[Federal Register Volume 63, Number 189 (Wednesday, September 30, 1998)]
[Rules and Regulations]
[Pages 52140-52146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26155]


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FEDERAL RESERVE SYSTEM

12 CFR Part 203

[Regulation C; Docket No. R-0999]


Home Mortgage Disclosure

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule.

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SUMMARY: The Board is publishing a final rule to amend Regulation C, 
which implements the Home Mortgage Disclosure Act. The amendments: 
modify the Loan Application Register to prepare for Year 2000 data 
systems conversion; delete the requirement to enter the reporting 
institution's parent company on the Transmittal Sheet; and make certain 
other technical changes to the regulation and reporting forms.

EFFECTIVE DATE: September 24, 1998. The amendments apply to data 
collected for calendar year 1998, to be reported by March 1, 1999.

FOR FURTHER INFORMATION CONTACT: Pamela Morris Blumenthal, Staff 
Attorney, or John C. Wood, Senior Attorney, Division of Consumer and 
Community Affairs, Board of Governors of the Federal Reserve System, 
Washington, DC 20551, at (202) 452-2412 or (202) 452-3667; for users of 
Telecommunications Device for the Deaf (TDD) only, contact Diane 
Jenkins at (202) 452-3544.

SUPPLEMENTARY INFORMATION:

I. Background

    The Board's Regulation C (12 CFR part 203) implements the Home 
Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801-2810). The regulation 
requires most mortgage lenders located in metropolitan statistical 
areas (MSAs) to report annually to federal supervisory agencies, and 
disclose to the public, information about their home mortgage and home 
improvement lending activity. The supervisory agencies include the 
Board, the Office of the Comptroller of the Currency, the Office of 
Thrift Supervision, the Federal Deposit Insurance Corporation, the 
National Credit Union Administration, and the Department of Housing and 
Urban Development.
    In February 1998, the Board proposed to amend Regulation C to 
modify the HMDA Loan Application Register (HMDA-LAR) to prepare for 
Year 2000 data systems conversion, delete parent company information on 
the Transmittal Sheet (TS), and make certain other technical changes 
(63 FR 9453, February 25, 1998). The Board received 16 comments on the 
proposal. The majority of the commenters favored adoption of the 
proposal; several commenters suggested changes or clarifications on 
certain points, as discussed below.

II. Discussion of Final Rule

A. Year 2000 Changes

    Among items reported on the HMDA-LAR, institutions are required to 
enter the date of application and the date action was taken. Currently, 
these dates are to be entered using two digits for the year, in the 
form MM/DD/YY. As part of the interagency program related to the Year 
2000--Century Date Change, the agencies responsible for HMDA compliance 
have modified software--to avoid the confusion of a date in the 21st 
century with a date in the 20th century--by adding two digits to 
represent the century. For example, January 15, 2000, will be reflected 
as 01/15/2000 rather than 01/15/00. To carry out this program with 
regard to HMDA reporting, the HMDA-LAR form and the instructions 
(Appendix A to Regulation C) have been revised to require the date of 
application and date of action taken to be entered using four digits 
for the year.
    A few commenters noted that the 1998 data collection has been under 
way since the beginning of the year using the two-digit format. They 
stated that making the change to a four-digit year could be burdensome. 
One institution said that it was in the process of acquiring several 
other institutions which were collecting data using a two-digit year; 
these institutions all used different software and different data 
processing vendors. The commenter believed that it would be difficult 
for them to convert the HMDA data to a four-digit year for 1998 data.
    The Board believes that, for the vast majority of HMDA reporting 
institutions, use of a four-digit year in reporting 1998 data will not 
present a problem. The personal computer data entry software available 
from the supervisory agencies for 1998 data collection already reflects 
the four-digit year (as well as the deletion of parent company 
information on the TS, discussed below). The Board believes that 
private sector software vendors (and institutions that have developed 
their own software) have modified their HMDA data entry software in a 
similar manner, or are in the process of doing so.
    The Board therefore is adopting the amendments making the Year 2000 
program change to the HMDA-LAR form and instructions. The Board 
recognizes that there could be isolated instances in which an 
institution may experience difficulty in converting its data base to 
reflect the four-digit identification for the calendar year 1998. In 
such cases, the institution should consult with its supervisory agency 
for further guidance as soon as possible but no later than December 31, 
1998. Earlier consultation will enable the agency to work with the 
institution to resolve the technical difficulties, and

[[Page 52141]]

avoid the last-minute need to resubmit the data in a conforming format.
    The MM/DD/CCYY format applies to paper submissions only. For 
institutions submitting data in electronic form, the proper format (as 
already stated in the 1998 HMDA File Specifications) is CCYYMMDD.
    The paper version of the HMDA-LAR model form in Appendix A shows 
sample transactions that reflect dates from 1992, as do the 
instructions. To update these examples and instructions, as well as to 
remind reporting institutions of the change to a four-character year, 
the amendments replace ``92'' with ``1999'' in the examples and 
instructions.

B. Deletion of Parent Company Information

    The Transmittal Sheet (TS) that accompanies the HMDA-LAR currently 
calls for the name and address of the parent company of the institution 
submitting HMDA data. The Board proposed to amend the TS by deleting 
this requirement, given that in most cases the information is available 
from the bank structure information already collected by the agencies.
    Several commenters suggested that the parent company information is 
useful in analyzing lending patterns of an entire organization such as 
a bank holding company and all of its bank and non-bank subsidiaries. 
Commenters were concerned that the parent company information might not 
be readily accessible to the public. Information about an institution's 
parent, subsidiary, and affiliate companies is available through the 
FFIEC's Web site (at www.ffiec.gov/nic/default.htm), and generally is 
more accurate and complete than the information from the TS. Users of 
this Web site can search for institutions by name or location, and, 
starting with a specific institution, can ascertain the institution's 
parent, subsidiaries, and affiliates, if any.
    The Board believes that the availability of information from the 
FFIEC Web site makes the continuation of the requirement for parent 
company information on the TS unnecessary. Accordingly, the Board is 
deleting the requirement to enter parent company information on the TS.

C. Reassignment of Functions of Farmers Home Administration

    One of the items of information reported on the HMDA-LAR about a 
loan or application is the type of loan. Similarly, for loans sold, the 
lender reports the type of purchaser of the loan. The code sheet lists 
the Farmers Home Administration (FmHA) as one of the categories (as an 
insurer or purchaser of loans).
    Reorganization within the Department of Agriculture has resulted in 
the functions of the FmHA being reassigned to two new units, the Farm 
Service Agency and the Rural Housing Service. For ``type of loan,'' the 
Board has replaced the references to the Farmers Home Administration or 
FmHA (in the code sheet for the HMDA-LAR form and in the instructions 
regarding type of loan) with a reference to ``Farm Service Agency or 
Rural Housing Service'' (or ``FSA/RHS''). With regard to ``type of 
purchaser,'' the successor agencies to FmHA do not purchase loans. A 
secondary market entity that does purchase loans, the Federal 
Agricultural Mortgage Corporation, is not currently included in the 
list. Accordingly, the Board has revised the references to FmHA, as a 
purchaser of loans, to refer instead to the Federal Agricultural 
Mortgage Corporation or FAMC.
    These changes are effective for the collection and reporting of 
1998 data. However, to the extent that forms and software used for 
reporting purposes do not reflect the changes, institutions should use 
the existing codes for FmHA to refer to loans guaranteed by FSA or RHS, 
or to loans that have been sold to FAMC, as applicable.

D. Paperwork Reduction Act Requirements

    Regulations issued by the Office of Management and Budget (OMB) to 
implement the Paperwork Reduction Act (5 CFR Part 1320) contemplate 
that regulations imposing data collection requirements include control 
numbers assigned by OMB. Currently, Regulation C, the instructions for 
the HMDA-LAR and TS, and the TS form itself contain an OMB control 
number (7100-0247) assigned to the Board in connection with HMDA 
reporting requirements. The Board is now adopting a technical amendment 
to the regulation, the instructions, and the TS form--adding the 
control numbers assigned to the Office of the Comptroller of the 
Currency (1557-0159), the Federal Deposit Insurance Corporation (3064-
0046), and the Office of Thrift Supervision (1550-0021). The National 
Credit Union Administration and the Department of Housing and Urban 
Development are in the process of obtaining OMB control numbers; these 
numbers will be added at a later time. The amendment also includes a 
number of other minor technical changes in the instructions and the TS 
form, such as deletion of references to the OMB control number 
expiration dates on the TS form.

E. Clarification Regarding Coverage of Nondepository Lending 
Institutions

    The Board has adopted a technical amendment to clarify the coverage 
of nondepository institutions. The definition of ``financial 
institution'' under Regulation C includes nondepository lending 
institutions that, in the preceding calendar year, originated home 
purchase loans or refinancings of home purchase loans in an amount of 
10 percent or more of the institution's total loan origination volume, 
measured in dollars. The definition is stated in section 203.2(e)(2) 
and in paragraph I.D. of Appendix A to the regulation. Even if a 
nondepository institution meets the definition of ``financial 
institution,'' however, it is covered by Regulation C only if the 
institution either had assets over $10 million or originated 100 or 
more home purchase loans, including refinancings of home purchase 
loans, during the preceding calendar year. The instructions (see 
paragraph I.C. of Appendix A) refer expressly to refinancings, but 
section 203.3(a)(2)(ii) does not. Some institutions have suggested to 
the Board that including a reference to refinancings in section 203.3 
would be useful.
    The Board's notice at the time the 100-loan test was added to 
Regulation C made clear that refinancings of home purchase loans are 
included in calculating whether the coverage threshold was reached. 
(See 57 FR 56963, December 2, 1992.) Accordingly, the Board is adding a 
reference to refinancings of home purchase loans to section 
203.3(a)(2)(ii), to conform to paragraph I.C. of Appendix A.

F. Adjustment in Exemption Threshold for Depository Institutions

    The Board adjusts the exemption threshold for depository 
institutions annually based on the annual percentage change in the 
Consumer Price Index. In December 1997, the Board adjusted the 
exemption threshold for depository institutions for 1998 data 
collection to $29 million (from $28 million) (62 FR 66259, December 18, 
1997). The change was incorporated in the Regulation C staff 
commentary. Thus, depository institutions with assets of $29 million or 
less as of December 31, 1997, are exempt from data collection in 1998. 
The Board is amending the regulation and the instructions for the HMDA-
LAR to indicate that future adjustments will be included in the staff 
commentary.

[[Page 52142]]

III. Regulatory Flexibility Analysis

    In accordance with section 3(a) of the Regulatory Flexibility Act 
(5 U.S.C. 604), the Board has reviewed the final amendments to 
Regulation C. Two of the three requirements of a final regulatory 
flexibility analysis under this section are (1) a succinct statement of 
the need for and the objectives of the rule and (2) a summary of the 
issues raised by the public comments, the agency's assessment of the 
issues, and a statement of the changes made in the final rule in 
response to the comments. These two areas are discussed above. The 
third requirement of the analysis is a description of significant 
alternatives to the rule that would minimize the rule's economic impact 
on small entities and reasons why the alternatives were rejected.
    The final amendments will apply to mortgage lending institutions 
that exceed certain size thresholds (for depository institutions, $29 
million in assets; for nondepository institutions, $10 million in 
assets or the origination of 100 or more home purchase loans or 
refinancings in the preceding year). In addition, the amendments 
represent relatively small changes to the existing regulation; in some 
cases, the amendments clarify rights and duties of covered institutions 
or reduce economic burden. Accordingly, the amendments should not have 
a negative economic impact on small institutions, and, therefore, there 
were no significant alternatives that would have minimized the economic 
impact on those institutions.

IV. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR 1320, Appendix A.1), the Board reviewed the final rule 
under the authority delegated to the Board by the Office of Management 
and Budget. The Federal Reserve may not conduct or sponsor, and an 
organization is not required to respond to, this information collection 
unless it displays a currently valid OMB control number. The OMB 
control number for the Board is 7100-0247.
    The collection of information that is revised by this rulemaking is 
found in 12 CFR 203.1, 203.3, and Appendix A to Part 203. This 
information collection is mandatory (12 U.S.C. 2801 et seq.) under the 
Home Mortgage Disclosure Act (HMDA). HMDA requires institutions to 
collect and report data about home purchase and home improvement loans. 
The purposes of HMDA are threefold. The first is to provide the public 
and government officials with information that will help determine 
whether financial institutions are serving the housing needs of the 
communities in which they are located. The second purpose is to help 
public officials promote investments in neighborhoods where investment 
is needed. Finally, the data collected assist in identifying possible 
discriminatory lending patterns. The respondents/record keepers are all 
types of financial institutions and other mortgage-lending institutions 
that meet the coverage tests. Small businesses with assets of $29 
million or less, as of December 31, 1997, are not required to report 
1998 data. Records must be retained for five years.
    No comments specifically addressing the burden estimate were 
received.
    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. The amendments will make several technical changes in the 
reporting requirements and also clarify existing requirements of 
Regulation C; these changes should have no effect on reporting burden, 
and in some cases may reduce burden. The Board received HMDA-LARs 
covering 1997 data from 513 state member banks and 81 mortgage banking 
subsidiaries. Therefore, the total hour burden for institutions the 
Federal Reserve supervises is 116,586. There is estimated to be no 
annual cost burden, associated capital, or start up costs.
    The Board has previously determined HMDA data collection and 
reporting is required by law; completion of the loan/application 
register, submission to the Board, and disclosure to the public on 
request are mandatory. The data, as modified according to Appendix A of 
the regulation, 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)).
    The Board has a continuing interest in the public's opinions of the 
Federal Reserve's collections of information. At any time, comments 
regarding the burden estimate, or any other aspect of this collection 
of information, including suggestions for reducing the burden, may be 
sent 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.

Text of Revisions

    Pursuant to the authority granted in section 305(a) of HMDA, 12 
U.S.C. 2804(a), and for the reasons set forth in the preamble, the 
Board amends 12 CFR Part 203 as set forth below:

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 203.1 is amended by revising the last sentence of 
paragraph (a) to read as follows:


Sec. 203.1  Authority, purpose, and scope.

    (a) Authority. * * * The information-collection requirements have 
been approved by the U.S. Office of Management and Budget under 44 
U.S.C. 3501 et seq. and have been assigned OMB Numbers 1557-0159, 3064-
0046, 1550-0021, and 7100-0247 for institutions reporting data to the 
Office of the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, the Office of Thrift Supervision, and the 
Federal Reserve System, respectively; numbers for the National Credit 
Union Administration and the Department of Housing and Urban 
Development are pending.
* * * * *
    3. Section 203.3 is amended as follows:
    a. Paragraphs (a)(1) introductory text and (a)(2) introductory text 
are republished;
    b. Paragraph (a)(1)(ii) is revised; and
    c. Paragraph (a)(2)(ii) is revised.
    The revisions read as follows:


Sec. 203.3  Exempt institutions.

    (a) Exemption based on location, asset size, or number of home 
purchase loans. (1) A bank, savings association, or credit union is 
exempt from the requirements of this regulation for a given calendar 
year if on the preceding December 31:
    (i) * * *
    (ii) The institution's total assets were at or below the asset 
threshold established by the Board. The asset threshold was adjusted 
from $10 million to $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

[[Page 52143]]

seasonally adjusted, for each twelve-month period ending in November, 
with rounding to the nearest million. The Board will publish any 
adjustment to the asset figure in December in the staff commentary.
    (2) A for-profit mortgage lending institution (other than a bank, 
savings association, or credit union) is exempt from the requirements 
of this regulation for a given calendar year if:
    (i) * * *
    (ii) The institution's total assets combined with those of any 
parent corporation were $10 million or less on the preceding December 
31, and the institution originated fewer than 100 home purchase loans 
(including refinancings of home purchase loans) in the preceding 
calendar year.
* * * * *
    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

    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 
Numbers for this information collection are 1557-0159, 3064-0046, 
1550-0021, and 7100-0247 for institutions reporting data to the 
Office of the Comptroller of the Currency, the Federal Deposit 
Insurance Corporation, the Office of Thrift Supervision, and the 
Federal Reserve System, respectively; numbers for the National 
Credit Union Administration and the Department of Housing and Urban 
Development are pending. Send comments regarding this burden 
estimate or any other aspect of this collection of information, 
including suggestions for reducing the burden, to the respective 
agencies and to the Office of Information and Regulatory Affairs, 
Office of Management and Budget, Washington, D.C. 20503.
* * * * *
    5. Appendix A to Part 203 is amended as follows:
    a. Paragraph I.A.2. is revised;
    b. Paragraphs V.A.2. and V.A.3. are revised;
    c. In paragraph V.B.3., the introductory text is revised; and
    d. Paragraph V.E.1. introductory text is republished and paragraph 
V.E.1.4 is revised.
    The revisions read as follows:

I. Who Must File a Report

A. Depository Institutions

    1. * * *
    2. The asset threshold was adjusted from $10 million to $28 
million as of December 31, 1996. Any adjustment to the asset 
threshold for depository institutions will be published by the Board 
in December in the staff commentary.
* * * * *

V. Instructions for Completion of Loan/Application Register

A. Application or Loan Information

    1. * * *
    2. Date application received. For paper submissions only, enter 
the date the loan application was received by your institution by 
month, day, and year, using numerals in the form MM/DD/CCYY (for 
example, 01/15/1999). For institutions submitting data in electronic 
form, the proper format is CCYYMMDD. If your institution normally 
records the date shown on the application form, you may use that 
date instead. Enter ``NA'' for loans purchased by your institution.
    3. Type. Indicate the type of loan or application by entering 
the applicable code from the following:

1--Conventional (any loan other than FHA, VA, FSA, or RHS loans)
2--FHA-insured (Federal Housing Administration)
3--VA-guaranteed (Veterans Administration)
4--FSA/RHS-guaranteed (Farm Service Agency or Rural Housing Service)
* * * * *

B. Action Taken

* * * * *
    3. Date of action. For paper submissions only, enter the date by 
month, day, and year, using numerals in the form MM/DD/CCYY (for 
example, 02/22/1999). For institutions submitting data in electronic 
form, the proper format is CCYYMMDD.
* * * * *

E. Type of Purchaser

    1. Enter the applicable code to indicate whether a loan that 
your institution originated or purchased was then sold to a 
secondary market entity within the same calendar year:
* * * * *
4--FAMC (Federal Agricultural Mortgage Corporation)
* * * * *
    6. In Appendix A, the LOAN/APPLICATION REGISTER Transmittal Sheet 
is revised to read as follows:

BILLING CODE 6210-01-P

[[Page 52144]]

[GRAPHIC] [TIFF OMITTED] TR30SE98.022



[[Page 52145]]

    7. In Appendix A, the LOAN/APPLICATION REGISTER is revised to read 
as follows:
[GRAPHIC] [TIFF OMITTED] TR30SE98.023


BILLING CODE 6210-01-C

[[Page 52146]]

    8. In Appendix A, the LOAN/APPLICATION REGISTER CODE SHEET is 
revised to read as follows:

Loan/Application Register Code Sheet

    Use the following codes to complete the Loan/Application 
Register. The instructions to the HMDA-LAR explain the proper use of 
each code.

Application or Loan Information

Type:
    1--Conventional (any loan other than FHA, VA, FSA, or RHS loans)
    2--FHA-insured (Federal Housing Administration)
    3--VA-guaranteed (Veterans Administration)
    4--FSA/RHS-guaranteed (Farm Service Agency or Rural Housing 
Service)

Purpose:
    1--Home purchase (one-to-four family)
    2--Home improvement (one-to-four family)
    3--Refinancing (home purchase or home improvement, one-to-four 
family)
    4--Multifamily dwelling (home purchase, home improvement, and 
refinancings)

Owner-Occupancy:
    1--Owner-occupied as a principal dwelling
    2--Not owner-occupied
    3--Not applicable

Action Taken:
    1--Loan originated
    2--Application approved but not accepted
    3--Application denied by financial institution
    4--Application withdrawn by applicant
    5--File closed for incompleteness
    6--Loan purchased by your institution

Applicant Information

Race or National Origin:
    1--American Indian or Alaskan Native
    2--Asian or Pacific Islander
    3--Black
    4--Hispanic
    5--White
    6--Other
    7--Information not provided by applicant in mail or telephone 
application
    8--Not applicable

Sex:
    1--Male
    2--Female
    3--Information not provided by applicant in mail or telephone 
application
    4--Not applicable

Type of Purchaser

0--Loan was not originated or was not sold in calendar year covered 
by register
1--FNMA (Federal National Mortgage Association)
2--GNMA (Government National Mortgage Association)
3--FHLMC (Federal Home Loan Mortgage Corporation)
4--FAMC (Federal Agricultural Mortgage Corporation)
5--Commercial bank
6--Savings bank or savings association
7--Life insurance company
8--Affiliate institution
9--Other type of purchaser

Reasons for Denial (optional)

1--Debt-to-income ratio
2--Employment history
3--Credit history
4--Collateral
5--Insufficient cash (downpayment, closing costs)
6--Unverifiable information
7--Credit application incomplete
8--Mortgage insurance denied
9--Other

    By order of the Board of Governors of the Federal Reserve 
System, September 24, 1998.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 98-26155 Filed 9-29-98; 8:45 am]
BILLING CODE 6210-01-P