					 the remaining precomputed balance must be computed. The determination of the
					 balance will identify the last entirely paid installment. In determining the
					 remaining precomputed balance, an authorized lender must adjust the amount of
					 the remaining precomputed balance for any amounts relating to any minor payment
					 schedule irregularities or any add-on insurance premiums or other permissible
					 charges applied to the precomputed balance after the consummation of the loan.
					 After determining the remaining precomputed balance, the remaining precomputed
					 balance must be divided by the regular installment amount. This calculation
					 will reveal the number of remaining installments to be paid. By determining the
					 number of remaining installments to be paid, the due date of the last paid
					 installment may be determined (this must be a wholly unpaid installment). Texas
					 Finance Code, § 342.204(a)(1) only permits a deferment charge to be
					 assessed on an installment that is completely unpaid.
(iii) Determination of "next succeeding
					 unpaid installment." The due date of the next succeeding unpaid installment is
					 the end of the "deferment period."
(iv) Calculation for deferment charge. The
					 calculation for the deferment charge is the scheduled interest charge for the
					 "deferment period."
(v) Example of
					 deferment calculation. The terms of a precomputed Texas Finance Code, §
					 342.301 loan are as follows: Date of loan: 09/01/2015; First payment due date:
					 10/01/2015; Cash Advance: $2,766.48; Finance Charge: $833.52; Total of
					 Payments: $3,600; Term: 36 months; Monthly installment: $100; Refunding method:
					 Sum of the periodic balances; and Annual Percentage Rate: 18%. If an authorized
					 lender agrees to a deferment roughly six months into the contract and the
					 remaining precomputed balance is $3,095 (no adjustments are necessary), to
					 determine the "last entirely paid installment," the authorized lender must
					 divide the precomputed balance by the regular installment amount ($3,095
					 divided by $100 = 30.95). Because the entire amount of the installment must be
					 unpaid, the result must be rounded to the next lowest whole number (in this
					 case, 30). For calculation purposes, there are 30 remaining installments and 6
					 installments have been made. In this case, the 7th scheduled installment is
					 being deferred. The deferment charge is calculated by determining the scheduled
					 interest charge for the deferment period, or from the last entirely paid
					 installment to the "first entirely unpaid installment" (the 6th entirely paid
					 scheduled installment) to the "next succeeding unpaid installment" (7th
					 scheduled installment). The "next succeeding unpaid installment" is determined
					 by subtracting one unit period from the "last entirely paid installment" (30 -
					 1 = 29). The calculation of the deferment charge is the difference between the
					 interest refund of the 6th entirely paid installment (36 - 30) and the 7th
					 first entirely unpaid installment (36 - 29). This difference would be $37.54. A
					 scheduled installment earnings refund method would yield a slightly different
					 result of $36.69.