[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