[Federal Register Volume 65, Number 134 (Wednesday, July 12, 2000)]
[Proposed Rules]
[Pages 42889-42893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17520]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 65, No. 134 / Wednesday, July 12, 2000 / 
Proposed Rules  

[[Page 42889]]



FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1075]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Public hearings and request for comments.

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SUMMARY: The Board will hold public hearings on predatory lending 
practices in the home-equity lending market, and invites consumers, 
consumer advocacy organizations, lenders, and other interested parties 
to attend and to provide written comments on relevant issues. The 
hearings will be held pursuant to the Home Ownership and Equity 
Protection Act of 1994, which amended the Truth in Lending Act to 
impose disclosure requirements and substantive limitations on certain 
closed-end mortgage loans bearing rates or fees above a certain 
percentage or amount. The act directs the Board to examine the home-
equity loan market and the adequacy of existing Truth in Lending 
provisions in protecting the interests of consumers.

DATES: Hearings. The hearings are scheduled as follows:
    1. Charlotte, North Carolina, July 27, 2000, 9 a.m. to 4:30 p.m.
    2. Boston, Massachusetts, August 4, 2000, 9 a.m. to 4:30 p.m.
    3. San Francisco, California, September 7, 2000, 9 a.m. to 4:30 
p.m.
    Comments. Comments from persons unable to attend the hearings or 
wishing to submit written views on the issues raised in this notice 
must be received by Friday, September 1, 2000.

ADDRESSES: Hearings. Hearings will be held at the following locations:
    1. Charlotte, North Carolina--Federal Reserve Bank of Richmond, 
Charlotte Branch, 530 East Trade Street.
    2. Boston, Massachusetts--Federal Reserve Bank of Boston, 600
    Atlantic Street.
    3. San Francisco, California--Federal Reserve Bank of San 
Francisco, 101 Market Street.
    Comments. Comments on the questions listed in this document should 
refer to Docket No. R-1075, and may be mailed to Ms. Jennifer J. 
Johnson, Secretary, Board of Governors of the Federal Reserve System, 
20th Street and Constitution Avenue, NW, Washington, DC 20551 or mailed 
electronically to [email protected]. Comments addressed 
to Ms. Johnson may also be delivered to the Board's mail room between 
8:45 a.m. and 5:15 p.m. weekdays, and to the security control room at 
all other times. The mail room and the security control room, both in 
the Board's Eccles Building, are accessible from the courtyard entrance 
on 20th Street between Constitution Avenue and C Street, NW. Comments 
may be inspected in room MP-500 in the Board's Martin Building between 
9 a.m. and 5 p.m., pursuant to the Board's Rules Regarding the 
Availability of Information, 12 CFR part 261.

FOR FURTHER INFORMATION CONTACT: Kyung Cho-Miller, Counsel, or Jane E. 
Ahrens, Senior Counsel, Division of Consumer and Community Affairs, at 
(202) 452-3667 or 452-2412; for the hearing impaired only, contact 
Janice Simms, Telecommunication Device for the Deaf, (202) 872-4984.
    For directions and other matters relating to the meeting facilities 
in Charlotte, contact Mary Chick, (704) 358-2495; in Boston, Cynthia 
Reardon, (617) 973-3512; in San Francisco, Lena Robinson, (415) 974-
2422.

SUPPLEMENTARY INFORMATION:

I. Background

    In 1994, the Congress enacted the Home Ownership and Equity 
Protection Act of 1994 (HOEPA) as an amendment to the Truth in Lending 
Act (TILA). HOEPA was a response to anecdotal reports of abusive 
lending practices whereby unscrupulous lenders made unaffordable home-
secured loans to ``house-rich but cash-poor borrowers.'' These cases 
frequently involved elderly and sometimes unsophisticated homeowners 
who were targeted for loans with high rates and fees and repayment 
terms that were difficult or impossible for the homeowners to meet. 
Oftentimes the transactions involved fraud or unlawful 
misrepresentations by lenders or brokers.
    HOEPA does not prohibit creditors from making any type of home-
secured loan, nor does it limit or cap rates that creditors may charge. 
Instead, the act identifies a class of high-cost mortgage loans through 
rate and fee triggers. For transactions covered by HOEPA, creditors 
must provide abbreviated disclosures to consumers at least three days 
before the loan is closed, in addition to the disclosures generally 
required by TILA. When combined with TILA's three-day right of 
rescission after the loan closing, the HOEPA disclosures afford 
consumers a minimum of six days to consider key loan terms before 
finally deciding to enter into a transaction. Transactions covered by 
HOEPA are also subject to substantive limitations that prohibit certain 
terms from being included in the loan agreement.
    HOEPA directs the Board, in consultation with its Consumer Advisory 
Council, to conduct public hearings periodically to examine home-equity 
loans in the marketplace and consider the adequacy of federal laws 
(including HOEPA) in protecting consumers--particularly low-income 
consumers. In June 1997, within two years after HOEPA became effective, 
the Board held hearings on home-equity lending and HOEPA. The results 
of those hearings were summarized and submitted to the Congress by the 
Board and Department of Housing and Urban Development (HUD) in July 
1998, in a joint report concerning reform of TILA and the Real Estate 
Settlement Procedures Act.
    Predatory lending practices in home-secured loans continue to 
receive attention from the Congress and regulatory agencies. The 
available information concerning predatory lending is essentially 
anecdotal; there is no ready method for measuring the amount of 
predatory lending or determining how prevalent a problem it represents. 
There are enough anecdotal reports, however, to suggest that predatory 
lending continues to be a problem. Abusive practices may involve, among 
other things, excessive fees and interest rates, unnecessary insurance, 
and fraud. Borrowers saddled with unaffordable payments can lose their 
homes. Excessive up-front fees combined with frequent refinancings

[[Page 42890]]

(often referred to as ``loan flipping'') may also strip the equity from 
consumers'' homes.
    Given the wide range of practices that predatory lending may 
involve, a multifaceted approach to dealing with the problem, including 
both regulatory and nonregulatory strategies, is likely to be the most 
effective. This includes strengthening enforcement of current laws, 
voluntary industry action, community outreach efforts, and consumer 
education and counseling. Several bills taking different approaches to 
addressing predatory lending have been introduced in the Congress. 
Several states have enacted or are considering legislation. The Board 
has convened a nine-agency working group, including the five federal 
agencies that supervise depository institutions, HUD, the Office of 
Federal Housing Enterprises Oversight, the Department of Justice, and 
the Federal Trade Commission. The aims of the group are to tighten 
enforcement of existing statutes and to establish a coordinated 
approach to addressing predatory practices.
    On May 24, the Board presented testimony at a hearing held by the 
House Committee on Banking and Financial Services on predatory lending 
and possible remedial actions. HUD and the Department of the Treasury 
have convened a National Task Force on Predatory Lending. The primary 
mission of the Task Force has been to collect information about 
predatory lending, provide data on the impact of predatory practices, 
and comment on existing legislative proposals for reform in order to 
provide a basis for HUD and Treasury to make recommendations for 
legislation to the Congress. To solicit information about local and 
national aspects of the predatory lending problem, HUD and Treasury 
held five pubic forums in Los Angeles, Chicago, New York, Atlanta, and 
Baltimore. On June 20, HUD and Treasury issued a report on their 
findings, that discusses possible ways to curb predatory lending and 
contains recommendations to the Congress regarding possible legislative 
action and to the Board regarding the exercise of the Board's 
regulatory authority under HOEPA.
    The Board's home-equity hearings under HOEPA will be primarily 
focused on the Board's regulatory authority under that act, and 
specific ways that the Board might consider exercising that authority. 
As described below, the Board is authorized to make some adjustments to 
HOEPA's high-cost triggers that could affect the scope of the act's 
coverage. The Board is also directed by HOEPA to prohibit certain acts 
and practices in connection with mortgage loans if the Board makes the 
finding required by the statute. Based on information gathered during 
recent public hearings, the interagency discussions, and meetings with 
industry and consumer representatives, the Board has developed a series 
of questions for discussion at the HOEPA hearings and for public 
comment. These questions are intended to solicit views on the ways that 
the Board might exercise its authority, and will be used to focus the 
discussion at the HOEPA hearings on possible regulatory approaches to 
deter predatory lending.

The Truth in Lending Act and HOEPA

    The Truth in Lending Act (TILA) (15 U.S.C. 1601 et seq.) is 
intended to promote the informed use of consumer credit by requiring 
disclosures about its terms and cost. The act requires creditors to 
disclose the cost of credit as a dollar amount (the ``finance charge'') 
and as an annual percentage rate (the ``APR''). Uniformity in 
creditors' disclosures is intended to assist consumers in comparison 
shopping. TILA requires additional disclosures for loans secured by a 
consumer's home and permits consumers to rescind certain transactions 
that involve their principal dwelling. The act is implemented by the 
Board's Regulation Z (12 CFR part 226).
    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, amends TILA 
to impose disclosure requirements and substantive limitations on 
certain home-secured loans (closed-end installment loans) with rates 
and fees above a specified amount. A loan is covered by HOEPA if (1) 
the APR exceeds the rate for treasury securities with a comparable 
maturity by more than 10 percentage points, or (2) the points and fees 
paid by the consumer exceed the greater of 8 percent of the loan amount 
or $400 (adjusted annually based on the consumer price index). HOEPA is 
implemented by section 32 of the Board's Regulation Z (12 CFR 226.32), 
effective in October 1995. 60 FR 15463, March 24, 1995.
    HOEPA does not prohibit creditors from making any home-secured 
loan, nor does it limit or cap rates that creditors may charge. 
Instead, HOEPA layers disclosure and timing requirements onto the 
requirements already imposed for consumer credit transactions. 
Creditors offering HOEPA-covered loans must provide abbreviated 
disclosures to consumers three days before the loan is closed. The 
disclosures provide that consumers are not obligated to complete the 
closing, remind borrowers that they could lose their home if they fail 
to make payments, and state a few key cost disclosures, including the 
APR, the regular payment, and, if the loan has a variable rate, a 
``worst case payment'' if rates increase as high and quickly as 
possible under the loan agreement.
    In addition, creditors making HOEPA-covered loans are prohibited 
from including in their loan agreements, among other provisions: (1) 
Balloon payments in loans with maturities of less than five years, (2) 
payment schedules that result in negative amortization, (3) higher 
default interest rates, and (4) prepayment penalties in most instances. 
Consumers entering into a HOEPA-covered loan may rescind the 
transaction for up to three years after closing if creditors fail to 
provide the early disclosures or if they include a prohibited term in 
the loan agreement.
    Home-purchase loans are not covered by HOEPA. Although reverse 
mortgages are exempt from the HOEPA requirements imposed for 
traditional mortgages, reverse mortgages are subject to an alternative 
detailed disclosure scheme under HOEPA (implemented by section 33 of 
Regulation Z). Home-equity lines of credit (open-end credit) are also 
exempt from HOEPA, as congressional hearings preceding enactment did 
not reveal evidence of abusive practices connected with open-end home-
equity lending.
    In June 1997, the Board held hearings on home-equity lending and 
HOEPA in Los Angeles, Atlanta, and Washington, DC. Participants were 
asked to address several topics, including the effect of HOEPA on 
homeowners seeking home-equity credit and on credit opportunities in 
the communities targeted by the legislation (for example, whether there 
had been changes to the volume or cost of home-equity installment 
loans); the effectiveness of the disclosures and suggestions for 
improvements; and whether any exemptions or prohibitions would be 
appropriate for the Board to consider under its HOEPA rulemaking 
authority. 62 FR 23189, April 29, 1997.
    Those testifying at the hearings generally concurred that it was 
too soon after HOEPA's enactment to determine the effectiveness of the 
new law. However, consumer representatives reported continuing abusive 
practices by home-equity lenders of all degrees of sophistication. The 
hearings formed the basis for a detailed analysis of the problem of 
abusive lending practices in mortgage lending contained in a July

[[Page 42891]]

1998 report to the Congress by the Board and HUD on possible reforms to 
TILA and the Real Estate Settlement Procedures Act regarding mortgage-
related disclosures. (The 1998 joint report is available at the Board's 
website address: www.federalreserve.gov/boarddocs/press/general/1998.) 
Chapter 6 of the report suggested a multifaceted approach to curbing 
predatory lending practices, including some legislative action, 
stronger enforcement of current laws, and nonregulatory strategies such 
as community outreach efforts and consumer education and counseling. 
(See also Chapter 2 at page 17, Chapter 7 at page 76, and Appendix D.)

II. Public Hearings

    Since HOEPA's enactment, the volume of home-equity lending has 
increased significantly. This overall growth in home-equity lending has 
been accompanied by a sharp boost in the subprime mortgage market. HUD 
reports that the number of subprime home-equity loans has increased 
from 80,000 in 1993 to 790,000 in 1998.
    The growth in subprime lending brought a substantial increase in 
the availability of credit to borrowers having less-than-perfect credit 
histories and to other consumers who do not meet the underwriting 
standards of prime lenders. Because consumers who obtain subprime 
mortgage loans have, or perceive they have, fewer credit options than 
other borrowers, they may be more vulnerable to unscrupulous lenders or 
brokers. With the increase in the number of subprime loans, consumer 
advocates have been concerned for some time about the potential for a 
corresponding increase in the number of predatory loans. Some industry 
representatives have noted, however, that the trend toward securitizing 
subprime mortgages has served to standardize creditor practices and to 
limit the opportunity for widespread abuse.
    To address concerns about predatory lending and consider approaches 
the Board might take in exercising its regulatory authority under 
HOEPA, the Board has scheduled three one-day hearings in Charlotte 
(Thursday, July 27), Boston (Friday, August 4), and San Francisco 
(Thursday, September 7). The hearings will seek statements from the 
public about home-equity lending in general, but will focus 
specifically on collecting testimony on the ways that the Board might 
use its rulewriting authority under HOEPA to address predatory lending 
practices in the home-equity market. To focus the discussion at the 
hearings, interested parties wishing to present oral statements at the 
hearings (and persons submitting written comments to the Board) are 
asked to address the issues set forth below, as applicable:

A. Adjusting the HOEPA Triggers

    HOEPA covers mortgage loans that meet one of the act's two ``high-
cost'' triggers. A loan is covered if (1) the APR exceeds the rate for 
treasury securities with a comparable maturity by more than 10 
percentage points, or (2) the points and fees paid by the consumer 
exceed the greater of 8 percent of the loan amount or $400. The Board 
is required to adjust the $400 threshold annually, based on the 
consumer price index; for 2000 the amount is $451.
1. APR Trigger
    HOEPA authorizes the Board to adjust the HOEPA trigger by 2 
percentage points from the current standard of 10 percentage points 
above the U.S. Treasury securities with comparable maturities. Some 
consumer advocates and others have suggested that, based on the current 
APR trigger, only a small percentage of subprime mortgage loans are 
covered by HOEPA. They contend that lowering the APR trigger would 
allow HOEPA's protections to be extended to a broader class of 
transactions.
     Would lowering the APR trigger to 8 percentage points be 
effective in furthering the purposes of HOEPA, and if so, how?
     If the APR trigger were lowered, would such action have 
any significant impact on the availability or cost of subprime mortgage 
loans?
    The Board also solicits comment on any available data regarding the 
percentage of subprime mortgage loans covered under the existing APR 
trigger, and the percentage of transactions that would be affected by 
lowering the trigger by 2 percentage points.
2. Points and Fees Trigger
    A loan is covered by HOEPA if the points and fees paid by the 
consumer exceed the greater of 8 percent of the loan amount or $400. 
For this purpose, ``points and fees'' include all items included in the 
finance charge and APR except interest, and all compensation paid to 
mortgage brokers. The act specifically excludes reasonable closing 
costs that are paid to unaffiliated third parties. HOEPA also 
authorizes the Board to add ``such other charges'' to the points and 
fees test as the Board deems appropriate. Accordingly, comment is 
solicited on what fees, if any, should be added to the calculation. In 
particular, comment is requested on the following:
    a. Credit Insurance: Premiums paid for credit insurance that a 
borrower is required to purchase are finance charges that are currently 
included in both the APR and the points and fees test under HOEPA. But 
premiums paid for optional credit life insurance currently are not 
included in the points and fees test. Some consumer advocates assert 
that because these premiums are excluded, predatory lenders may avoid 
HOEPA coverage by ``packing'' loans with high-priced credit insurance 
that represents a significant source of fee income, in lieu of charging 
fees that would be included under the current HOEPA trigger.
     What would be the effect of including lump-sum premiums 
collected at closing for optional credit insurance in HOEPA's points 
and fees test? Should such premiums be included only if they are paid 
to the creditor or an affiliate of the creditor, or only to the extent 
that the creditor receives compensation in connection with the sale of 
the insurance?
    b. Prepayment Penalties: In some cases, prepayment penalties may 
provide fee income that is an additional incentive for creditors to 
encourage frequent refinancings that are not in a consumer's interest. 
If the consumer must pay a prepayment penalty to the same creditor that 
is refinancing the loan, the prepayment fee could be viewed as a cost 
of the new transaction.
     What would be the effect of including a prepayment penalty 
(assessed on the original loan) in HOEPA's points and fees test for the 
new loan when the loan is refinanced with the same creditor (or an 
affiliate)?
    c. Points: Consumers who refinance their loans generally pay points 
on the entire refinanced amount.
     What would be the effect of adding any points paid by the 
consumer for the existing loan to the points and fees test when the 
same creditor (or an affiliate) refinances the loan within a specified 
time period?
    The current points and fees test under HOEPA is complex. The 
statute allows many closing costs to be excluded from the calculation 
if they are reasonable and paid to third parties. The Board solicits 
comments on whether a better approach would be to recommend a statutory 
amendment that would include all closing costs in the points and fees 
test.

B. Restricting Certain Acts or Practices Under HOEPA

    The hearings will explore how the Board's regulatory authority 
under HOEPA to prohibit specific practices can be used to curb 
predatory lending.

[[Page 42892]]

Under HOEPA, the Board is authorized to prohibit acts and practices:
     In connection with mortgage loans--if the Board finds the 
practice to be unfair, deceptive, or designed to evade HOEPA; and
     In connection with refinancings of mortgage loans--if the 
Board finds that the practice is associated with abusive lending 
practices or otherwise not in the interest of the borrower.
    Comment is invited on the following specific approaches to dealing 
with predatory lending practices, and whether any new requirements or 
prohibitions should apply to all mortgage transactions, only to 
refinancings, or only to HOEPA-covered refinancings. Both regulatory 
and legislative proposals should be discussed.
    1. Credit insurance. Premiums for credit insurance are often 
collected from the borrower at closing and added to the loan amount, 
increasing the total finance charges paid by the consumer. Consumer 
advocates express concern about high-pressure sales tactics, which may 
mislead consumers about whether the insurance is required. The Board 
previously recommended that the Congress consider prohibiting the 
advance collection of premiums for credit insurance policies in 
connection with HOEPA loans. If no statutory prohibition is adopted, 
should the Board regulate the conditions under which such policies are 
sold or financed? For example:
     What would be the effect of the Board's requiring the sale 
of single-premium policies to be accompanied by a disclosure that the 
coverage may also be available with periodic premiums? What other 
disclosures might be helpful?
     To address concerns about ``insurance packing,'' what 
would be the effect of the Board's requiring that the sale of single-
premium policies include a disclosure at the time of purchase of how 
unearned premiums will be rebated if the policy is cancelled or the 
loan is paid in full early?
     What would be the effect of requiring notification to 
borrowers, after the loan closing, of their right to cancel the policy 
and obtain a refund?
     What would be the effect of regulations prohibiting 
creditors from selling single-premium insurance products until after 
loan closing?
    2. Unaffordable loans. Under HOEPA a creditor may not engage in a 
pattern or practice of extending credit based on the collateral if 
(given the consumer's current and expected income, current obligations, 
and employment status) the consumer will be unable to make the 
scheduled loan payments.
     Would additional interpretative guidance on the ``pattern 
or practice'' requirement be useful, or are case-by-case determinations 
more appropriate? If additional guidance would be useful, what elements 
of the requirement should the guidance address?
     What regulatory standards could the Board adopt for 
determining whether a creditor has considered the consumer's ability to 
repay the loan in order to satisfy this requirement?
    3. Refinancing lower-rate loans. When a consumer seeks a second 
mortgage to consolidate debts or to finance home improvements, some 
creditors also require the existing first mortgage to be paid off as a 
condition of providing the new funds. This ensures that the creditor 
will be the senior lien-holder, but may increase significantly the 
points and fees paid for the new loan. Is regulatory action appropriate 
to protect consumers from abuses and, if so, what type of action could 
be taken without restricting credit in legitimate transactions?
    4. Balloon Payments. Depending on the circumstances, mortgages with 
a balloon payment feature may be attractive to some borrowers, but may 
harm other consumers. HOEPA currently prohibits balloon payments for 
high-cost loans that have terms of less than 5 years. Lenders that 
price their loans just below HOEPA's triggers, however, might include 
balloon payments that force consumers to refinance the loan and pay 
additional points and fees.
     For loans not covered by HOEPA's restriction on balloon 
payments, are any restrictions or additional disclosures needed in 
connection with balloon payments in order to prevent abusive practices?
     To avoid evasions of HOEPA's restrictions on balloon 
payments, what would be the effect of the Board's prohibiting ``payable 
on demand'' clauses for HOEPA loans unless such a clause is exercised 
in connection with a consumer's default? (A similar limitation already 
exists for home-equity lines of credit.)
    5. Prepayment penalties. Prepayment penalties allow creditors to 
recover their transaction costs if loans are prepaid earlier than 
expected. That rationale may not be relevant in cases where high rates 
and up-front fees are charged. In such cases, the penalty might be used 
to deter the consumer from refinancing the loan on more favorable 
terms.
     Is it feasible to limit the use of prepayment penalties to 
transactions where consumers receive, in return, a benefit in the form 
of lower up-front costs or lower interest rates? How might the 
existence of such benefits be measured?
    6. Foreclosures. Consumers who have been victims of abusive 
practices must be afforded adequate opportunity to assert their rights 
in order to avoid unwarranted foreclosures. State law and local 
practice generally govern the procedures followed for foreclosures. 
Some states require actual notice to the consumer, but in other states 
notice by publication is sufficient. Even when consumers do receive 
notice, they may not get adequate information about their legal 
options.
     What would be the effect of setting minimum federal 
standards for foreclosures involving a consumer's primary dwelling? For 
example, a creditor might be required to provide the consumer with 
actual notice of: (1) The applicable foreclosure procedures; (2) any 
legal rights the consumer may have to avoid the foreclosure; and (3) 
the specific amount that, if paid in accordance with the notice, will 
terminate the foreclosure.
    7. Misrepresentations regarding borrower's qualifications. There is 
some concern that many borrowers who obtain high-cost loans may 
actually qualify for lower cost credit. Some brokers or creditors may 
provide consumers with false or materially misleading information that 
the consumer does not qualify for a lower cost loan based on the 
creditor's underwriting criteria. Such a practice generally would be 
illegal under state laws that protect against fraud and deception. What 
benefit to consumers might be achieved if the Board issued a rule that 
prohibited such misrepresentations as unfair and deceptive under HOEPA?
    8. Reporting borrowers' payment history. Some creditors do not 
report to consumer reporting agencies subprime borrowers' good payment 
history in order to avoid having the borrowers solicited by competitors 
for a refinancing on more attractive terms. What would be the effect of 
requiring creditors that choose not to report borrowers' positive 
payment history to disclose that fact?
    9. Referral to credit counseling services. What regulatory action 
would better enable consumers in general, or HOEPA borrowers in 
particular, to take advantage of any available credit counseling 
services?
    10. HOEPA disclosures. In their 1998 report to the Congress, the 
Board and HUD recommended amendments to the required disclosures, 
including adding references to the availability of credit

[[Page 42893]]

counseling, using more ``user-friendly'' text in the narrative 
reminders about the potential consequences for not making payments, and 
requiring the consumer's monthly income to be disclosed in close 
proximity to the consumer's monthly payment. Comment is requested on 
those recommendations. Comment also is solicited on whether additional 
information in the current HOEPA disclosures would benefit consumers. 
For example:
     The consumer must receive HOEPA disclosures three days 
before loan closing, specifying the APR and monthly payment amount. Due 
to the marketing practices of some lenders, consumers may not be aware 
of high up-front costs that will be financed. What would be the effect 
of the Board's requiring that the disclosure also include additional 
information, such as the total loan amount on which the disclosed 
monthly payment is based?
     For HOEPA loans, what would be the effect of requiring 
that consumers receive a complete Truth in Lending disclosure statement 
three days before closing?
    11. Open-end home equity lines. HOEPA does not cover home-equity 
lines of credit. Is there evidence that lenders are using open-end 
credit lines to evade HOEPA? If so, what benefit might be derived from 
prohibiting the practice of structuring a home-secured loan as open-end 
credit in order to evade the provisions of HOEPA? How could such 
practices be identified and what limitations on these practices would 
be appropriate to effect the purposes of HOEPA?

Community Outreach and Consumer Education

    In addition to issues concerning the Board's regulatory authority 
under HOPEA, views will also be elicited at the hearings about 
nonregulatory approaches to curbing predatory lending, such as 
community outreach and consumer education. Accordingly, the Board seeks 
comment on the following:
    What community outreach activities and consumer education efforts 
are being pursued currently? Which types of products, programs, and 
delivery systems have been most effective? What other strategies might 
be implemented to reach the targeted populations? How might outreach 
and education efforts be tailored to address some lenders' and brokers' 
aggressive marketing practices? What role can government agencies play 
in increasing the effectiveness of these programs?

Additional Data

    The Board seeks information about any studies or data pertaining to 
subprime lending or HOEPA loans that would be useful in determining how 
the Board might use its regulatory authority under HOEPA. For example, 
are there data regarding the percentage of HOEPA loans that result in 
foreclosures? Are there data regarding the effect of HOEPA disclosures 
showing the percentage of transactions cancelled by borrowers based on 
disclosures provided before closing?

III. Form of Statements and Comments

    These hearings are open to the public to attend. Invited speakers 
will participate in panel discussions. In addition, about two hours is 
reserved for brief statements by other interested parties, starting at 
approximately 2:30 p.m. To allow as many persons as possible to offer 
their views during this period, oral statements should be brief (five 
minutes or less); written statements of any length may be submitted for 
the record. Interested parties who wish to participate during this 
``open-mike'' period are asked to contact the Board in advance of the 
hearing date, to facilitate planning for this portion of the hearings. 
The order of speakers generally will be based on their registration at 
the hearing site on the day of the hearing.
    Comment letters should refer to Docket No. R-1075, and, when 
possible, should use a standard typeface with a font size of 10 or 12. 
This will enable the Board to convert the text to 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 computer diskettes 
in any IBM-compatible DOS- or Windows-based format.

    By order of the Board of Governors of the Federal Reserve 
System, July 6, 2000.
Jennifer J. Johnson,
Secretary to the Board.
[FR Doc. 00-17520 Filed 7-11-00; 8:45 am]
BILLING CODE 6210-01-P