[Federal Register Volume 73, Number 154 (Friday, August 8, 2008)]
[Rules and Regulations]
[Pages 46190-46191]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-18275]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1320]


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 (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 
2009 is $583. This adjustment does not affect the new rules for 
``higher-priced mortgage loans'' adopted by the Board in July 2008.

EFFECTIVE DATE: January 1, 2009.

FOR FURTHER INFORMATION CONTACT: Dana Miller, 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 
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.
    HOEPA was contained in the Riegle Community Development and 
Regulatory Improvement Act of 1994 and was enacted as an amendment to 
TILA. Public Law 103-325, 108 Stat. 2160 (60 FR 15463). In 1995, the 
Board amended Regulation Z to implement HOEPA. 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 HOEPA's requirements 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. The statute 
requires the Board to adjust the $400 figure annually on January 1 
based on the annual percentage change in the Consumer Price Index (CPI) 
that was reported on the preceding June 1. 15 U.S.C.

[[Page 46191]]

1602(aa)(3) and 12 CFR 226.32(a)(1)(ii). The Board adjusted the $400 
amount to $561 for the year 2008.
    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 14, 2008, was the CPI-U index in effect on 
June 1, and reflects the percentage increase from April 2007 to April 
2008. The adjustment to the $400 figure below reflects a 3.94 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, 2009, 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 $583 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 2009. 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.
    This adjustment is being made pursuant to TILA section 103(aa)(3). 
In July 2008, the Board used its authority in TILA section 129(l)(2) to 
amend Regulation Z to prohibit certain acts and practices in connection 
with ``higher-priced mortgage loans.'' These additional protections and 
the definition of ``higher-priced mortgage loans'' are contained in 
section 226.35 of Regulation Z. The adjustment being published today 
pursuant to section 103(aa) does not affect the new rules for ``higher-
priced mortgage loans'' adopted by the Board in section 226.35.

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.xiv. is added to read as follows:

Supplement I to Part 226--Official Staff Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 226.32--Requirements for Certain Closed-End Home Mortgages

    32(a) Coverage
* * * * *
    Paragraph 32(a)(1)(ii)
* * * * *
    2. Annual adjustment of $400 amount.
* * * * *
    xiv. For 2009, $583, reflecting a 3.94 percent increase in the CPI-
U from June 2007 to June 2008, 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.

    Dated: August 5, 2008.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E8-18275 Filed 8-7-08; 8:45 am]
BILLING CODE 6210-01-P