[Federal Register Volume 61, Number 240 (Thursday, December 12, 1996)]
[Rules and Regulations]
[Page 65317]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31531]



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  Federal Register / Vol. 61, No. 240 / Thursday, December 12, 1996 / 
Rules and Regulations  

[[Page 65317]]



FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-0949]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice of adjustment of dollar amount.

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SUMMARY: The Board is publishing an adjustment to the dollar amount 
that triggers certain requirements of Regulation Z (Truth in Lending) 
for mortgages bearing fees above a certain amount. The Home Ownership 
and Equity Protection Act of 1994 sets forth rules for creditors 
offering home-secured loans with total points and fees payable by the 
consumer at or before loan consummation that exceed the greater of $400 
or 8 percent of the total loan amount. The Board is required to 
annually adjust the $400 amount based on the annual percentage change 
in the Consumer Price Index as reported on June 1. The Board adjusted 
the $400 amount to $412 for 1996. The Board has adjusted the dollar 
amount from $412 to $424 for 1997.

EFFECTIVE DATE: January 1, 1997, through December 31, 1997.

FOR FURTHER INFORMATION CONTACT: Michael Hentrel, Staff 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 only, please contact Dorothea 
Thompson, at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

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. The TILA is 
implemented by the Board's Regulation Z (12 CFR part 226).
    On March 24, 1995, the Board published amendments to Regulation Z 
implementing the Home Ownership and Equity Protection Act of 1994 
(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, which became effective on October 1, 1995, 
are contained in Sec. 226.32 of the regulation and impose additional 
disclosure requirements and substantive limitations on certain closed-
end mortgage loans bearing rates or fees above a certain percentage or 
amount. Generally, creditors are required to comply with the rules in 
Sec. 226.32 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. The TILA and Sec. 226.32(a)(1)(ii) of 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. See 15 U.S.C. 1602(aa).
    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 believes the CPI-U 
index, which is based on all urban consumers and represents 
approximately 80 percent of the U.S. population, is the appropriate 
index to use in any adjustment to the $400 dollar figure.
    The adjustment the $400 dollar figure reflects the adjustment 
reported on May 15 (the rate ``in effect'' on June 1) which states the 
percentage increase from April 1995 to April 1996. Last year, the Board 
adjusted the $400 amount to $412, reflecting a 3.1 percent increase in 
the CPI-U (See 61 FR 3177, January 31, 1996). During the period from 
April 1995 to April 1996, the CPI-U increased by 2.9 percent. As a 
result, this increase in the CPI-U would cause an adjustment of the 
$412 to $423.94. The Board is rounding that number to whole dollars for 
ease of compliance.

Adjustment

    For the reasons set forth in the preamble, for purposes of 
determining if a mortgage is covered by Sec. 226.32 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, effective 
January 1, 1997, through December 31, 1997, the dollar amount is 
adjusted from $412 to $424.

    By order of the Board of Governors of the Federal Reserve 
System, December 6, 1996.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 96-31531 Filed 12-11-96; 8:45 am]
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