[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
[[Page 38490]]
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\)