[Federal Register Volume 75, Number 149 (Wednesday, August 4, 2010)]
[Rules and Regulations]
[Pages 46837-46838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19101]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 75, No. 149 / Wednesday, August 4, 2010 /
Rules and Regulations
[[Page 46837]]
FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. R-1389]
Truth in Lending
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule; staff commentary.
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SUMMARY: The Board is publishing a final rule amending the staff
commentary that interprets the requirements of Regulation Z (Truth in
Lending). The Board is required to adjust annually the dollar amount
that triggers requirements for certain home mortgage loans bearing fees
above a certain amount. The Home Ownership and Equity Protection Act of
1994 (HOEPA) sets forth rules for home-secured loans in which the total
points and fees payable by the consumer at or before loan consummation
exceed the greater of $400 or 8 percent of the total loan amount. In
keeping with the statute, the Board has annually adjusted the $400
amount based on the annual percentage change reflected in the Consumer
Price Index as reported on June 1. The adjusted dollar amount for 2011
is $592.
DATES: Effective Date: January 1, 2011.
FOR FURTHER INFORMATION CONTACT: Dana Miller, Senior Attorney, Division
of Consumer and Community Affairs, Board of Governors of the Federal
Reserve System, at (202) 452-3667. For the users of Telecommunications
Device for the Deaf (``TDD'') only, contact (202) 263-4869.
SUPPLEMENTARY INFORMATION:
I. Background
The Truth in Lending Act (TILA; 15 U.S.C. 1601-1666j) requires
creditors to disclose credit terms and the cost of consumer credit as
an annual percentage rate. The act requires additional disclosures for
loans secured by a consumer's home, and permits consumers to cancel
certain transactions that involve their principal dwelling. TILA is
implemented by the Board's Regulation Z (12 CFR part 226). The Board's
official staff commentary (12 CFR part 226 (Supp. I)) interprets the
regulation, and provides guidance to creditors in applying the
regulation to specific transactions.
In 1995, the Board published amendments to Regulation Z
implementing HOEPA, contained in the Riegle Community Development and
Regulatory Improvement Act of 1994, Public Law 103-325, 108 Stat. 2160
(60 FR 15463). These amendments, contained in Sec. Sec. 226.32 and
226.34 of the regulation, impose substantive limitations and additional
disclosure requirements on certain closed-end home mortgage loans
bearing rates or fees above a certain percentage or amount. As enacted,
the statute requires creditors to comply with the HOEPA requirements if
the total points and fees payable by the consumer at or before loan
consummation exceed the greater of $400 or 8 percent of the total loan
amount. TILA and Regulation Z provide that the $400 figure shall be
adjusted annually on January 1 by the annual percentage change in the
Consumer Price Index (CPI) that was reported on the preceding June 1.
15 U.S.C. 1602(aa)(3) and 12 CFR 226.32(a)(1)(ii). The Board adjusted
the $400 amount to $579 for the year 2010.
The Bureau of Labor Statistics publishes consumer-based indices
monthly, but does not report a CPI change on June 1; adjustments are
reported in the middle of each month. The Board uses the CPI-U index,
which is based on all urban consumers and represents approximately 87
percent of the U.S. population, as the index for adjusting the $400
dollar figure. The adjustment to the CPI-U index reported by the Bureau
of Labor Statistics on May 19, 2010, was the CPI-U index in effect on
June 1, and reflects the percentage change from April 2009 to April
2010. The adjustment to the $400 figure below reflects a 2.2 percent
increase in the CPI-U index for this period and is rounded to whole
dollars for ease of compliance.
The fee trigger being adjusted in this Federal Register notice
pursuant to TILA section 103(aa) is used in determining whether a loan
is covered by section 226.32 of Regulation Z. Such loans have generally
been known as ``HOEPA loans.'' In July 2008, the Board revised
Regulation Z to adopt additional protections for ``higher-priced''
loans, using its authority under TILA section 129(l)(2). Those
revisions define a class of dwelling-secured transactions, described in
section 226.35 of Regulation Z, using a threshold based on average
market rates that the Board publishes on a regular basis. The
adjustment published today does not affect the triggers adopted in July
2008 for higher-priced loans.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Reform Act'') was enacted into law.\1\ Section
1431 of the Reform Act revises the statutory fee trigger for HOEPA
loans. The amendments made by Section 1431 of the Reform Act will be
implemented in a future rulemaking. Accordingly, the adjustment to the
fee trigger that is being published today will become effective on
January 1, 2011 and will apply for one year, or until final rules under
the Reform Act become effective, whichever is earlier.
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\1\ Public Law 111-203, 124 Stat. 1376 (2010).
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II. Adjustment and Commentary Revision
Effective January 1, 2011, for purposes of determining whether a
home mortgage transaction is covered by 12 CFR 226.32 (based on the
total points and fees payable by the consumer at or before loan
consummation), a loan is covered if the points and fees exceed the
greater of $592 or 8 percent of the total loan amount. Comment
32(a)(1)(ii)-2, which lists the adjustments for each year, is amended
to reflect the dollar adjustment for 2011. Because the timing and
method of the adjustment are set by statute, the Board finds that
notice and public comment on the change are unnecessary.
III. Regulatory Flexibility Analysis
The Board certifies that this amendment to Regulation Z will not
have a significant economic impact on a substantial number of small
entities. The only change is to increase the threshold for transactions
requiring HOEPA disclosures. This change is mandated by statute.
[[Page 46838]]
List of Subjects in 12 CFR Part 226
Advertising, Federal Reserve System, Mortgages, Reporting and
recordkeeping requirements, Truth in lending.
0
For the reasons set forth in the preamble, the Board amends Regulation
Z, 12 CFR part 226, as set forth below:
PART 226--TRUTH IN LENDING (REGULATION Z)
0
1. The authority citation for part 226 continues to read as follows:
Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5).
0
2. In Supplement I to Part 226, under Section 226.32--Requirements for
Certain Closed-End Home Mortgages, under Paragraph 32(a)(1)(ii),
paragraph 2.xvi. is added.
Supplement I to Part 226--Official Staff Interpretations
* * * * *
Subpart E--Special Rules for Certain Home Mortgage Transactions
* * * * *
Section 226.32--Requirements for Certain Closed-End Home Mortgages
32(a) Coverage
* * * * *
Paragraph 32(a)(1)(ii)
* * * * *
2. Annual adjustment of $400 amount.
* * * * *
xvi. For 2011, $592, reflecting a 2.2 percent increase in the CPI-U
from June 2009 to June 2010, rounded to the nearest whole dollar.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, acting through the Director of the Division of Consumer and
Community Affairs under delegated authority, July 29, 2010.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2010-19101 Filed 8-3-10; 8:45 am]
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