[Federal Register Volume 62, Number 101 (Tuesday, May 27, 1997)]
[Rules and Regulations]
[Pages 28620-28626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13593]


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FEDERAL RESERVE SYSTEM

12 CFR Part 203

[Regulation C; Docket No. R-0951]


Home Mortgage Disclosure

AGENCY: Board of Governors of the Federal Reserve System.


[[Page 28621]]


ACTION: Final rule.

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SUMMARY: The Board is publishing final revisions to Regulation C (Home 
Mortgage Disclosure). The revisions implement the amendments to the 
Home Mortgage Disclosure Act included in the Economic Growth and 
Regulatory Paperwork Reduction Act of 1996. The action makes final an 
interim rule adopted in January, which set the asset-exemption 
threshold for depository institutions at $28 million. The final rule 
also establishes an alternative way for institutions to provide 
disclosure statements in metropolitan areas where they have branch 
offices, which they may begin using immediately. In addition, the Board 
is extending its information collection authority under the Paperwork 
Reduction Act for another three years, and making technical amendments 
to the transmittal sheet accompanying the loan/application register.

DATES: Effective date. This rule is effective July 1, 1997.
    Applicability date. This rule applies to all data collection in 
1997.
    Compliance date. Voluntary compliance with the disclosure 
provisions in Sec. 203.5 and paragraphs III. D., E., and F. of Appendix 
A to Part 203 can begin June 1, 1997.

FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell, Senior Attorney, or 
Manley Williams, Staff Attorney, Division of Consumer and Community 
Affairs, Board of Governors of the Federal Reserve System, at (202) 
452-3667; for the hearing impaired only, Diane Jenkins, 
Telecommunications Device for the Deaf, at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

I. Background

    The Home Mortgage Disclosure Act of 1975 (HMDA) (12 U.S.C. 2801 et 
seq.) requires most mortgage lenders located in metropolitan 
statistical areas (MSAs) to collect data about their housing-related 
lending activity. Annually, lenders must file reports with their 
federal supervisory agencies and make disclosures available to the 
public. The Board's Regulation C (12 CFR Part 203) carries out the 
provisions of HMDA. Provisions of the Economic Growth and Regulatory 
Paperwork Reduction Act of 1996 (the 1996 Act) (Pub. L. 104-208, 110 
Stat. 3009) amended HMDA to expand the exemption for small depository 
institutions and modify the disclosure requirements.
    To implement the amendments to HMDA, in December 1996 the Board 
published a proposal for public comment. (61 FR 68168, Dec. 27, 1996.) 
The Board received about 30 comment letters. The comments came from 
community groups, financial institutions and their representatives, and 
financial services firms. Overall, the commenters supported the 
proposed amendments, although views were mixed on some issues. Based on 
a review of the comment letters and upon further analysis, the Board 
has made some changes to the proposal, as discussed below. The revised 
exemption for depository institutions is applicable to all data 
collection in 1997. Compliance with the revised disclosure provisions 
is optional until July 1, 1997, the effective date for mandatory 
compliance.

II. Revisions

A. Increasing the Exemption Based on Asset Size

    The 1996 Act increased the asset-size exemption for depository 
institutions. Previously, depository institutions with assets of $10 
million or less were exempt from HMDA. The 1996 Act adjusts the $10 
million figure by the change since 1975 in the Consumer Price Index for 
Urban Wage Earners and Clerical Workers (CPIW)--rounded to the nearest 
million--and provides for annual adjustments thereafter in accordance 
with CPIW changes. In January, the Board published an interim rule to 
implement the first threshold change. This change reflects the change 
in the CPIW (not seasonally adjusted) from 1975 through 1996. On an 
annual average basis, the ratio of the CPIW for 1996 to the CPIW for 
1975 was 2.848. Thus, the new threshold, rounded to the nearest 
million, is $28 million. Depository institutions with assets of $28 
million or less as of December 31, 1996 are not required to collect 
HMDA data in 1997. (62 FR 3603, Jan. 24, 1997.) The Board is now 
publishing final revisions to Sec. 203.3(a)(1)(ii) of Regulation C and 
making conforming amendments to Appendix A--Form and Instructions for 
Completion of HMDA Loan/Application Register, and to Supplement I--
Staff Commentary.
    Under the proposal, the annual adjustments to the asset-size 
exemption threshold were to be based on the change in the CPIW data for 
the month of December as compared to the previous December, and 
published in the Federal Register as soon as those data became 
available in January. The proposal requested comment, however, on 
whether the Board should base the annual adjustments on the data for 
the month of November instead, which would allow the Board to announce 
the new threshold by year-end. Many of the commenters on this issue 
recommended that the Board use the November data, suggesting that this 
could reduce burden by providing certainty and predictability of 
coverage for the initial weeks of the reporting year. Other commenters 
recommended using the December data because of the potential for a 
higher threshold. A few commenters recommended that the Board publish 
an initial threshold based on the November data and revise it upward, 
if appropriate, based on the December data.
    A related issue is whether the annual adjustments should be based 
on the CPIW data for December of the current year as compared to the 
CPIW data for December of the previous year, or on the annual average 
of the CPIW for the current year compared to the annual average of the 
CPIW for the previous year. Under the proposal, the annual adjustments 
to the asset-size exemption threshold were to be based on comparing the 
data for December with the data for the previous December. Some 
commenters asserted that this would produce undesirable volatility in 
the annual adjustments, especially because the Board would not be using 
seasonally adjusted numbers.
    Based on the comments and upon further analysis, the Board has 
decided to base the threshold change on the annual average of the CPIW 
data for the 12-month period ending in November. Because the 1996 Act 
provides that the increase should be based on the ``annual percentage 
increase,'' the Board believes that comparing the average of 12 months 
of data with the average of the prior 12 months of data, would be more 
appropriate than comparing the data for a single month with the data 
for that month in the prior year. The Board also believes that basing 
the threshold change on a 12-month period ending in November rather 
than on a 12-month period ending in December would be less burdensome. 
This will allow the Board to revise the regulation and publish the new 
threshold in the Federal Register in December, for compliance beginning 
January 1. Although in some cases this could result in a lower 
threshold than if the Board used a 12-month average ending in December, 
a review of the CPIW data suggests that such instances would be rare.

B. Alternative Disclosure Statement Requirements

    The 1996 Act amends section 304 of HMDA (12 U.S.C. 2803) to provide 
that an institution must make its disclosure statement available at the 
institution's home office and either (1) in at least one

[[Page 28622]]

branch office in each additional MSA where the institution has offices; 
or (2) provide notice that the disclosure statement is available from 
the home office upon written request, and mail or deliver a copy within 
fifteen calendar days of receiving a written request.
    The proposal did not require institutions to receive requests at 
their home office, but permitted them to specify the address where 
requests should be sent, for more efficient distribution of the data. 
The proposal also did not require an institution to post a notice 
identifying the address where a written request should be sent. A 
number of community group commenters expressed concern that eliminating 
the requirement that the disclosure be available at certain branches 
would result in the diminished availability of the HMDA data in many 
cases, and a reduction in timely access to the data in almost all 
cases. They believed that these problems would be exacerbated if 
institutions did not post the address to which requests for disclosures 
should be sent.
    The statute requires that institutions which opt for the 
alternative branch disclosure approach must provide a notice at branch 
offices stating that the information is available from the home office 
upon request. This provision could be read to require that requests go 
to institutions' home offices, but the Board does not believe that such 
a strict interpretation is necessary. The intent of the provision is to 
reduce burden while preserving the public availability of the data. The 
Board believes that if an institution chooses to specify a service 
center or a central location for requests relating to all banks in a 
multibank holding company, for example, that is permissible. After 
consideration of the comments and upon further analysis, however, the 
Board has determined that to preserve the public availability of the 
data, it is reasonable and appropriate to require banks to post the 
address to which a request should be sent. Accordingly, the final rule 
permits institutions that elect to provide the information upon request 
instead of at one branch per MSA, to select the address to which 
requests should be sent, but requires them to post that address in each 
branch office in an MSA. The Board believes that this approach will 
best satisfy the amendment's goals of reducing compliance burden while 
preserving the prompt public availability of the data. The Board has 
revised Sec. 203.5 and Appendix A--Form and Instructions for Completion 
of HMDA Loan/Application Register accordingly.
    Because the requirements for public disclosure of the disclosure 
statement differ from the requirements for the modified loan 
application register, the Board has also reorganized several paragraphs 
in Appendix A, Section III. Submission of HMDA-LAR and Public Release 
of Data to clarify the requirements. A cross reference in Supplement 
I--Staff Commentary has been revised accordingly. As part of this 
reorganization, the Board has clarified some requirements that may have 
been ambiguous. For example, the revised section makes clear that an 
institution need not prepare a modified loan application register in 
advance of receiving a request for it.

C. Revisions to the HMDA Loan/Application Register

    The Board proposed to make three minor revisions to the HMDA loan/
application register, and has adopted the changes generally as 
proposed. First, the Board deleted the requirement to list the name and 
address of the respondent's supervisory agency. Because respondents 
must report the agency code, this additional requirement was 
unnecessary. Second, to facilitate prompt communication, the Board 
added a blank for the respondent's facsimile number. Third, the Board 
added a notice required under the Paperwork Reduction Act, but shifted 
the location of that notice from the transmittal form to the Paperwork 
Reduction Act Notice section of the Instructions for Completion of the 
HMDA Loan/Application Register.

III. Regulatory Flexibility Analysis

    In accordance with section 3(a) of the Regulatory Flexibility Act 
(5 U.S.C. 604), the Board's Office of the Secretary has reviewed the 
amendments to Regulation C. Overall, the amendments reduce the burden 
on small entities. The regulatory revisions implement the 1996 Act 
which, in part, increases the exemption threshold for depository 
institutions. The 1996 Act also creates an alternative means for making 
branch disclosures available. The Board certifies that the regulatory 
revisions will not have an adverse effect on a substantial number of 
small entities.

IV. Paperwork Reduction Act

A. Paperwork Burden

    The revisions to the information collection requirements are found 
in 12 CFR 203.3, 203.5, and Appendix A to Part 203 and implement the 
data collection and reporting requirements established by the Home 
Mortgage Disclosure Act. The respondents are mortgage lenders in 
metropolitan areas. Under the act, each respondent must make its loan/
application register available to the public for three years; and must 
provide for five years the disclosure statement that the Federal 
Financial Institutions Examination Council prepares from the data 
submitted by the respondent. The data provide the public and government 
officials with information to enable them to determine whether mortgage 
lenders are fulfilling the housing needs of the communities and 
neighborhoods in which they are located and to assist public officials 
in their determination of the distribution of public sector 
investments.
    The amendments decrease the number of respondents and ease 
compliance with the public disclosure requirements of the regulation. 
The amendments directly affect small businesses: many are no longer 
required to collect, report, or disclose the information.
    Regulation C applies to all types of financial institutions and 
other mortgage-lending institutions that meet the coverage tests. Under 
the Paperwork Reduction Act, however, the Board accounts for the 
paperwork burden associated with Regulation C only for state member 
banks, their subsidiaries, subsidiaries of bank holding companies, and 
other entities regulated by the Federal Reserve. Any estimates of 
paperwork burden for other respondents are provided by the federal 
agency or agencies that supervise them.
    The Board estimates that the effect of the amendments on the burden 
per response is negligible. The estimated burden per response varies 
from 10 to 10,000 hours, depending on individual circumstances, with 
estimated averages of 202 hours for state member banks and 160 hours 
for mortgage banking subsidiaries.
    It is estimated that of the 565 state member banks that were 
covered in 1996 because their assets exceeded the $10 million 
threshold, 39 will be exempt as a result of the higher threshold. The 
93 mortgage banking subsidiaries reporting HMDA data to the Federal 
Reserve remain covered. The total amount of annual burden is estimated 
to decrease from 129,168 hours to 121,368 because of these exemptions. 
The Board estimates that there would be no capital or start-up cost 
associated with these amendments, and that there is no annual cost 
burden beyond the estimated burden hours.
    The Board did not receive any comments specifically addressing the 
burden estimate.

[[Page 28623]]

B. OMB Control Number

    Under the Paperwork Reduction Act, an agency may not conduct or 
sponsor, and an organization is not required to respond to, a 
collection of information unless it displays a currently valid OMB 
control number. The Federal Reserve's OMB control number applicable to 
the HMDA-LAR data collection is 7100-0247.

C. Confidentiality

    The Board has previously determined that the HMDA loan/application 
register is required by law (12 U.S.C. 2801-2810; 12 CFR Part 203) and 
completion of the register, submission to the appropriate federal 
supervisory agency, and disclosure to the public on request are 
mandatory. The data, as modified according to Appendix A of the 
regulation (paragraph III.E.), are made publicly available and are not 
considered confidential. Information that might identify individual 
borrowers or applicants is given confidential treatment under exemption 
6 of the Freedom of Information Act (5 U.S.C. 552(b)(6)).

D. Extension of Authority

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR 1320 Appendix A.1), the Board has reviewed Regulation C 
under the authority delegated to the Board by the Office of Management 
and Budget. The Board is extending the authority to collect the HMDA 
loan/application register for three years through May 31, 2000.

E. Request for Comments

    The Board has a continuing interest in the public's opinions of 
Federal Reserve collections of information. Comments regarding the 
burden estimate, or any other aspect of this collection of information, 
including suggestions for reducing the burden, may be sent at any time 
to: Secretary, Board of Governors of the Federal Reserve System, 20th 
and C Streets, N.W., Washington, DC 20551; and to the Office of 
Management and Budget, Paperwork Reduction Project (7100-0247), 
Washington, DC 20503.

List of Subjects in 12 CFR Part 203

    Banks, banking, Consumer protection, Federal Reserve System, 
Mortgages, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Board amends 12 CFR 
part 203 as follows:

PART 203--HOME MORTGAGE DISCLOSURE (REGULATION C)

    1. The authority citation for part 203 continues to read as 
follows:

    Authority: 12 U.S.C. 2801-2810.

    2. Section 203.3 is amended by revising paragraph (a)(1)(ii) to 
read as follows:


Sec. 203.3  Exempt institutions.

    (a) Exemption based on location, asset size, or number of home 
purchase loans.
    (1) * * *
    (ii) The institution's total assets were at or below the asset 
threshold established by the Board. For data collection in 1997, the 
asset threshold is $28 million as of December 31, 1996. For subsequent 
years, the Board will adjust the threshold based on the year-to-year 
change in the average of the Consumer Price Index for Urban Wage 
Earners and Clerical Workers, not seasonally adjusted, for each twelve-
month period ending in November, with rounding to the nearest million. 
The Board will publish any adjustment in the asset figure in December.
* * * * *
    3. Section 203.5 is amended as follows:
    a. Paragraph (b) is revised;
    b. Under paragraph (c), the last sentence is revised; and
    c. Paragraph (e) is revised.
    The revisions and additions read as follows:


Sec. 203.5  Disclosure and reporting.

* * * * *
    (b) Public disclosure of statement. (1) A financial institution 
shall make its mortgage loan disclosure statement (to be prepared by 
the Federal Financial Institutions Examination Council) available to 
the public at its home office no later than three business days after 
receiving it from the Examination Council.
    (2) In addition, a financial institution shall either:
    (i) Make its disclosure statement available to the public (within 
ten business days of receiving it) in at least one branch office in 
each additional MSA where the institution has offices (the disclosure 
statement need only contain data relating to the MSA where the branch 
is located); or
    (ii) Post the address for sending written requests for the 
disclosure statement in the lobby of each branch office in an MSA where 
the institution has offices, and mail or deliver a copy of the 
disclosure statement, within fifteen calendar days of receiving a 
written request (the disclosure statement need only contain data 
relating to the MSA for which the request is made). Including the 
address in the general notice required under paragraph (e) of this 
section satisfies this requirement.
    (c) Public disclosure of loan application register. * * * The 
modified register need only contain data relating to the MSA for which 
the request is made.
* * * * *
    (e) Notice of availability. A financial institution shall post a 
general notice about the availability of its HMDA data in the lobby of 
its home office and of each branch office located in an MSA. It shall 
promptly upon request provide the location of the institution's offices 
where the statement is available for inspection and copying, or it may 
include the location in the notice.
    4. In Appendix A to Part 203 under the heading Paperwork Reduction 
Act Notice, the undesignated paragraph is revised to read as follows:

Appendix A to Part 203--Form and Instructions for Completion of HMDA 
Loan/Application Register

Paperwork Reduction Act Notice

    Public reporting burden for collection of this information is 
estimated to vary from 10 to 10,000 hours per response, with an 
average of 202 hours per response for state member banks and 160 
hours per response for mortgage banking subsidiaries, including time 
to gather and maintain the data needed and to review instructions 
and complete the information collection. This report is required by 
law (12 U.S.C. 2801-2810 and 12 CFR part 203). An agency may not 
conduct or sponsor, and an organization is not required to respond 
to, a collection of information unless it displays a currently valid 
OMB Control Number. The OMB Control number for this information 
collection is 7100-0247. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing the burden, to Secretary, Board 
of Governors of the Federal Reserve System, Washington, D.C. 20551; 
and to the Office of Information and Regulatory Affairs, Office of 
Management and Budget, Washington, D.C. 20503.
* * * * *
    5. Paragraph I of Appendix A to Part 203 is amended as follows:
    a. Paragraph A. is amended by redesignating the introductory text, 
paragraph 1., and paragraph 2., as paragraph 1., paragraph 1.a., and 
paragraph 1.b., respectively;
    b. Newly designated paragraph 1.a. is revised;
    c. A new paragraph 2. is added; and
    d. The undesignated paragraph EXAMPLE, is designated as paragraph 
3. and revised.

[[Page 28624]]

    The addition and revisions read as follows:
* * * * *

I. Who Must File a Report

A. Depository Institutions

    1. * * *
    a. Had assets of more than the asset threshold for coverage as 
published by the Board each year in December, and
    b. * * *
    2. For data collection in 1997, the asset threshold is $28 
million in total assets as of December 31, 1996.
    3. Example. If on December 31 you had a home or branch office in 
an MSA and your assets exceeded the asset threshold, you must 
complete a register that lists the home-purchase and home-
improvement loans that you originate or purchase (and also lists 
applications that did not result in an origination) beginning 
January 1.
* * * * *
    6. Paragraph III. of Appendix A to Part 203 is amended as follows:
    a. Paragraph D. is revised;
    b. Under paragraph E., paragraph 2. is revised and a new paragraph 
3. is added;
    c. Paragraph F. is removed; and
    d. Paragraph G. is redesignated as paragraph F., and in newly 
redesignated paragraph F, the first paragraph following the heading is 
designated as paragraph 1. and a new heading is added to the newly 
designated paragraph 1., and paragraph 2. is added after the Home 
Mortgage Disclosure Act Notice.
    The revisions and additions read as follows:
* * * * *

III. Submission of HMDA-LAR and Public Release of Data

* * * * *
    D. Availability of disclosure statement. 1. The Federal 
Financial Institutions Examination Council (FFIEC) will prepare a 
disclosure statement from the data you submit. Your disclosure 
statement will be returned to the name and address indicated on the 
transmittal sheet. Within three business days of receiving the 
disclosure statement, you must make a copy available at your home 
office for inspection by the public. For these purposes a business 
day is any calendar day other than a Saturday, Sunday, or legal 
public holiday. You also must either:
    a. Make your disclosure statement available to the public, 
within ten business days of receiving it from the FFIEC, in at least 
one branch office in each additional MSA where you have offices (the 
disclosure statement need only contain data relating to properties 
in the MSA where the branch office is located); or
    b. Post in the lobby of each branch office in an MSA the address 
where a written request for the disclosure statement may be sent, 
and mail or deliver a copy of the statement to any person requesting 
it, within fifteen calendar days of receiving a written request. The 
disclosure statement need only contain data relating to the MSA for 
which the request is made.
    2. You may make the disclosure statement available in paper form 
or, if the person requesting the data agrees, in automated form 
(such as by PC diskette or computer tape).
    E. Availability of modified loan application register.
* * * * *
    2. You may make the modified register available in paper or 
automated form (such as by PC diskette or computer tape). Although 
you are not required to make the modified loan application register 
available in census-tract order, you are strongly encouraged to do 
so in order to enhance its utility to users.
    3. You must make your modified register available following the 
calendar year for which the data are complied, by March 31 for a 
request received on or before March 1, and within 30 days for a 
request received after March 1. You are not required to prepare a 
modified loan application register in advance of receiving a request 
from the public for this information, but must be able to respond to 
a request within 30 days. A modified register need only reflect data 
relating to the MSA for which the request is made.
    F. Posters.
    1. Suggested language. * * *
    2. Additional language for institutions making the disclosure 
statement available upon request. For an institution that makes its 
disclosure statement available upon request instead of at branch 
offices must post a notice informing the public of the address to 
which a request should be sent. For example, the institution could 
include the following sentence in its general notice: ``To receive a 
copy of these data send a written request to [address].''
* * * * *
    7. In Appendix A to part 203, the LOAN/APPLICATION REGISTER 
Transmittal Sheet is revised to read as follows:
* * * * *
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* * * * *
    8. Supplement I to Part 203 is amended as follows:
    a. Under Section 203.3--Exempt Institutions, under 3(a) Exemption 
based on location, asset size, or number of home-purchase loans, the 
second sentence of Paragraph 1. General is revised; and
    b. Under Section 203.5--Disclosure and Reporting, under 5(e) Notice 
of availability, the parenthetical at the end of Paragraph 1. Poster--
suggested text is revised.
    The revisions read as follows:

Supplement I to Part 203--Staff Commentary

* * * * *

Section 203.3--Exempt Institutions

    3(a) Exemption based on location, asset size, or number of home-
purchase loans.
    1. General. * * * For example, a bank whose assets are at or 
below the threshold on December 31 of a given year reports data for 
that full calendar year, in which it was covered, but does not 
report data for the succeeding calendar year. * * *
* * * * *

Section 203.5--Disclosure and Reporting

    5(e) Notice of availability.
    1. Poster--suggested text. * * * (Appendix A of this part, 
paragraph III.F.)
* * * * *
    By order of the Board of Governors of the Federal Reserve 
System, May 19, 1997.
William W. Wiles,
Secretary of the Board.
[FR Doc. 97-13593 Filed 5-23-97; 8:45 am]
BILLING CODE 6210-01-P