[Federal Register Volume 69, Number 157 (Monday, August 16, 2004)]
[Rules and Regulations]
[Pages 50298-50299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18650]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

Regulation Z; Docket No. R-1208]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule; staff commentary.

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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 home mortgage loans 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. 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 2005 is 
$510.

EFFECTIVE DATE: January 1, 2005.

FOR FURTHER INFORMATION CONTACT: Minh-Duc T. Le, Senior 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 (``TDD'') only, contact (202) 
263-4869.

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 a 
dollar amount and 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.
    The Home Ownership and Equity Protection Act amendments to TILA 
were enacted in 1994 as part of the RiegleCommunity Development and 
Regulatory Improvement Act of 1994, Pub. L. 103-325, 108 Stat. 2160. In 
1995, the Board published amendments to Regulation Z implementing HOEPA 
(60 FR 15463). These amendments, contained in Sec. Sec.  226.32 and 
226.34 of the regulation, impose substantive limitations and additional 
disclosure requirements on certain closed-end home 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. 
(See 15 U.S.C. 1602(aa)(3) and 12 CFR 226.32(a)(1)(ii)). The Board 
adjusted the $400 amount to $499 for the year 2004.
    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 87 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, 2004, was the 
CPI-U index ``in effect'' on June 1, and reflects the percentage 
increase from April 2003 to April 2004. The adjustment to the $400 
figure below reflects a 2.29 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

    Effective January 1, 2005, for purposes of determining whether a 
home 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 $510 or 8 percent of the total loan amount. Comment 
32(a)(1)(ii)-2, which lists the adjustments for each year, is amended 
to reflect the dollar adjustment for 2005. 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.

[[Page 50299]]

III. Regulatory Flexibility Analysis

    The Board certifies that this amendment will not have a substantial 
effect on regulated entities because the only change is to raise the 
threshold 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.

0
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)

0
1. The authority citation for part 226 continues to read as follows:

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


0
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.x. 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.
* * * * *
    x. For 2005, $510, reflecting a 2. 29 percent increase in the CPI-U 
from June 2003 to June 2004, 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, August 10, 2004.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 04-18650 Filed 8-13-04; 8:45 am]
BILLING CODE 6210-01-P