[Federal Register Volume 71, Number 192 (Wednesday, October 4, 2006)]
[Notices]
[Pages 58672-58678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8479]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket No. 06-12]

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

[Docket No. OP-1267]

FEDERAL DEPOSIT INSURANCE CORPORATION

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

[No. 2006-36]

NATIONAL CREDIT UNION ADMINISTRATION


Proposed Illustrations of Consumer Information for Nontraditional 
Mortgage Products

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC); 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); Office of Thrift Supervision, 
Treasury (OTS); and National Credit Union Administration (NCUA).

ACTION: Notice of proposed illustrations of consumer information with 
request for comment.

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SUMMARY: The OCC, Board, FDIC, OTS, and NCUA (the Agencies), request 
comment on these Proposed Illustrations of Consumer Information for 
Nontraditional Mortgage Products. The illustrations are intended to 
assist institutions in implementing the consumer protection portion of 
the Interagency Guidance on Nontraditional Mortgage Product Risks 
(Interagency Guidance), which is being published simultaneously with 
this notice. The illustrations are not intended as model forms, and 
institutions will not be required to use them. Rather, they are 
provided at the request of commenters to the Interagency Guidance to 
illustrate the type of information that the Interagency Guidance 
contemplates.

DATES: Comments must be submitted on or before December 4, 2006.

ADDRESSES: The Agencies will jointly review all of the comments 
submitted. Therefore, interested parties may send comments to any of 
the Agencies and need not send comments (or copies) to all of the 
Agencies. Please consider submitting your comments by e-mail or fax 
since paper mail in the Washington area and at the Agencies is subject 
to delay. Interested parties are invited to submit comments to:
    OCC: You should include ``OCC'' and Docket Number 06-12 in your 
comment. You may submit your comment by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     OCC Web site: http://www.occ.treas.gov. Click on ``Contact 
the OCC,'' scroll down and click on ``Comments on Proposed 
Regulations.''
     E-Mail Address: [email protected].
     Fax: (202) 874-4448.
     Mail: Office of the Comptroller of the Currency, 250 E 
Street, SW., Mail Stop 1-5, Washington, DC 20219.
     Hand Delivery/Courier: 250 E Street, SW., Attn: Public 
Information Room, Mail Stop 1-5, Washington, DC 20219.
    Instructions: All submissions received must include the agency name 
(OCC) and docket number for this notice. In general, the OCC will enter 
all comments received into the docket without change, including any 
business or personal information that you provide.
    You may review comments and other related materials by any of the 
following methods:
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC's Public Information Room, 250 E 
Street, SW., Washington, DC. You can make an appointment to inspect 
comments by calling (202) 874-5043.
     Viewing Comments Electronically: You may request that we 
send you an electronic copy of comments via e-mail or mail you a CD-ROM 
containing electronic copies by contacting the OCC at 
[email protected].
     Docket Information: You may also request available 
background documents and project summaries using the methods described 
above.
    Board: You may submit comments, identified by Docket No. OP-1267, 
by any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail: [email protected]. Include the 
docket number in the subject line of the message.
     Fax: 202/452-3819 or 202/452-3102.
     Mail: Jennifer J. Johnson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue, 
NW., Washington, DC 20551.
    All public comments are available from the Board's Web site at 
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, 
unless modified for technical reasons. Accordingly, your comments will 
not be edited to remove any identifying or contact information. Public 
comments may also be viewed in electronic or paper form in Room MP-500 
of the Board's Martin Building (20th and C Streets, NW.) between 9 a.m. 
and 5 p.m. on weekdays.
    FDIC: You may submit comments by any of the following methods:
     Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow the instructions for submitting comments 
on the Agency Web site.
     E-Mail: [email protected].
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
     Hand Delivery/Courier: Guard station at the rear of the 
550 17th Street Building (located on F Street) on business days between 
7 a.m. and 5 p.m.

[[Page 58673]]

    Instructions: All submissions received must include the agency 
name. All comments received will be posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html including any 
personal information provided.
    OTS: You may submit comments, identified by docket number 2006-36, 
by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     E-mail address: [email protected]. Please 
include docket number 2006-36 in the subject line of the message and 
include your name and telephone number in the message.
     Fax: (202) 906-6518.
     Mail: Regulation Comments, Chief Counsel's Office, Office 
of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, 
Attention: No. 2006-36.
     Hand Delivery/Courier: Guard's Desk, East Lobby Entrance, 
1700 G Street, NW., from 9 a.m. to 4 p.m. on business days. Address 
envelope as follows: Attention: Regulation Comments, Chief Counsel's 
Office, Attention: No. 2006-36.
    Instructions: All submissions received must include the agency name 
and docket number for this proposed Guidance. All comments received 
will be posted without change to the OTS Internet Site at http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1, including any 
personal information provided.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1. In addition, you may inspect comments 
at the OTS's Public Reading Room, 1700 G Street, NW., by appointment. 
To make an appointment for access, call (202) 906-5922, send an e-mail 
to public.info@ots.treas.gov">public.info@ots.treas.gov, or send a facsimile transmission to (202) 
906-7755. (Prior notice identifying the materials you will be 
requesting will assist us in serving you.) We schedule appointments on 
business days between 10 a.m. and 4 p.m. In most cases, appointments 
will be available the next business day following the date we receive a 
request.
    NCUA: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your 
name] Comments on'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT: OCC: Michael S. Bylsma, Director, 
Stephen Van Meter, Assistant Director, or Kathryn D. Ray, Special 
Counsel, Community and Consumer Law Division, (202) 874-5750.
    Board: Kathleen C. Ryan, Counsel, Division of Consumer and 
Community Affairs, (202) 452-3667; or Andrew Miller, Counsel, Legal 
Division, (202) 452-3428. For users of Telecommunications Device for 
the Deaf (``TDD'') only, contact (202) 263-4869.
    FDIC: April Breslaw, Acting Associate Director, Compliance Policy & 
Exam Support Branch, (202) 898-6609, Division of Supervision and 
Consumer Protection; or Richard Foley, Counsel, (202) 898-3784, Legal 
Division.
    OTS: Montrice G. Yakimov, Assistant Managing Director, Compliance 
and Consumer Protection Division, (202) 906-6173; or Glenn Gimble, 
Senior Project Manager, Compliance and Consumer Protection Division, 
(202) 906-7158.
    NCUA: Cory Phariss, Program Officer, Examination and Insurance, 
(703) 518-6618.

SUPPLEMENTARY INFORMATION: 

I. Background

    On December 29, 2005, the Agencies published for comment proposed 
Interagency Guidance on Nontraditional Mortgage Products, 70 FR 77249 
(Dec. 29, 2005). The consumer protection section of the proposed 
guidance set forth recommended practices to ensure that consumers have 
clear and balanced information about nontraditional mortgages prior to 
making a mortgage product choice, such as when lenders provide 
promotional materials about nontraditional mortgages or during face-to-
face meetings when consumers are shopping for a mortgage. Additionally, 
the proposed guidance recommended that monthly statements given with 
payment option mortgages provide information that enables consumers to 
make informed payment choices. The Agencies have revised the proposed 
guidance based on the comments received, and today are publishing the 
final Interagency Guidance in a separate Federal Register notice.
    The Interagency Guidance, including the consumer protection 
portion, is a set of recommended practices to assist institutions in 
addressing particular risks raised by nontraditional mortgage products. 
Several commenters to the proposal, including industry trade 
associations, encouraged the Agencies to include model or sample 
disclosures or other descriptive materials as part of the Interagency 
Guidance.
    In response to commenters, the Agencies believe that illustrations 
of consumer information may be useful to institutions as they seek to 
implement the consumer information recommendations of the Interagency 
Guidance. The Agencies also believe that it would be desirable to seek 
public comment before issuing illustrations of the recommended 
practices, to determine the types of illustrations that would be most 
useful to consumers and institutions.

II. Proposed Illustrations

    The Agencies appreciate that some institutions, including community 
banks, may prefer not to incur the costs and other burdens of 
developing their own consumer information documents to address the 
issues raised in the Interagency Guidance, and could benefit from 
illustrations like those below.
    Use of the proposed illustrations would be entirely voluntary. 
Accordingly, there is no Agency requirement or expectation that 
institutions must use the illustrations in their communications with 
consumers.
    Institutions seeking to follow the recommendations set forth in the 
Interagency Guidance could, at their option, elect to:
     Use or not use the illustrations;
     Provide information based on the illustrations, but 
expand, abbreviate, or otherwise tailor any information in the 
illustrations as appropriate to reflect, for example:
    [cir] The institution's product offerings, such as by deleting 
information about loan products and loan terms not offered by the 
institution and by revising the illustrations to reflect specific terms 
currently offered by the institution;
    [cir] The consumer's particular loan requirements;
    [cir] Current market conditions, such as by changing the loan 
amounts, interest rates, and corresponding payment amounts to reflect 
current local market circumstances; and

[[Page 58674]]

    [cir] Other information, consistent with the Interagency Guidance, 
such as the payment and loan balance information for monthly statements 
discussed in connection with Illustration 3 or information about when a 
prepayment penalty may be imposed; or
     Provide the information described in the Interagency 
Guidance, as appropriate, in an alternate format.
    Whether or not an institution chooses to use the proposed 
illustrations, the Interagency Guidance recommends that promotional 
materials and other product descriptions provide consumers with 
information about the costs, terms, features, and risks of 
nontraditional mortgage products that can assist consumers in their 
product selection decisions. This includes information about potential 
payment shock and negative amortization and, where applicable, 
information about prepayment penalties and the costs of reduced 
documentation loans. The recommended information could be presented in 
a brief narrative format as shown in Illustration 1 and/or in a chart 
with examples as shown in Illustration 2.
    Set forth below are three illustrations that show how important 
information about nontraditional mortgages could be provided to 
consumers in a concise and focused manner and format. The Agencies 
request comment on all aspects of these illustrations. We encourage 
specific comment on whether the illustrations, as proposed, would be 
useful to institutions, including community banks, seeking to implement 
the ``Communications with Consumers'' portion of the Interagency 
Guidance, or whether changes should be made to them. We also encourage 
specific comment on whether the illustrations, as proposed, would be 
useful in promoting consumer understanding of the risks and material 
terms of nontraditional mortgage products, as described in the 
Interagency Guidance, or whether changes should be made to them. 
Finally, we seek comment on whether there are other illustrations 
relating to nontraditional mortgages that would be useful to 
institutions and consumers.
    The Agencies are aware that individual institutions and industry 
associations have developed and are likely to continue developing 
documents that can be effective in conveying critical information 
discussed in the ``Communications with Consumers'' portion of the 
Interagency Guidance. These illustrations are not intended to dissuade 
institutions and trade associations from developing their own means of 
delivering important information about nontraditional mortgages to 
consumers. In this regard, the Agencies note that they have not 
conducted any consumer testing to assess the effectiveness of any 
existing documents currently used by institutions, or of the proposed 
illustrations set forth below. Commenters are specifically invited to 
provide information on any consumer testing they have conducted in 
connection with comparable disclosures.

[[Page 58675]]

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[[Page 58676]]


Illustration 2
    Some of the information recommended by the guidance--in particular, 
some of the more detailed information about payment shock and negative 
amortization--may be conveyed most effectively through quantitative 
illustrations. The Interagency Guidance expressly contemplates 
hypothetical loan examples to aid consumer understanding. This 
information also could be incorporated into a narrative format as shown 
in Illustration 1. Illustration 2 shows another way in which this 
information could be presented. The chart and the narrative explanation 
may also be combined into a two-page document that both explains and 
illustrates the key facts about nontraditional mortgage products.
BILLING CODE 7535-01-P

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[GRAPHIC] [TIFF OMITTED] TN04OC06.011


[[Page 58678]]


Illustration 3
    The Interagency Guidance also recommends that if institutions 
provide monthly statements to consumers on payment option mortgages, 
those statements should provide information that enables consumers to 
make informed payment choices, including an explanation of each payment 
option available and the impact of that choice on loan balances. The 
following illustration shows one way in which this information could be 
presented. It is important to note this illustration is not intended to 
set forth all of the information that may be useful, and could be 
provided, to consumers on their monthly statement, such as the current 
loan balance, an itemization of the payment amount devoted to interest 
and to principal, and whether the loan balance has increased.
[GRAPHIC] [TIFF OMITTED] TN04OC06.012

III. Request for Comment

    As noted above, the Agencies request comment on all aspects of the 
proposed illustrations. Comments are specifically requested on the 
usefulness of the illustrations, as proposed, for consumers and for 
institutions, or whether changes should be made; whether the 
information is set forth in a clear manner and format; whether these 
illustrations or a modified form should be adopted by the Agencies; and 
whether there are other illustrations relating to nontraditional 
mortgages that would be useful to consumers and institutions in 
addition to these.

    Dated: September 25, 2006.
John C. Dugan,
Comptroller of the Currency.
    By order of the Board of Governors of the Federal Reserve 
System, September 27, 2006.
Jennifer J. Johnson,
Secretary of the Board.
    Dated at Washington, DC, this 27th day of September, 2006.

By order of the Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
    Dated: September 28, 2006.

    By the Office of Thrift Supervision.
John M. Reich,
Director.
    By the National Credit Union Administration on : Thursday, 
September 28, 2006.
JoAnn M. Johnson,
Chairman.
[FR Doc. 06-8479 Filed 10-3-06; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P; 7535-01-C