[Federal Register Volume 67, Number 89 (Wednesday, May 8, 2002)]
[Rules and Regulations]
[Pages 30771-30772]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11343]


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FEDERAL RESERVE SYSTEM

12 CFR Part 203

[Regulation C; Docket No. R-1001]


Home Mortgage Disclosure

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rules; delay of effective date.

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SUMMARY: On February 15, 2002, the Board published in the Federal 
Register amendments to Regulation C effective for data collected 
beginning January 1, 2003, and solicited comment on several related 
issues with a comment period that closed on April 12. Financial 
institutions and their trade associations requested a postponement of 
the effective date until January 1, 2004, on the grounds that a 2003 
deadline does not afford institutions adequate time to take the steps 
necessary to ensure full compliance with the new rules (including 
reprogramming their data systems and retraining their employees). 
Consumer and community organizations generally opposed postponement of 
the effective date. The Board has weighed the financial institutions' 
claims and underlying assumptions against public policy benefits of 
collecting the new data as soon as possible. The Board believes that 
some HMDA reporters, especially the largest ones, will not be able to 
fully implement the new rules by January 1, 2003, without jeopardizing 
the quality and usefulness of the data and incurring substantial 
additional implementation costs that could be avoided by a 
postponement. Accordingly, the Board is changing the effective date of 
the amendments from January 1, 2003, to January 1, 2004. The Board is, 
however, adopting an interim amendment to Appendix A, effective January 
1, 2003, mandating the use of 2000 census data.

DATES: The effective date of the amendments to Regulation C (12 CFR 
part 203) published February 15, 2002, at 67 FR 7222 is delayed from 
January 1, 2003, to January 1, 2004. The interim amendment to Appendix 
A to part 203 contained herein is effective January 1, 2003.

FOR FURTHER INFORMATION CONTACT: Kathleen C. Ryan, Senior Attorney, or 
Dan S. Sokolov, Attorney, Division of Consumer and Community Affairs, 
Board of Governors of the Federal Reserve System, Washington, DC 20551, 
at (202) 452-3667 or (202) 452-2412. For users of Telecommunications 
Device for the Deaf (TDD) only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

    On February 15, 2002, the Board published in the Federal Register 
significant changes to Regulation C that expanded its coverage, 
redefined key terms, and required the collection of additional 
categories of data, including loan pricing data (the spread between the 
annual percentage rate on a loan and the yield on comparable Treasury 
securities). (67 FR 7222) The Board made the changes effective for data 
collected beginning January 1, 2003, and reported in March 2004.
    In a related action, the Board sought public comment on a proposed 
rule to require lenders to report lien status for applications and 
originated loans and to ask telephone applicants their ethnicity, race, 
and sex. The Board also sought comment on the appropriate percentage 
thresholds for the reporting of loan pricing data. The public comment 
period closed on April 12, 2002.

II. Postponement of the Effective Date

    Some financial institutions and several major trade associations 
submitted letters indicating that the January 1, 2003, effective date 
does not give financial institutions adequate time to implement the 
amendments effectively and efficiently. These commenters explained 
that, to comply with the amendments, the typical institution must take 
multiple steps including reprogramming systems for data collection, 
processing, and reporting; testing the software changes; and retraining 
employees, which ideally awaits development and testing of the software 
they will use. Commenters stated that these steps are particularly

[[Page 30772]]

complex and time-consuming for large institutions with several 
interfacing data systems; employees in numerous locations and 
departments; and relationships with affiliates and with many third 
party brokers. Moreover, the commenters submit that the time available 
to them to accomplish these steps is even more limited than might 
appear given that they cannot get the changes fully under way until the 
Board acts on the proposed rule.
    The Board also solicited input from consumer and community 
organizations. Their representatives generally oppose a postponement, 
and argue that forgoing even temporarily the anticipated public policy 
benefits of the amendments would be a substantial cost to the public. 
They believe that financial institutions are generally able to comply 
with a January 1, 2003, effective date without compromising the quality 
of the data.
    There are significant public policy benefits to collecting the data 
as soon as possible, but those benefits will accrue only if the data 
are reliable and accurate. The Board believes that some HMDA reporters, 
especially the largest ones, will not be able to fully implement the 
new rule by January 1, 2003, without jeopardizing the quality and 
usefulness of the data and incurring substantial additional 
implementation costs that could be avoided by a postponement. 
Accordingly, the Board is changing the effective date of the revisions 
to Regulation C published on February 15, 2002, from January 1, 2003, 
to January 1, 2004.

III. Change That Will Take Effect on January 1, 2003: 2000 Census 
Data

    The requirement to use 2000 census data rather than 1990 census 
data will become effective January 1, 2003, as previously scheduled. 
The change is implemented by an interim amendment to the current 
provisions in Appendix A concerning census data.
    Changing to 2000 census tracts will make the HMDA data 
substantially more useful. Many of the output tables that comprise the 
individual institutions' HMDA disclosures and the aggregate disclosure 
statements for metropolitan areas rely on population and other 
characteristics for given census tracts (for example, the distribution 
of a census tract's residents by their income level). Given the many 
changes that have occurred since 1990, use of 2000 census tracts and 
demographics will produce more accurate and useful data in the HMDA 
disclosure statements and aggregate reports. Updated information will 
enhance evaluations under the Community Reinvestment Act, which rely on 
census data. The burden of changing to 2000 census tracts is mitigated 
by the availability of geocoding services from public and private 
sources, and should be about the same regardless of the effective date.

IV. Pending Item on Telephone Applications

    The comment period on several items related to the final amendments 
to Regulation C closed on April 12. The Board has not yet taken final 
action. One item is a proposed amendment requiring lenders to ask 
telephone applicants for their race, ethnicity, and sex. This proposed 
amendment does not appear to require substantial changes to 
institutions' data systems. Accordingly, if the amendment is adopted, 
it may be made effective January 1, 2003, to reduce the risk of a 
further increase in the rate of missing data on race, ethnicity, and 
sex.

List of Subjects in 12 CFR Part 203

    Banks, Banking, Federal Reserve System, Mortgages, Reporting and 
recordkeeping requirements.

Authority and Issuance

    For the reasons set forth in the preamble, the Board amends 12 CFR 
part 203 as follows:

PART 203--HOME MORTAGE DISCLOSURE (REGULATION C)

    1. The authority citation for part 203 continues to read as 
follows:

    Authority: 12 U.S.C. 2801-2810.

    2. Appendix A, paragraphs V.C.3.b. and V.C.4., are amended by 
removing ``1990'' and adding ``2000'' in its place wherever it appears.

    By order of the Board of Governors of the Federal Reserve 
System, May 2, 2002.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. 02-11343 Filed 5-7-02; 8:45 am]
BILLING CODE 6210-01-P