[Federal Register Volume 65, Number 227 (Friday, November 24, 2000)]
[Rules and Regulations]
[Page 70465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30044]


=======================================================================
-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1089]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule; staff commentary.

-----------------------------------------------------------------------

SUMMARY: The Board is publishing a final rule amending the staff 
commentary that interprets the requirements of Regulation Z (Truth in 
Lending). The Board is required to adjust annually the dollar amount 
that triggers requirements for certain mortgages bearing fees above a 
certain amount. The Home Ownership and Equity Protection Act of 1994 
(HOEPA) 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. In 
keeping with the statute, 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. The adjusted dollar amount for 
2001 is $465.

EFFECTIVE DATE: January 1, 2001.

FOR FURTHER INFORMATION CONTACT: Minh-Duc T. Le, 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 Janice 
Simms at (202) 872-4984.

SUPPLEMENTARY INFORMATION:

I. 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). The Board's 
official staff commentary (12 CFR part 226 (Supp. I)) interprets the 
regulation, and provides guidance to creditors in applying the 
regulation to specific transactions.
    In 1995, the Board published amendments to Regulation Z 
implementing 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 are contained in Sec. 226.32 of the 
regulation and impose substantive limitations and additional disclosure 
requirements 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 HOEPA rules 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 12 CFR 226.32(a)(1)(ii)). The Board adjusted the $400 amount to 
$451 for the year 2000.
    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 figure. The adjustment to the CPI-U index reported 
by the Bureau of Labor Statistics on May 15, 2000, was the CPI-U index 
``in effect'' on June 1, and reflects the percentage increase from 
April 1999 to April 2000. The adjustment to the $400 figure below 
reflects a 3.1 percent increase in the CPI-U index for this period and 
is rounded to whole dollars for ease of compliance.

II. Adjustment and Commentary Revision

    For the reasons set forth in the preamble, for purposes of 
determining whether a mortgage transaction is covered by 12 CFR 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 $465 or 8 percent of the total loan amount, 
effective January 1, 2001. Comment 32(a)(1)(ii)-2, which lists the 
adjustments for each year, is amended to reflect the dollar adjustment 
for 2001. Because the timing and method of the adjustment is set by 
statute, the Board finds that notice and public comment on the change 
are unnecessary.

III. Regulatory Flexibility Analysis

    The Board certifies that this amendment will not have a substantial 
effect on the regulated entities because the only change is to raise 
the exemption level for transactions requiring HOEPA disclosures.

List of Subjects in 12 CFR Part 226

    Advertising, Federal Reserve System, Mortgages, Reporting and 
recordkeeping requirements, Truth in lending.

    For the reasons set forth in the preamble, the Board amends 
Regulation Z, 12 CFR part 226, as set forth below:

PART 226--TRUTH IN LENDING (REGULATION Z)

    1. The authority citation for part 226 would continue to read as 
follows:

    Authority: 12 U.S.C. 3806; 15 U.S.C. 1604 and 1637(c)(5).


    2. In Supplement I to Part 226, under Section 226.32--Requirements 
for Certain Closed-End Home Mortgages, under paragraph 32(a)(1)(ii), 
paragraph 2.vi. is added.

Supplement I to Part 226--Official Staff Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Sec. 226.32--Requirements for Certain Closed-End Home Mortgages

    32(a) Coverage.
* * * * *
    Paragraph 32(a)(1)(ii).
* * * * *
    2. Annual adjustment of $400 amount.
* * * * *
    vi. For 2001, $465, reflecting a 3.1 percent increase in the 
CPI-U from June 1999 to June 2000, rounded to the nearest whole 
dollar.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, acting through the Director of the Division of Consumer and 
Community Affairs under delegated authority, November 20, 2000.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 00-30044 Filed 11-22-00; 8:45 am]
BILLING CODE 6210-01-P