[Federal Register Volume 63, Number 26 (Monday, February 9, 1998)]
[Rules and Regulations]
[Page 6474]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3108]
[[Page 6474]]
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FEDERAL RESERVE SYSTEM
12 CFR Part 226
[Regulation Z; Docket No. R-0998]
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 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. 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 and to $424 for 1997. The Board has adjusted the dollar amount
from $424 to $435 for 1998.
EFFECTIVE DATES: January 1, 1998 through December 31, 1998.
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 Diane
Jenkins 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. As to fees, creditors are generally 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 (15 U.S.C. 1602(aa)(3)) 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.
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 the adjustment to the $400 dollar figure.
The adjustment to the $400 dollar figure reflects the adjustment
reported on May 15, 1997, the rate ``in effect'' on June 1, which
states the percentage increase from April 1996 to April 1997. In 1995,
the Board adjusted the $400 amount to $412 for 1996. Last year, the
Board adjusted the $400 amount from $412 to $424, reflecting a 2.9
percent increase in the CPI-U. During the period from April 1996 to
April 1997, the CPI-U increased by 2.5 percent, bringing the adjusted
amount to $434.60. 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 whether a mortgage transaction is covered by Sec. 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 $435 or 8 percent of the total loan amount,
effective January 1, 1998 through December 31, 1998.
By order of the Board of Governors of the Federal Reserve
System, February 3, 1998.
William W. Wiles,
Secretary of the Board.
[FR Doc. 98-3108 Filed 2-6-98; 8:45 am]
BILLING CODE 6210-01-P