[Federal Register Volume 63, Number 235 (Tuesday, December 8, 1998)]
[Rules and Regulations]
[Page 67575]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32460]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1030]


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 has annually adjusted the $400 amount 
based on the annual percentage change reflected in the Consumer Price 
Index that is in effect on June 1. For 1999, the adjusted dollar amount 
is $441.

EFFECTIVE DATE: January 1, 1999.

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. 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, Pub. L. 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 enacted, the statute requires creditors 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. TILA and 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. (15 U.S.C. 1602(aa)(3)) and section 
226.32(a)(1)(ii) The Board adjusted the $400 amount to $412 for 1996, 
to $424 for 1997, and to $435 for 1998.
    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 uses the CPI-U 
index, which is based on all urban consumers and represents 
approximately 80 percent of the U.S. population, as the index for 
adjusting the $400 dollar figure. The adjustment to the CPI-U index 
reported by the Bureau of Labor Statistics on May 15, 1998, was the 
CPI-U index ``in effect'' on June 1, and reflects the percentage 
increase from April 1997 to April 1998. The adjustment to the $400 
figure below reflects a 1.4 percent increase in the CPI-U index for 
this period.

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 $441 or 8 percent of the total loan amount, 
effective January 1, 1999.

    By order of the Board of Governors of the Federal Reserve 
System, acting through the Secretary of the Board under delegated 
authority, December 2, 1998.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 98-32460 Filed 12-7-98; 8:45 am]
BILLING CODE 6210-01-P