[Federal Register Volume 62, Number 138 (Friday, July 18, 1997)]
[Proposed Rules]
[Pages 38489-38491]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18940]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-0979]

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 3500

[Regulation X; Docket No. FR-4257-N-01]


Truth in Lending Act and Real Estate Settlement Procedures Act; 
Simplification and Improvement of Consumer Disclosures

AGENCIES: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner (HUD); Board of

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Governors of the Federal Reserve System (the Board) (collectively, the 
Agencies).

ACTION: Advance notice of proposed rulemaking; public forum.

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SUMMARY: The Board and HUD will hold a public forum concerning the 
streamlining and reform of the Truth in Lending Act (TILA) and the Real 
Estate Settlement Procedures Act (RESPA). The Economic Growth and 
Regulatory Paperwork Reduction Act of 1996 directs the Agencies to 
submit legislative recommendations to the Congress on how to simplify 
and improve consumer disclosures under RESPA and TILA if the 
disclosures cannot be simplified through regulatory change. The 
Agencies have concluded that meaningful simplification of the 
disclosures can only come about through statutory revisions. In 
addition, some have suggested that more effective protection of 
consumers from adverse steering and unnecessary costs, as well as 
greater certainty about permitted and prohibited behavior, might be 
achieved through reform of other provisions of RESPA. The public forum 
is intended to give interested parties an opportunity to discuss their 
views on statutory reform with the Agencies.

DATES: Public Forum. Wednesday, July 30, 1997, 8:15 a.m. to 4:30 p.m.
    Comments: Persons unable to attend the forum or wishing to provide 
written views on the issues raised in this notice may submit comments 
by August 15, 1997.

ADDRESSES: Public Forum. Terrace Level, Room E of the Federal Reserve 
Board's Martin Building, C Street Northwest, between 20th and 21st 
Streets, Washington, DC
    Comments: Comments may be submitted to either agency.
    Board: Comments submitted to the Board should refer to Docket No. 
R-0979, and may be mailed to William W. Wiles, Secretary, Board of 
Governors of the Federal Reserve System, 20th Street and Constitution 
Avenue, NW, Washington, DC 20551. Comments also may be delivered to 
Room B-2222 of the Eccles Building between 8:45 a.m. and 5:15 p.m. 
weekdays, or to the guard station in the Eccles building courtyard on 
20th Street, NW (between Constitution Avenue and C Street) at any time. 
When possible, comment letters should use a standard courier typeface 
with a type size of 10 or 12 characters per inch. This will enable the 
Board to convert the text into machine-readable form through electronic 
scanning, and will facilitate automated retrieval of comments for 
review. Also, if accompanied by an original document in paper form, 
comments may be submitted on 3\1/2\ inch or 5\1/4\ inch computer 
diskettes in any IBM-compatible DOS-based format. Comments may be 
inspected in Room MP-500 of the Martin Building between 9:00 a.m. and 
5:00 p.m. weekdays, except as provided in 12 CFR 261.8 of the Board's 
Rules Regarding Availability of Information.
    HUD: Comments to HUD should be addressed to the Rules Docket Clerk, 
Office of General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410-0500. 
Communications should refer to the above docket number and title. 
Facsimile (FAX) comments are not acceptable. Comments received will be 
available for public inspection and copying between 7:30 a.m. and 5:30 
p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT:

    Board: Sheilah A. Goodman or Kyung Cho-Miller, Staff Attorneys, 
Division of Consumer and Community Affairs, Board of Governors of the 
Federal Reserve System, at (202) 452-3667 or (202) 452-2412; for the 
hearing impaired only, Diane Jenkins, Telecommunications Device for the 
Deaf (TDD), at (202) 452-3544.
    HUD: David R. Williamson, Director, Officer of Consumer and 
Regulatory Affairs, Room 9146, (202) 708-4560; or for legal questions, 
Kenneth A. Markison, Assistant General Counsel for GSE/RESPA, Grant E. 
Mitchell, Senior Attorney for RESPA, or Rodrigo J. Alba, Attorney, 
Office of General Counsel, Room 9262, (202) 708-1550. For hearing- and 
speech-impaired persons, these numbers may be accessed via TTY (text 
telephone) by calling the Federal Information Relay Service at 1-800-
877-8339. The address for the above-listed persons is: Department of 
Housing and Urban Development, 451 Seventh Street, SW Washington, D.C. 
20410. The telephone numbers for the Agencies are not toll-free.

SUPPLEMENTARY INFORMATION:

I. Background

    On September 30, 1996, the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996 (Pub. L. 104-208, 110 Stat. 3009) became law. 
Section 2101 of that act directs the Board and HUD to simplify and 
improve the disclosures given in a home mortgage transaction subject to 
TILA and RESPA, and to create a single disclosure that will satisfy the 
requirements of both statutes, if possible. If legislation is necessary 
to accomplish this objective, the Agencies are directed to submit 
legislative recommendations to the Congress.
    TILA is a comprehensive statute that covers all types of consumer 
credit transactions. The act's goal is to help consumers understand 
credit terms and shop for credit by requiring creditors to provide 
uniform credit disclosures. TILA is primarily a disclosure statute, 
though it contains some substantive provisions. TILA disclosures focus 
primarily on the costs imposed by a creditor and the terms of a credit 
obligation. The law requires the disclosure of two terms thought to be 
key in aiding consumers in comparison shopping for credit--the finance 
charge and the annual percentage rate (APR). The finance charge is 
intended to reflect the dollar amount of the cost of credit; the APR is 
the cost of the credit expressed as a yearly rate. TILA also requires, 
among other things, the disclosure of a payment schedule, whether a 
creditor will impose a penalty if a loan is prepaid, whether a loan may 
be assumed, and the fee for a late payment. Finally, TILA provides 
substantive protections for certain home-secured loans such as 
prohibitions on certain contract terms, and the right to cancel the 
transaction.
    RESPA was enacted in large measure to ensure that the home-buying 
public is afforded timely and effective information about the costs of 
settlement in mortgage transactions, and to eliminate kickbacks and 
referral fees that tend to increase unnecessarily the cost of 
settlement services. To achieve these goals, RESPA mandates disclosures 
at various points in the home financing process for transactions 
involving ``federally related mortgage loans,'' which include most 
financial transactions creating a lien on owner-occupied residential 
structures. RESPA disclosures focus on the fees for services required 
in home mortgage transactions and require an itemization of all costs 
associated with settlement. RESPA also imposes certain restrictions on 
payments among settlement service providers (such as lenders, 
appraisers, and title companies). Section 8(a) of RESPA prohibits 
compensation for the referral of settlement service business; section 
8(b) prohibits unearned fees and fee splitting arrangements. Section 
8(c)(2) of RESPA, however, provides that payment may be made for ``* * 
* goods or facilities actually furnished or for services actually 
performed * * *.''
    In December 1996, the Board and HUD jointly published for comment 
an advance notice of proposed rulemaking on the issue of simplifying 
and

[[Page 38491]]

combining the disclosure requirements of RESPA and TILA (61 FR 69055, 
Dec. 31, 1996). The notice requested comment on both regulatory and 
statutory changes to improve the current disclosure scheme. The 
comments that were received covered a wide range of issues. Nearly all 
of the recommendations for reconciling the two regulations require 
legislative action (e.g. changes to the timing of disclosures under the 
two statutes). The remainder of the recommendations generally involved 
small changes that could produce only minor improvements that likely 
would not be worth the corresponding compliance costs for creditors 
associated with reprinting forms or retraining personnel. HUD is 
separately considering whether to propose minor simplification 
amendments to various RESPA-required forms. HUD will also weigh the 
merits of proposing such changes in light of the associated costs.
    On April 2, 1997, the Board published a second notice summarizing 
the comments and reopening the comment period to allow interested 
parties more time to comment on potential legislative action. (62 FR 
15624) The Board determined, in consultation with HUD, that beyond the 
revisions that have been made over the past several years, without 
legislative action any additional regulatory changes would be 
inadequate to achieve the goal of harmonizing TILA and RESPA to any 
significant degree. The notice stated that the Agencies would consider 
holding public meetings, as was suggested by many of the commenters, to 
help in developing legislative recommendations.

II. Public Forum

    Although TILA and RESPA both regulate mortgage transactions, they 
differ in fundamental ways. In crafting legislative recommendations, 
the Board and HUD believe that it is important to examine the goals of 
RESPA and TILA, and what problems this dual--but not identical--
statutory scheme presents. Therefore, the Board and HUD will hold a 
joint public forum on July 30, 1997, to help the Agencies in their 
consideration of issues to be addressed in the legislative 
recommendations. The forum will be held at the Board's offices in 
Washington, D.C. The Agencies have invited speakers representing 
industry and consumer interests to participate in the discussion, which 
will be followed by an open session for other members of the public to 
express their views.
    At the forum, the Board's staff will present preliminary findings 
of a survey on consumer credit shopping that was commissioned by the 
Board. Each invited speaker will be given an opportunity to make a 
brief introductory statement. The invitees will be asked to discuss a 
number of topics, including (1) consumer credit shopping behavior, (2) 
the goals of TILA and RESPA, and whether the current statutory and 
regulatory scheme for home mortgage lending satisfies those goals, and 
(3) whether significant improvement can be made to the existing 
provisions of TILA and RESPA, or whether there is a need for more 
comprehensive reform.
    There will be an opportunity during the open session for other 
attendees to offer the Agencies their views on these issues. Oral 
statements in this open session should be brief to allow as many 
speakers as possible to offer their views. Written statements of any 
length may be submitted for the record, and are due by August 15, 1997.

    Dated: July 14, 1997.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.

    By order of the Board of Governors of the Federal Reserve 
System, July 14, 1997.
William W. Wiles,
Secretary of the Board.
[FR Doc. 97-18940 Filed 7-17-97; 8:45 am]
BILLING CODE 6210-01-P (\1/2\)
BILLING CODE 4210-27-P (\1/2\)