[Federal Register Volume 74, Number 223 (Friday, November 20, 2009)]
[Rules and Regulations]
[Pages 60143-60153]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-27742]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1378]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Interim final rule; request for public comment.

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SUMMARY: The Board is publishing for public comment an interim final 
rule amending Regulation Z (Truth in Lending). The interim rule 
implements Section 131(g) of the Truth in Lending Act (TILA), which was 
enacted on May 20, 2009, as Section 404(a) of the Helping Families Save 
Their Homes Act. TILA Section 131(g) became effective immediately upon 
enactment and established a new requirement for notifying consumers of 
the sale or transfer of their mortgage loans. The purchaser or assignee 
that acquires the loan must provide the required disclosures in writing 
no later than 30 days after the date on which the loan is sold or 
otherwise transferred or assigned. The Board is issuing this interim 
rule, effective immediately upon publication, so that parties subject 
to the statutory requirement have guidance on how to comply. However, 
to allow time for any necessary operational changes, compliance with 
the interim final rule is optional for 60 days from the date of 
publication; during this period, covered persons would continue to be 
subject to the statute's requirements. The Board seeks comment on all 
aspects of the interim rule.

DATES: This interim final rule is effective November 20, 2009; however, 
to allow time for any necessary operational changes, compliance with 
this interim final rule is optional until January 19, 2010. Comments 
must be received on or before January 19, 2010.

ADDRESSES: You may submit comments, identified by Docket No. R- 1378, 
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: regs.comments@federalreserve.gov. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Address to Jennifer J. Johnson, Secretary, Board of 
Governors of the Federal Reserve System, 20th Street and Constitution 
Avenue, NW., Washington, DC 20551.
    All public comments will be made available on the Board's Web site 
at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper 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.

FOR FURTHER INFORMATION CONTACT: Paul Mondor, Senior Attorney, or 
Stephen Shin, Attorney; Division of Consumer and Community Affairs, 
Board of Governors of the Federal Reserve System, Washington, DC 20551, 
at (202) 452-2412 or (202) 452-3667. For 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 et seq., seeks to 
promote the informed use of consumer credit by requiring disclosures 
about its costs and terms. TILA requires additional disclosures for 
loans secured by consumers' homes and permits consumers to rescind 
certain transactions that involve their principal dwelling. TILA 
directs the Board to prescribe regulations to carry out its purposes 
and specifically authorizes the Board, among other things, to issue 
regulations that contain such classifications, differentiations, or 
other provisions, or that provide for such

[[Page 60144]]

adjustments and exceptions for any class of transactions, that in the 
Board's judgment are necessary or proper to effectuate the purposes of 
TILA, facilitate compliance with TILA, or prevent circumvention or 
evasion of TILA. 15 U.S.C. 1604(a). TILA is implemented by the Board's 
Regulation Z, 12 CFR part 226. An Official Staff Commentary interprets 
the requirements of the regulation and provides guidance to creditors 
in applying the rules to specific transactions. See 12 CFR part 226, 
Supp. I.
    On May 20, 2009, the Helping Families Save Their Homes Act of 2009 
(the ``2009 Act'') was signed into law. Public Law 111-22, 123 Stat. 
1632. Section 404(a) of the 2009 Act amended TILA to establish a new 
requirement for notifying consumers of the sale or transfer of their 
mortgage loans. The purchaser or assignee that acquires the loan must 
provide the required disclosures no later than 30 days after the date 
on which the loan is acquired. This provision is contained in TILA 
Section 131(g), 15 U.S.C. 1641(g), which applies to any consumer credit 
transaction secured by the principal dwelling of a consumer. 
Consequently, the disclosure requirements in Section 131(g) apply to 
both closed-end mortgage loans and open-end home equity lines of credit 
(HELOCs).
    Section 131(g) became effective immediately upon enactment on May 
20, 2009, and did not require the issuance of implementing regulations. 
Mortgage loans sold or transferred on or after that date became subject 
to the requirements of Section 131(g), and failure to comply can result 
in civil liability under TILA Section 130(a). See 15 U.S.C. 1640(a). 
Accordingly, as discussed below, the Board finds there is good cause 
for issuing an interim rule that is effective immediately upon 
publication, so that parties subject to the rule have guidance on how 
to interpret and comply with the statutory requirements.
    Under the Real Estate Settlement Procedures Act (RESPA), consumers 
must be notified when the servicer of their mortgage loan has 
changed.\1\ The 2009 Act's legislative history reflects that, in 
addition to the information provided under RESPA, the Congress intended 
to provide consumers with information about the identity of the owner 
of their mortgage loan. In some cases, consumers that have an extended 
right to rescind the loan under TILA Section 125, 15 U.S.C. 1635, can 
assert that right against the purchaser or assignee. See TILA Section 
131(c), 15 U.S.C. 1641(c). Among other things, the 2009 Act seeks to 
ensure that consumers attempting to exercise this right know the 
identity of the assignee and how to contact the assignee or its agent 
for that purpose. See 155 Cong. Rec. S5098-99 (daily ed. May 5, 2009); 
155 Cong. Rec. S5173-74 (daily ed. May 6, 2009). The legislative 
history indicates, however, that TILA Section 131(g) was not intended 
to require notice when a transaction ``does not involve a change in the 
ownership of the physical note,'' such as when the note holder issues 
mortgage-backed securities but does not transfer legal title to the 
loan. 155 Cong. Rec. S5099.
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    \1\ RESPA is implemented by Regulation X, 24 CFR part 3500, 
which is issued by the Department of Housing and Urban Development 
(HUD).
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II. Summary of the Interim Final Rule

    Consistent with the legislative intent, this interim final rule 
implements Section 404(a) of the 2009 Act by applying the new 
disclosure requirements to any person or entity that acquires ownership 
of an existing consumer mortgage loan, whether the acquisition occurs 
as a result of a purchase or other transfer or assignment. A person is 
covered by the rule only if the person acquires legal title to the debt 
obligation. Although TILA and Regulation Z generally apply only to 
persons to whom the obligation is initially made payable and that 
regularly engage in extending consumer credit, Section 404(a) and the 
interim final rule apply to persons that acquire mortgage loans without 
regard to whether they also extend consumer credit by originating 
mortgage loans. However, the interim final rule applies only to persons 
that acquire more than one mortgage loan in any 12-month period.
    To comply with the interim rule, a covered person must mail or 
deliver the required disclosures on or before the 30th day following 
the date that the covered person acquired the loan. The disclosure need 
not be given, however, if the covered person transfers or assigns the 
loan to another party on or before that date. This exception seeks to 
prevent the confusion that could result if consumers receive outdated 
contact information for parties that no longer own their loan. For 
example, a covered person that acquires a mortgage loan on March 1 must 
mail or deliver the disclosures on or before March 31. However, if the 
covered person sells or assigns the loan to a third party on March 31 
(or earlier), the covered person need not provide the disclosures, but 
subsequent purchasers would have to comply with the rule.

III. Legal Authority

General Rulemaking Authority

    As noted above, TILA Section 105(a) directs the Board to prescribe 
regulations to carry out the act's purposes. 15 U.S.C. 1604(a). Section 
404 of the 2009 Act became effective immediately without any 
requirement that the Board first issue implementing rules. 
Nevertheless, the Board finds that the legislative purpose of Section 
404 will be furthered and its effectiveness enhanced by the issuance of 
rules that specify the manner in which covered persons can comply with 
its provisions. In addition, the Board believes that implementing 
regulations will facilitate covered persons' compliance with the 
statutory provisions.
    TILA also specifically authorizes the Board, among other things, 
to:
     Issue regulations that contain such classifications, 
differentiations, or other provisions, or that provide for such 
adjustments and exceptions for any class of transactions, that in the 
Board's judgment are necessary or proper to effectuate the purposes of 
TILA, facilitate compliance with the act, or prevent circumvention or 
evasion. 15 U.S.C. 1604(a).
     Exempt from all or part of TILA any class of transactions 
if the Board determines that TILA coverage does not provide a 
meaningful benefit to consumers in the form of useful information or 
protection. The Board must consider factors identified in the act and 
publish its rationale at the time it proposes an exemption for comment. 
15 U.S.C. 1604(f).

Authority To Issue Interim Final Rules Without Notice and Comment

    The Administrative Procedures Act (APA), 5 U.S.C. 551 et seq., 
generally requires public notice before promulgation of regulations. 
See 5 U.S.C. 553(b). Unless notice or a hearing is specifically 
required by statute, however, the APA also provides an exception ``when 
the agency for good cause finds (and incorporates the finding and a 
brief statement of reasons therefore in the rules issued) that notice 
and public procedure thereon are impracticable, unnecessary, or 
contrary to the public interest.'' 5 U.S.C. 553(b)(B).
    As an initial matter, neither TILA nor the 2009 Act specifically 
requires the Board to provide notice or a hearing with respect to this 
rulemaking. See TILA Section 105(a), 15 U.S.C. 1604(a). In addition, 
the Board finds that there is good cause to conclude that providing 
notice and an opportunity to comment before issuing this interim final 
rule

[[Page 60145]]

would be impracticable and contrary to the public interest. The 
statutory requirements in Section 404 became effective upon enactment 
on May 20, 2009, as noted above. Covered persons must comply with those 
requirements even if the Board does not issue this interim final rule.
    This interim final rule implements the requirements contained in 
the 2009 Act but also interprets the statutory text to resolve issues 
and ambiguities not directly addressed by the statute. Providing notice 
and opportunity for comment on these matters before issuing these rules 
is not in the public interest because the legislation was effective 
upon enactment. As a result, persons covered by Section 404(a) already 
must be in compliance with the law or face potential liability for 
violations. The Board is issuing final rules at this time so that 
covered persons receive immediate guidance on how they can comply with 
the law in a manner that effectuates its purposes and avoids potential 
liability. The Board's issuance of a notice of proposed rulemaking for 
public comment would not serve this purpose because it would not 
provide certainty regarding a covered person's compliance obligations 
until the rules were finalized. By clarifying that Section 404(a) of 
the 2009 Act covers persons that acquire mortgage loans even if they 
are not ``creditors'' as defined under TILA, the interim final rule 
also ensures that consumers will receive the notice that was intended 
by the legislation. Consequently, the Board finds that the use of 
notice and comment procedures before issuing these rules would be 
impracticable and would not be in the public interest. Interested 
parties will still have an opportunity to submit comments in response 
to this interim final rule.

Authority To Issue Interim Final Rules That Are Effective Immediately

    This interim final rule is effective upon publication in the 
Federal Register. Institutions may rely on the rules immediately to 
ensure they are complying with the statutory requirements. However, to 
allow time for any necessary operational changes, compliance with the 
interim final rules is optional until January 19, 2010. During this 60-
day period, institutions continue to be subject to the statute's 
requirements.
    The APA generally requires that rules be published not less than 30 
days before their effective date. See 5 U.S.C. 553(d). As with the 
notice and comment requirement, however, the APA provides an exception 
when ``otherwise provided by the agency for good cause found and 
published with the rule.'' 5 U.S.C. 553(d)(3). Similarly, Section 302 
of the Riegle Community Development and Regulatory Improvement Act of 
1994 generally requires that new regulations and amendments to existing 
regulations prescribed by a Federal banking agency, which impose 
additional reporting, disclosure, or other new requirements on insured 
depository institutions, take effect on the first day of the calendar 
quarter that begins on or after the date on which the regulations are 
published in final form.\2\ There is an exception, however, when ``the 
agency determines, for good cause published with the regulation, that 
the regulations should become effective before such time.'' 12 U.S.C. 
4802(b)(1)(A).
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    \2\ See Public Law 103-325, Title III, Sec.  302(b), Sept. 23, 
1994, 108 Stat. 2214, codified at 12 U.S.C. 4802(b).
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    The interim final rule implements statutory disclosure requirements 
that have been in effect since May 20, 2009. For the reasons discussed 
above, the Board finds there is good cause to make these rules 
effective immediately. These rules are intended to interpret and 
clarify the statutory requirements and provide compliance guidance. The 
Board will consider public comments on the provisions before adopting 
further rules.
    Finally, TILA Section 105(d) generally provides that a regulation 
requiring any disclosure that differs from the disclosures previously 
required shall have an effective date no earlier than ``that October 1 
which follows by at least six months the date of promulgation.'' To the 
extent that the interim rule contains disclosure requirements that are 
already in effect under the statute, Section 105(d) does not apply. 
Moreover, the Board believes that the effective date mandated by the 
2009 Act for the specific disclosures required under section 404 
overrides the general provision in TILA Section 105(d).

IV. Section-by-Section Analysis

Section 226.39--Mortgage Transfer Disclosures

39(a) Scope
    Section 226.39(a) defines the scope of the interim rule's coverage. 
The disclosure requirements of Sec.  226.39 apply to any ``covered 
person,'' with certain exceptions that are specified in the rule. For 
purposes of the rule, a ``covered person'' includes any natural person 
or organization (as defined in section 226.2(a)(22) of the regulation) 
that acquires more than one existing mortgage loan in any 12-month 
period. Consistent with the statute, the rule applies to all consumer 
mortgage transactions secured by the principal dwelling of a consumer, 
whether the transaction is a closed-end loan or an open-end line of 
credit.
    Generally, TILA and Regulation Z apply to parties that regularly 
extend consumer credit. However, Section 404(a) of the 2009 Act is not 
limited to persons that extend credit by originating loans. Section 
404(a) imposes the disclosure duty on the ``creditor that is the new 
owner or assignee of the debt.'' The Board believes that to give effect 
to the legislative purpose, the term ``creditor'' in Section 404(a) 
must be construed to refer to the owner of the debt following the sale, 
transfer or assignment, without regard to whether that party would be a 
``creditor'' for other purposes under TILA or Regulation Z. The Board 
declines to limit Section 404(a) to parties that originate consumer 
loans because such an interpretation would exempt a significant 
percentage of mortgage transfers which are acquisitions by secondary 
market investors that do not extend consumer credit and are not 
``creditors'' for purposes of other provisions of Regulation Z.
    The Board also believes that Section 404(a) of the 2009 Act does 
not alter the definition of ``creditor'' as currently used in TILA or 
Regulation Z. Thus, the fact that a person purchases mortgage loans and 
provides disclosures under Sec.  226.39 does not by itself make that 
person a ``creditor'' for purposes of TILA and Regulation Z (even if 
the disclosure provided under Section 404(a) uses the term 
``creditor''). Accordingly, in describing the persons subject to the 
requirements of Sec.  226.39, the interim final rule uses the term 
``covered person'' rather than the term ``creditor.''
    Under the interim final rule, the disclosure requirements in Sec.  
226.39 apply only to persons that acquire more than one consumer 
mortgage transaction in any 12-month period. Generally, TILA and 
Regulation Z cover only parties that are regularly engaged in consumer 
credit transactions, who are expected to have the capacity to put 
systems in place to ensure compliance with the rules. There is no 
indication in the legislative history that Section 404 was intended to 
apply more broadly. For example, individual homeowners might choose to 
facilitate the sale of their home by providing seller financing and 
accepting the buyer's promissory note for a portion of the purchase 
price. At a later date, ownership of the debt obligation might be 
transferred to

[[Page 60146]]

another family member or to a trust for estate planning purposes, or 
might be transferred to another person if the original note holder 
dies. The Board believes that a formal notice under Section 404 is not 
needed in situations involving individual transfers because the 
acquiring party is likely to provide adequate information to borrowers 
to ensure that they know to whom the loan payments should be made.
    Accordingly, to prevent undue burden on individuals under the 
interim rule, a person who acquires only one existing mortgage loan in 
any 12-month period is not a covered person. The Board intends to 
exclude persons who are not regularly engaged in the business of 
purchasing or investing in consumer mortgages loans and are involved in 
such transactions infrequently and would not have systems in place to 
comply. The Board specifically solicits comment on this definition and 
whether the scope of the interim final rule's coverage is appropriate, 
or whether a different standard should apply in determining which 
persons must comply with the disclosure requirement in Sec.  226.39. 
For example, comment is requested on whether the Board should use the 
same standard that applies in determining whether a person is regularly 
engaged in extending consumer credit, which would limit the application 
of Sec.  226.39 to persons that have acquired more than five mortgage 
loans in the preceding or current calendar year. See Sec.  
226.2(a)(17)(i), footnote 3.
    To become a ``covered person'' subject to Sec.  226.39, a person 
must become the owner of an existing mortgage loan by acquiring legal 
title to the debt obligation. Consequently, Sec.  226.39 does not apply 
to persons who acquire only a beneficial interest in the loan or a 
security interest in the loan, such as when the owner of the debt 
obligation uses the loan as security to obtain financing and the party 
providing the financing obtains only a security interest in the loan. 
Section 226.39 also does not apply to a party that assumes the credit 
risk without acquiring legal title to the loans. Accordingly, an 
investor who purchases an interest in a pool of loans (such as 
mortgage-backed securities, pass-through certificates, participation 
interests, or real estate mortgage investment conduits) but does not 
directly acquire legal title in the underlying mortgage loan, is not 
covered by Sec.  226.39.
    The Board has received a letter from the Department of Housing and 
Urban Development's Office of General Counsel, in its capacity as legal 
counsel for the Government National Mortgage Association (Ginnie Mae), 
seeking to clarify Ginnie Mae's status under Section 404(a) of the 2009 
Act. Ginnie Mae guarantees securities that are collateralized by 
mortgage loans. HUD's letter states that, as the guarantor of these 
securities, Ginnie Mae obtains equitable title in the mortgage loans 
but further states that the issuers of the securities retain legal 
title to the loans that collateralize the securities. According to HUD, 
legal title to the loans is not conveyed to Ginnie Mae unless the 
issuer of the securities defaults in its obligations. If the securities 
issuer defaults, Ginnie Mae can immediately extinguish the securities 
issuer's interest in the loans and take legal title. Based on HUD's 
representations and legal opinion regarding Ginnie Mae's status, the 
Board believes that the requirements of Sec.  226.39 do not apply to 
Ginnie Mae until it finds the issuer in default and acquires legal 
title to the loans.
    Section 131(f) of TILA addresses the treatment of loan servicers 
under the assignee liability provisions in Section 131 as well as the 
provisions of Section 131(g) which were added by the 2009 Act. Under 
TILA section 131(f)(2), a party servicing the mortgage loan is not 
treated as the owner of the obligation if the obligation was assigned 
to the servicer solely for the administrative convenience of the 
servicer in servicing the obligation. Accordingly, the requirements of 
Sec.  226.39 do not apply to a loan servicer in this circumstance, even 
if the servicer holds legal title to the loan.
    Some industry representatives have requested clarification whether 
a disclosure under Sec.  226.39 is required in the case of a merger, 
acquisition, or reorganization. The Board believes that the statute 
covers acquisitions that occur in these situations when ownership of 
the loan is transferred to a different legal entity. Accordingly, the 
interim final rule does not provide an exception for such transactions.
39(b) Disclosure Required
    Section 226.39(b) contains the general requirement for covered 
persons to provide the disclosures required under Section 404 of the 
2009 Act, unless the exception specified in Sec.  226.39(c) applies. 
The disclosures must be mailed or delivered to the consumer on or 
before the 30th calendar day following the date that the covered person 
acquires the loan. For purposes of this requirement, the date that the 
covered person acquires the loan is deemed to be the acquisition date 
that is recognized in the books and records of the acquiring party. If 
there is more than one covered person, the interim rule provides that 
only one disclosure shall be given; the covered persons must determine 
among themselves which one of them will provide the disclosure. If 
there is more than one consumer, a covered person may mail or deliver 
the disclosures to any consumer who is primarily liable on the 
obligation.
    The transfer of ownership of a mortgage loan is subject to the 
disclosure requirements of this section when the acquiring party is a 
separate legal entity from the transferor, even if the parties are 
affiliated entities. However, if a covered person acquires a mortgage 
loan and subsequently transfers the loan to another entity, the 
regulation does not prohibit the two entities from combining their 
disclosures on a single document. Comment 39(b)-2 clarifies how two 
entities may comply with the rules in certain circumstances by 
providing a single form that covers both entities. For example, a 
covered person that acquires a loan on August 31 might mail a single 
disclosure on or before September 30 with the knowledge that it will 
assign the loan to another entity on October 15. The covered person 
could mail a single disclosure providing the required information for 
both entities and indicating when the subsequent transfer will occur.
39(c) Exceptions
    To comply with the interim final rule, a covered person must mail 
or deliver the required disclosures on or before the 30th day following 
the date that the covered person acquired the loan. Section 
226.39(c)(1) provides an exception, however, if the covered person 
transfers or assigns the loan to another party on or before that date. 
This exception is made pursuant to the Board's authority to make 
exceptions and exemptions under TILA Sections 105(a) and 105(f). 15 
U.S.C. 1604(a), 1604(f). This exception seeks to prevent the confusion 
that could result if consumers receive outdated contact information for 
parties that no longer own their loans. For example, if a mortgage loan 
is originated on February 22 and the original creditor sells the loan 
on March 1 to a covered person, the covered person must mail or deliver 
the disclosures required by Sec.  226.39 on or before March 31. 
However, under the exception in Sec.  226.39(c)(1) the covered person 
would not be required to provide the disclosures if the loan is sold or 
otherwise transferred or assigned to a third party on or before March 
31.
    The Board specifically solicits public comment on the need for this 
exception and its scope. The Board believes that

[[Page 60147]]

this exception is necessary and proper to effectuate the purposes of 
Section 404 and to facilitate compliance. The Board is concerned about 
the potential for consumers to receive multiple disclosures, some of 
which contain information that is outdated and inaccurate by the time 
it is received. This can occur because during the normal securitization 
process, several legal entities may be created to serve as acquisition 
vehicles to hold the loan for a short period before delivering the loan 
to an entity that ultimately holds it for the investors. After 
origination, a loan might be assigned to one or more entities for only 
a few days before it is transferred to an entity that will hold it for 
a much longer time period.
    The Board believes that consumers may be confused if they receive 
one or more notices on or around the 30th day identifying multiple 
parties that no longer own the loan. Consequently, the interim final 
rule requires notices to be provided only by a covered person that 
still owns the loan on the 30th day after the acquisition. Thus 
consumers would be likely to receive notices only from parties actually 
holding the loan as of that date. In contrast, notices sent by 
temporary holders would provide information that most consumers are 
unlikely to need or use and could create information overload for many 
consumers, thereby hindering their ability to determine which party 
should be contacted to address a particular concern. The Board believes 
that the disclosure of short-term holdings of the debt obligation that 
do not reflect the current ownership status at the time the consumer 
receives the notice would be of minimal value to consumers and does not 
provide meaningful disclosure consistent with the purposes of TILA or 
the 2009 Act. Thus, the Board believes that a regulatory exception 
adopted pursuant to TILA Section 105(a) would effectuate TILA's 
purposes and facilitate compliance.
    The Board has also considered the relevant statutory factors in 
TILA Section 105(f). The Board believes that the Section 105(f) 
exemption is appropriate because the disclosure of ownership interests 
that are held less than the 30-day period would not provide a 
meaningful benefit to consumers in the form of useful information or 
protection. It would also complicate compliance and impose unnecessary 
burden and expense for persons that would be required to comply, that 
would not be outweighed by the benefits to consumers.\3\ The Board 
requests comment on whether the scope of this exemption is appropriate 
and whether the 30-day period should be shorter or longer.
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    \3\ In exercising its exemption authority under Section 105(f), 
Board must determine whether coverage of such transactions provides 
a meaningful benefit to consumers in light of specific factors. 15 
U.S.C. 1604(f)(2). These factors, which the Board has reviewed, are 
(1) the amount of the loan and whether the disclosure provides a 
benefit to consumers who are parties to the transaction involving a 
loan of such amount; (2) the extent to which the requirement 
complicates, hinders, or makes more expensive the credit process; 
(3) the status of the borrower, including any related financial 
arrangements of the borrower, the financial sophistication of the 
borrower relative to the type of transaction, and the importance to 
the borrower of the credit, related supporting property, and 
coverage under TILA; (4) whether the loan is secured by the 
principal residence of the borrower; and (5) whether the exemption 
would undermine the goal of consumer protection.
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    In some cases, the original creditor or owner of the mortgage loan 
may sell or transfer the legal title to secure business financing, 
pursuant to a repurchase agreement that obligates the original creditor 
or owner to repurchase the loan within a short period, typically a 
month or less. Under Sec.  226.39(c)(2) of the interim final rule, if 
the original creditor or owner does not recognize the transaction as a 
sale of the loan on its books and records for accounting purposes, the 
acquiring party is not subject to the disclosure requirements of Sec.  
226.39. However, if the transferor does not repurchase the mortgage 
loan, the acquiring party must make the disclosures required by Sec.  
226.39 within 30 days after the date that the transaction is recognized 
as an acquisition in its books and records. This exception is also 
being adopted pursuant to the Board's authority in TILA Sections 105(a) 
and 105(f). As with the exception in Sec.  226.39(c)(1), the exception 
for repurchase agreements in Sec.  226.39(c)(2) seeks to prevent 
consumer confusion from the receipt of outdated disclosures. The Board 
believes that providing disclosures for the transactions covered by the 
exception in Sec.  226.39(c)(2) would not provide a meaningful benefit 
to consumers in the form of useful information or protection. The Board 
also believes that the disclosure of transfers that are subject to 
repurchase agreements would complicate compliance and impose 
unnecessary burden and expense for persons that would be required to 
comply, that would not be outweighed by the benefits to consumers. 
Comment is requested on this exception, and any unintended consequences 
that may result.
39(d) Content of Required Disclosures
    Section 226.39(d) sets forth the contents of the notice that must 
be provided under this section. The disclosures must identify the loan 
that was acquired or transferred and, consistent with the statute, 
contain the following: (1) The identity, address, and telephone number 
of the covered person that owns the mortgage loan; (2) the date of the 
acquisition or transfer; (3) contact information that the consumer can 
use to reach an agent or party having authority to act on behalf of the 
covered person; (4) the location of the place where the transfer of the 
ownership of the debt is recorded.
    Identity, address, and telephone number. Section 226.39(d)(1) 
requires acquiring parties to provide their name, as well as their 
address and telephone number. Under the interim final rule, the party 
identified must be the covered person who owns the mortgage loan, 
regardless of whether another party has been appointed to service the 
loan or otherwise serve as the covered person's agent. The covered 
person has the option of also providing an electronic mail address or 
Internet Web site address but is not required to do so.
    Section 226.39(d)(1) provides that if there is more than one 
covered person, the required information must be provided for each of 
them. The Board specifically solicits comments on the benefits of this 
approach, or whether the identification of multiple parties may create 
confusion for consumers. Should there be limits on the number of 
covered persons identified and, if so, what limits would be appropriate 
consistent with the legislative intent?
    Acquisition date. Section 226.39(d)(2) requires disclosure of the 
date that the covered person acquired the loan. For purposes of this 
section, this is defined as the date of acquisition recognized in the 
books and records of the covered person. The Board believes that this 
approach provides flexibility to accommodate a variety of circumstances 
in which the acquisition could occur.
    Agent's contact information. Under Sec.  226.39(d)(3), a covered 
person must identify and provide contact information for the agent or 
party having authority to act on behalf of the covered person. The 
notice must identify one or more persons who are authorized to receive 
legal notices on behalf of the covered person and resolve issues 
concerning the consumer's payments on the loan. However, contact 
information for an agent is not required to be provided under Sec.  
226.39(d)(3) if the consumer can use the information provided for the 
covered person provided under paragraph Sec.  226.39(d)(1) for these 
purposes. Thus, the interim final rule implements the disclosure 
requirement in Section 404 but does not

[[Page 60148]]

require that the owner of a loan designate an agent or other party for 
any specific purpose. The rule simply requires that the owner disclose 
contact information when there is such an agent, so that consumers can 
direct their inquiries to the appropriate party.
    The Board recognizes that separate entities may be authorized by 
the owner of the loan to act on its behalf for different purposes. 
Identifying the party authorized to receive legal notices is intended 
to ensure that consumers have sufficient information to assert legal 
claims, including a right to rescind the loan, if applicable. However, 
a covered person might appoint a different agent to resolve loan 
servicing issues. In such cases, the covered person must provide 
contact information for each agent. If multiple agents are listed, the 
disclosure must state the extent to which the authority of each agent 
differs, for example, by indicating if only one of the agents is 
authorized to receive legal notices or only one is authorized to 
resolve issues concerning payments.
    A covered person may comply with Sec.  226.39(d)(3) by providing a 
telephone number on the written disclosure if the consumer can use the 
telephone number to obtain the address of the agent or other authorized 
person identified. This differs from the requirement in Sec.  
226.39(d)(1), which requires covered persons who acquire a loan to 
provide their name, address, and telephone number in all cases. The 
flexibility in Sec.  226.39(d)(3) is intended to allow covered persons 
to use a single disclosure form that contains a nationwide toll-free 
telephone number, even though there may be different physical locations 
to which documents should be sent in different regions of the country. 
Comment is specifically solicited on this approach and whether both a 
telephone number and address for the agent or authorized representative 
should be required to be included on each disclosure under Sec.  
226.39(d)(3).
    Comment 39(d)(3)-2 clarifies that the covered person has the option 
of also providing the agent's electronic mail address or internet web 
site address but is not required to do so.
    Recording location. Section 404 requires that the disclosure state 
the location of the place where the transfer of ownership of the debt 
is recorded. When a mortgage loan is sold, however, the transfer in 
ownership of the debt instrument typically is not recorded in public 
records. The new owner's security interest in the property that secures 
the debt may or may not be recorded in the public land records or, if 
it is recorded, it may not yet be recorded at the time the disclosure 
is sent.
    Consistent with the statute, Sec.  226.39(d)(4) of the interim 
final rules requires covered persons to disclose the location where 
their ownership of the debt is recorded. However, if the transfer of 
ownership has not been recorded in public records at the time the 
disclosure is provided, the covered person can comply with the rule by 
stating this fact. Whether or not the transfer of ownership has been 
recorded in public records at the time the disclosure is made, the 
disclosure may state that the transfer ``is or may be recorded'' at the 
specified location.
    The covered person also has the option of disclosing the location 
where the covered person's security interest in the property is or may 
be recorded. In light of the fact that the transfer in ownership of the 
debt instrument usually is not recorded in public records, the Board 
specifically solicits comment on whether disclosure of the location 
where the security interest is recorded should be required.
    Comment 39(d)(4)-2 clarifies that the covered person is not 
required to provide the postal address for the governmental office 
where the covered person's ownership interest is recorded or the name 
of the jurisdiction where the property is located. For example, it 
would be sufficient in all cases to disclose that the transaction is or 
may be recorded in the office of public land records or the recorder of 
deeds office ``for the county or local jurisdiction where the property 
is located.''
    The Board has taken this approach after considering the relative 
costs and benefits of requiring that the disclosure provide more 
detailed information. Industry representatives have noted that this 
information may not be readily accessible to the acquiring party. A 
requirement to provide the name and address of the governmental office 
would require parties that provide such notices to develop and maintain 
a system for matching the property address to the correct governmental 
office, and keeping the database up to date with correct address 
information. The Board does not believe that this would provide 
substantial benefit to consumers because they presumably know the 
county or jurisdiction in which the property is located and can easily 
obtain the address of the governmental office from public directories 
or other sources. The Board solicits comments on the approach taken in 
the interim final rule and the relative costs and benefits of requiring 
more detailed disclosures about the location where the lender's 
security interest is or may be recorded.
39(e) Optional Disclosures
    Section 404 provides that the party acquiring a loan shall notify 
the borrower of ``any other relevant information'' regarding the new 
owner of the loan. The Board interprets this statutory language as 
permitting the Board to impose additional disclosure requirements to 
further the legislative purpose. Any additional disclosure requirements 
would be imposed by regulation after notice and comment. The Board does 
not believe that the statutory language requires covered persons to 
determine independently what additional information a reviewing court 
might subsequently determine to be legally relevant in order to avoid 
liability. Although the interim final rule does not contain any 
additional disclosure requirements, the Board solicits comment on 
whether the rule should include any such requirements. The Board also 
believes that, under the statutory language, covered persons are 
permitted, in their sole discretion, to include additional information 
that they might deem relevant or helpful to consumers, which is 
reflected in Sec.  226.39(e) of the interim final rule. For example, 
the covered person may choose to inform consumers that the location 
where they should send mortgage payments has not changed.

V. Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires an 
initial and final regulatory flexibility analysis only when 15 U.S.C. 
553 requires publication of a notice of proposed rulemaking. See 5 
U.S.C. 603(a), 604(a). However, the Board has found good cause under 5 
U.S.C. 553(b)(B) to conclude that, with respect to this interim final 
rule, publication of a notice of proposed rulemaking is impracticable 
and not in the public interest. Accordingly, the Board is not required 
to perform an initial or final regulatory flexibility analysis. 
Nonetheless, to solicit additional information from small entities 
subject to the interim final rule, the Board is publishing an initial 
regulatory flexibility analysis.
    Based on its analysis and for the reasons stated below, the Board 
believes that this interim final rule will not have a significant 
economic impact on a substantial number of small entities. The Board 
invites comment on the effect of the interim final rule on small 
entities.

[[Page 60149]]

A. Reasons for the Interim Final Rule

    As indicated above, the 2009 Act was signed into law on May 20, 
2009. Section 404 amended TILA to establish a new requirement for 
notifying consumers of the sale or transfer of their mortgage loans. 
This requirement became effective immediately upon enactment on May 20, 
2009, and did not require the issuance of implementing regulations. As 
discussed above, the Board believes there is good cause for an interim 
final rule so that parties subject to the rule have guidance on how to 
interpret and comply with the statutory requirements and consumers 
receive notices consistent with legislative intent.
    Congress enacted TILA based on findings that economic stability 
would be enhanced and competition among consumer credit providers would 
be strengthened by the informed use of credit resulting from consumers' 
awareness of the cost of credit. One of the stated purposes of TILA is 
to provide a meaningful disclosure of credit terms to enable consumers 
to compare credit terms available in the marketplace more readily and 
avoid the uninformed use of credit.

B. Summary of 2009 Act

    As described previously, the purchaser or assignee that acquires a 
loan must provide the required disclosures no later than 30 days after 
the date on which the loan is acquired. Section 226.39(c) of the rule 
provides an exception if the covered person transfers or assigns the 
loan to another party on or before that date. Section 226.39(d) sets 
forth the contents of the notice. Consistent with the statute, the 
interim final rule requires that the notice contain the following: (1) 
The identity, address, and telephone number of the covered person who 
owns the mortgage loan; (2) the acquisition date; (3) a mailing address 
and telephone number that the borrower can use to reach an agent of the 
covered person; and (4) the location where the covered person's 
interest in the property securing the loan is or may be recorded.

C. Statement of Objectives and Legal Basis

    The SUPPLEMENTARY INFORMATION contains this information. The legal 
basis for the interim final rule is in TILA Sections 105(a), 105(f). 15 
U.S.C. 1604(a), 1604(f). A more detailed discussion of the Board's 
rulemaking authority is set forth in the SUPPLEMENTARY INFORMATION.

D. Description of Small Entities to Which the Interim Final Rule Would 
Apply

    The interim final rule would apply to all persons that acquire more 
than one existing mortgage loan in any 12-month period, other than 
servicers that take title solely as an administrative convenience to 
enable them to service the loans. The Board cannot identify with 
certainty the number of small entities that meet this definition. The 
Board can estimate, however, approximate numbers of small entities that 
purchase mortgage loans, as discussed below.
    The Board can identify through data from Reports of Condition and 
Income (``call reports'') approximate numbers of small depository 
institutions that would be subject to the interim final rules if they 
acquire more than one mortgage loan in a 12-month period. Approximately 
16,345 depository institutions in the United States filed call report 
data in December of 2008, of which approximately 11,907 had total 
domestic assets of $175 million or less and thus were considered small 
entities for purposes of the Regulatory Flexibility Act. Of 4231 banks, 
565 thrifts and 7111 credit unions that filed call report data and were 
considered small entities, 4091 banks, 530 thrifts, and 4797 credit 
unions, totaling 9418 institutions, extended mortgage credit. For 
purposes of this analysis, thrifts include savings banks, savings and 
loan entities, co-operative banks and industrial banks.
    The Board cannot identify with certainty the number of small non-
depository institutions because they do not file call reports. Neither 
can the Board determine with certainty how many of the 11,907 
institutions identified above as small entities acquired mortgage loans 
in 2008. Although an estimated 9418 such institutions extended mortgage 
credit, the Board recognizes that not all entities that extend mortgage 
credit also acquire existing mortgage loans. Moreover, the reverse is 
also true: there are entities that acquire existing mortgage loans but 
do not extend mortgage credit.
    The Board has another source of information, data obtained under 
the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. 2801 et seq.; 12 CFR 
part 203. Based on loan purchases reported for 2008 under HMDA, the 
Board estimates that 553 of the reporting institutions engaged in more 
than one mortgage acquisition. The 8388 lenders covered by HMDA in 2008 
accounted for the majority, but not all, of the home lending in the 
United States. Accordingly, the 553 institutions that reported loan 
purchases in 2008 probably do not represent all mortgage acquirers; 
institutions must report loan purchases only if they are required to 
report under HMDA based on loan originations and assets. Nevertheless, 
the Board's experience has been that the HMDA data are reasonably 
representative of the whole mortgage market.
    A total of 2,921,684 loan purchases were reported under HMDA in 
2008 by entities reporting more than one purchase (and thus subject to 
the interim final rule). Of those loan purchases, 2,773,918 were 
reported by depository institutions. Of those depository institution 
loan purchases, 2,122,288 (76.5%) were reported by large depository 
institutions (assets greater than $175 million), and 651,630 (23.5%) 
were reported by small depository institutions (assets of $175 million 
or less). Of the 553 HMDA reporters reporting more than one loan 
purchase, 502 were depository institutions. Of those 502 depository 
institutions, 387 (77.1%) were large and 115 (22.9%) were small. Those 
115 small depository institutions represent just slightly less than one 
percent (0.97%) of the 11,907 total small institutions estimated above 
from call report data.
    A total of 147,766 loan purchases were reported under HMDA by non-
depository institutions that reported more than one loan purchase in 
2008. The Board cannot tell from the HMDA data how many of those loan 
purchases were reported by small entities. Neither can the Board tell 
how many of the 51 non-depository institutions that reported those loan 
purchases are small entities. If the relative shares among small and 
large non-depository institutions do not differ significantly from 
those among depository institutions, however, the shares for non-
depository institutions can be estimated. On that basis, the Board 
estimates that 12 small non-depository institutions reported 34,725 
loan purchases and that 39 large non-depository institutions reported 
113,041 loan purchases (estimates are rounded to whole numbers).
    Using the foregoing numbers from 2008 HMDA data for depository 
institutions and the foregoing estimates for non-depository 
institutions, the Board estimates the following numbers for all 
entities reporting under HMDA combined: of the 2,921,684 loan purchases 
reported by 553 entities reporting more than one purchase, 2,235,329 
(76.5%) were reported by 426 large entities (77%), and 686,355

[[Page 60150]]

(23.5%) were reported by 127 small entities (23%). Based on these 
estimates, less than one-quarter of the institutions reporting covered 
loan purchases under HMDA were small entities, and less than one-
quarter of the covered loan purchases reported were reported by small 
entities.
    The foregoing data are not complete in many respects. Not all 
depository institutions that file call reports are reporters under 
HMDA, and not all HMDA reporters file call reports. Further, some 
unknown number of entities purchase more than one mortgage loan in any 
12-month period and yet file neither call reports nor HMDA data; how 
many of those are small entities also is unknown. Nevertheless, if one 
assumes that the existing data are reasonably representative of the 
market as a whole, they present an overall picture of minimal economic 
impact on small entities. For all these reasons, the Board believes 
that the interim final rule will not have a significant economic impact 
on a substantial number of small entities.

E. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    The compliance requirements of the interim final rules are 
described in the SUPPLEMENTARY INFORMATION. As indicated above, the 
Board is adopting a new disclosure rule requiring that consumers 
receive notice when ownership of their mortgage loan is transferred. 
The Board is aware that numerous covered persons are already complying 
with these statutory provisions, which became effective on May 20, 
2009. Therefore the additional burden imposed by the Board's rule 
itself is likely to be minimal. Furthermore, the information required 
to be provided is easily obtainable by the covered person. The covered 
person must provide contact information for itself and any agent (but 
is not required to designate an agent), may use the acquisition date in 
its own books and records, and may generally describe the location 
where the covered person's interest in the property securing the 
mortgage loan is or may be recorded. This information generally is 
already required by the statute.
    Based on informal surveys of industry representatives and practices 
in effect, the Board understands that entities are likely to designate 
servicers as their agents. Servicers already respond to consumer 
requests on the behalf of covered persons. Therefore, other than 
providing the notice itself, covered persons (including those who are 
small entities) are not likely to incur significant burden in 
responding to consumer requests. Furthermore, the Board has provided an 
exception to the rule for mortgage owners who do not hold the loan more 
than 30 days. The Board believes that this exception balances the needs 
of consumers for information with the burdens on industry of compliance 
and the potential for confusion to consumers of multiple disclosures.

F. Other Federal Rules

    The Board has not identified other rules that conflict with the 
rule. As indicated previously, under RESPA and HUD's Regulation X, 
consumers must be notified when the servicer of their mortgage loan has 
changed. Therefore, the disclosure of contact information for the agent 
of the owner of the mortgage loan, typically the servicer under 
applicable agreements, is already generally required by law. As a 
result of existing requirements, servicers are already subject to 
disclosure of their contact information and are already subject to 
calls regarding administration of payment information.

G. Significant Alternatives to the Interim Final Rule

    As noted above, this interim final rule implements the statutory 
requirements of the 2009 Act that were effective on May 20, 2009. The 
Board has implemented these requirements to minimize burden while 
retaining benefits to consumers. The Board was not required to issue 
rules but has decided that rules are needed to clarify who is subject 
to the requirements and what information must be disclosed, and to 
ensure that consumers receive disclosures of ownership that are 
consistent with legislative intent. The Board welcomes comment on any 
significant alternatives that would minimize the impact of the interim 
final rule on small entities.
    The Board welcomes further information and comment on any costs, 
compliance requirements, or changes in operating procedures arising 
from the application of the interim final rule to small businesses.

VI. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. 3506; 5 CFR part 1320 appendix A.1), the Board reviewed the 
interim final rule under the authority delegated to the Board by the 
Office of Management and Budget (OMB). The collection of information 
that is required by this final rule is found in 12 CFR 226.39. The 
Board may not conduct or sponsor, and an organization is not required 
to respond to, this information collection unless the information 
collection displays a currently valid OMB control number. The OMB 
control number is 7100-0199.
    This information collection is required to provide benefits for 
consumers and is mandatory (15 U.S.C. 1601 et seq.). Since the Board 
does not collect any information, no issue of confidentiality arises. 
The respondents/recordkeepers are persons or entities that acquire 
legal title to more than one mortgage loan in any 12-month period, 
including for-profit financial institutions and small businesses.
    TILA and Regulation Z are intended to ensure effective disclosure 
of the costs and terms of credit to consumers. For closed-end loans, 
such as mortgage and installment loans, cost disclosures are required 
to be provided prior to consummation. Special disclosures are required 
in connection with certain products, such as reverse mortgages, certain 
variable-rate loans, and certain mortgages with rates and fees above 
specified thresholds. To ease the burden and cost of complying with 
Regulation Z (particularly for small entities), the Board provides 
model forms, which are appended to the regulation. TILA and Regulation 
Z also contain rules concerning credit advertising. Creditors are 
required to retain evidence of compliance with Regulation Z for 24 
months (12 CFR 226.25), but Regulation Z does not specify the types of 
records that must be retained.
    Under the PRA, the Board accounts for the paperwork burden 
associated with Regulation Z for the state member banks and other 
entities supervised by the Board that engage in activities covered by 
Regulation Z and, therefore, are respondents under the PRA. Appendix I 
of Regulation Z defines the institutions supervised by the Federal 
Reserve System as: state member banks, branches and agencies of foreign 
banks (other than federal branches, Federal agencies, and insured state 
branches of foreign banks), commercial lending companies owned or 
controlled by foreign banks, and organizations operating under section 
25 or 25A of the Federal Reserve Act. Other Federal agencies account 
for the paperwork burden imposed on the entities for which they have 
administrative enforcement authority under TILA.
    The current total annual burden to comply with the provisions of 
Regulation Z is estimated to be 1,011,311 hours for the 1,138 
institutions supervised by the Federal Reserve that are deemed to be 
respondents for the purposes of the PRA.

[[Page 60151]]

    As discussed in the preamble, the Board is adopting a new 
disclosure rule requiring that consumers receive notice when ownership 
of their mortgage loan is transferred. The new disclosure requirement 
will impose a one-time increase in the total annual burden under 
Regulation Z for respondents supervised by the Federal Reserve that 
engage in mortgage acquisitions. The Board estimates that 68 
respondents \4\ supervised by the Federal Reserve will take, on 
average, 40 hours (one business week) to update their systems, internal 
procedure manuals, and provide training for relevant staff to comply 
with the new disclosure requirements in Sec.  226.39. Accordingly, this 
revision is estimated to result in a one-time increase in the aggregate 
burden by 2,720 hours for these 68 respondents.
---------------------------------------------------------------------------

    \4\ Based on loan purchases reported for 2008 under the Home 
Mortgage Disclosure Act (HMDA), 12 U.S.C. 2801 et seq., and 
Regulation C (12 CFR part 203), the Board estimates that 58 of the 
553 institutions engaged in such mortgage acquisitions are 
supervised by the Federal Reserve. Based on average Call Report data 
for the past four quarters, approximately 95 institutions that do 
not report under HMDA also would be subject to these new disclosure 
requirements and 10 of these institutions are supervised by the 
Federal Reserve.
---------------------------------------------------------------------------

    On a continuing basis, the Board estimates that 68 respondents 
supervised by the Federal Reserve would take, on average, 8 hours \5\ 
per month to comply with the new disclosure requirements, which would 
increase the ongoing aggregate burden by 6,528 hours annually for these 
respondents. Accordingly, the Board estimates that the new disclosure 
requirement will increase the total annual burden on a continuing basis 
for respondents supervised by the Federal Reserve from 1,011,311 to 
1,017,839 hours (not including the one-time increase of 2,720 hours to 
implement the changes, as described above). This total estimated burden 
increase represents averages for all respondents supervised by the 
Federal Reserve. The Board expects that the amount of time required to 
implement each of the changes for a given institution may vary based on 
the size and complexity of the respondent.
---------------------------------------------------------------------------

    \5\ Because financial institutions are familiar with the 
existing RESPA provisions which require notification to consumers 
when the servicer of their mortgage loan has changed, the Federal 
Reserve believes that implementation of requirements in Sec.  226.39 
should not be overly burdensome.
---------------------------------------------------------------------------

    The other federal financial institution supervisory agencies (the 
Office of the Comptroller of the Currency (OCC), the Office of Thrift 
Supervision (OTS), the Federal Deposit Insurance Corporation (FDIC), 
and the National Credit Union Administration (NCUA)) are responsible 
for estimating and reporting to OMB the total paperwork burden for the 
domestically chartered commercial banks, thrifts, and federal credit 
unions and U.S. branches and agencies of foreign banks for which they 
have primary administrative enforcement jurisdiction under TILA Section 
108(a), 15 U.S.C. 1607(a). These agencies may, but are not required to, 
use the Board's methodology for estimating burden. Using the Board's 
method, the total current estimated annual burden for the approximately 
17,200 domestically chartered commercial banks, thrifts, and federal 
credit unions and U.S. branches and agencies of foreign banks 
supervised by the Board, OCC, OTS, FDIC, and NCUA under TILA would be 
approximately 17,765,525 hours. The final rule will impose a one-time 
increase in the estimated annual burden for the estimated 638 
institutions thought to engage in mortgage acquisitions by 25,520 
hours. On a continuing basis the annual burden would increase by 61,248 
hours. The total annual burden is estimated to be 17,852,293 hours. The 
above estimates represent an average across all respondents and reflect 
variations between institutions based on their size, complexity, and 
practices.
    The Board has a continuing interest in public opinion on its 
collections of information. At any time, comments regarding the burden 
estimate or any other aspect of this collection of information, 
including suggestions for enhancing the quality of information 
collected and ways for reducing the burden on respondent. Comments on 
the collection of information may be sent to: Secretary, Board of 
Governors of the Federal Reserve System, 20th and C Streets, NW., 
Washington, DC 20551; and to the Office of Management and Budget, 
Paperwork Reduction Project (7100-0199), Washington, DC 20503.

List of Subjects in 12 CFR Part 226

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

Authority and Issuance

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, 1637(c)(5), and 
1639(l); Public Law 111-24 Sec.  2, 123 Stat. 1734.

Subpart E--Special Rules for Certain Home Mortgage Transactions

0
2. Add a new Sec.  226.39 to Subpart E of Part 226 to read as follows:


Sec.  226.39  Mortgage transfer disclosures.

    (a) Scope. The disclosure requirements of this section apply to any 
covered person except as otherwise provided in this section. For 
purposes of this section:
    (1) A ``covered person'' means any person, as defined in Sec.  
226.2(a)(22), that becomes the owner of an existing mortgage loan by 
acquiring legal title to the debt obligation, whether through a 
purchase, assignment, or other transfer, and who acquires more than one 
mortgage loan in any twelve-month period. For purposes of this section, 
a servicer of a mortgage loan shall not be treated as the owner of the 
obligation if the servicer holds title to the loan or it is assigned to 
the servicer solely for the administrative convenience of the servicer 
in servicing the obligation.
    (2) A ``mortgage loan'' means any consumer credit transaction that 
is secured by the principal dwelling of a consumer.
    (b) Disclosure required. Except as provided in paragraph (c) of 
this section, any person that becomes a covered person as defined in 
this section shall mail or deliver the disclosures required by this 
section to the consumer on or before the 30th calendar day following 
the acquisition date. If there is more than one covered person, only 
one disclosure shall be given and the covered persons shall agree among 
themselves which covered person shall comply with the requirements that 
this section imposes on any or all of them.
    (1) Acquisition date. For purposes of this section, the date that 
the covered person acquired the mortgage loan shall be the date of 
acquisition recognized in the books and records of the acquiring party.
    (2) Multiple consumers. If there is more than one consumer liable 
on the obligation, a covered person may mail or deliver the disclosures 
to any consumer who is primarily liable.
    (c) Exceptions. Notwithstanding paragraph (b) of this section, a 
covered person is not subject to the requirements of this section with 
respect to a particular mortgage loan if:
    (1) The covered person sells or otherwise transfers or assigns 
legal title to the mortgage loan on or before the 30th calendar day 
following the date that the covered person acquired the mortgage loan; 
or

[[Page 60152]]

    (2) The mortgage loan is transferred to the covered person in 
connection with a repurchase agreement and the transferor that is 
obligated to repurchase the loan continues to recognize the loan as an 
asset on its own books and records. However, if the transferor does not 
repurchase the mortgage loan, the acquiring party must make the 
disclosures required by Sec.  226.39 within 30 days after the date that 
the transaction is recognized as an acquisition in its books and 
records.
    (d) Content of required disclosures. The disclosures required by 
this section shall identify the loan that was acquired or transferred 
and state the following:
    (1) The identity, address, and telephone number of the covered 
person who owns the mortgage loan. If there is more than one covered 
person, the information required by this paragraph shall be provided 
for each of them.
    (2) The acquisition date recognized by the covered person.
    (3) How to reach an agent or party having authority to act on 
behalf of the covered person (or persons), which shall identify a 
person (or persons) authorized to receive legal notices on behalf of 
the covered person and resolve issues concerning the consumer's 
payments on the loan. However, no information is required to be 
provided under this paragraph if the consumer can use the information 
provided under paragraph (d)(1) of this section for these purposes. If 
multiple persons are identified under this paragraph, the disclosure 
shall provide contact information for each and indicate the extent to 
which the authority of each agent differs. For purposes of this 
paragraph (d)(3), it is sufficient if the covered person provides only 
a telephone number provided that the consumer can use the telephone 
number to obtain the address for the agent or other person identified.
    (4) The location where transfer of ownership of the debt to the 
covered person is recorded. However, if the transfer of ownership has 
not been recorded in public records at the time the disclosure is 
provided, the covered person complies with this paragraph by stating 
this fact.
    (e) Optional disclosures. In addition to the information required 
to be disclosed under paragraph (d) of this section, a covered person 
may, at its option, provide any other information regarding the 
transaction.

0
3. In Supplement I to Part 226, under Subpart E, a new Section 226.39--
Mortgage Transfer Disclosures is added to read as follows:

Supplement I to Part 226--Official Staff Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 226.39--Mortgage transfer disclosures.

    39(a) Scope.
    Paragraph 39(a)(1).
    1. Covered persons. The disclosure requirements of Sec.  226.39 
apply to any ``covered person'' that becomes the legal owner of an 
existing mortgage loan, whether through a purchase, assignment, or 
other transfer, regardless of whether the person also meets the 
definition of a ``creditor'' in Regulation Z. The fact that a person 
purchases or acquires mortgage loans and provides disclosures under 
Sec.  226.39 does not by itself make that person a ``creditor'' as 
defined in the regulation.
    2. Acquisition of legal title. To become a ``covered person'' 
subject to Sec.  226.39, a person must become the owner of an 
existing mortgage loan by acquiring legal title to the debt 
obligation. The transfer of ownership of a mortgage loan is subject 
to the disclosure requirements of this section when the acquiring 
party is a separate legal entity from the transferor, even if the 
parties are affiliated entities. Section 226.39 does not apply to 
persons who acquire only a beneficial interest in the loan or a 
security interest in the loan. Section 226.39 also does not apply to 
a party that assumes the credit risk without acquiring legal title 
to the loan. Thus, an investor that acquires mortgage-backed 
securities, pass-through certificates, or participation interests 
and does not directly acquire legal title in the underlying mortgage 
loans is not covered by this section.
    3. Loan servicers. Pursuant to TILA Section 131(f)(2), the 
servicer of a mortgage loan is not treated as the owner of the 
obligation for purposes of Sec.  226.39 if the servicer holds title 
to the loan as a result of the assignment of the obligation to the 
servicer solely for the administrative convenience of the servicer 
in servicing the obligation.
    4. Mergers, corporate acquisitions, or reorganizations. 
Disclosures are required under Sec.  226.39 when, as a result of a 
merger, corporate acquisition, or reorganization the ownership of a 
mortgage loan is transferred to a different legal entity.
    Paragraph 39(a)(2).
    1. Mortgage transactions covered. Section 226.39 applies to any 
consumer credit transaction secured by the principal dwelling of a 
consumer, which includes closed-end mortgage loans as well as home 
equity lines of credit.
    39(b) Disclosure required.
    1. Generally. A covered person must mail or deliver the 
disclosures required by Sec.  226.39 on or before the 30th calendar 
day following the date that the covered person acquired the loan, 
unless the exception in Sec.  226.39(c) applies. For example, if a 
covered person acquires a mortgage loan on March 1, the required 
disclosure must be mailed or delivered on or before March 31. For 
purposes of this requirement, the date that the covered person 
acquires the loan is the acquisition date recognized in its books 
and records.
    2. Disclosure provided on behalf of multiple entities. A 
mortgage loan may be acquired by a covered person and subsequently 
transferred to an affiliate or other entity that is also a covered 
person required to provide disclosures under Sec.  226.39. In such 
cases, a single disclosure may be provided on behalf of both 
entities instead of providing two separate disclosures, as long as 
the disclosure satisfies the timing and content requirements 
applicable to both entities. For example, if a covered person 
acquires a loan on August 31 with the knowledge that it will assign 
the loan to another entity on October 15, the covered person could 
mail a single disclosure on or before September 30 which provides 
the required information for both entities and indicates when the 
subsequent transfer is expected to occur. Even though one person 
delegates responsibility for the disclosures to another covered 
person, each has a duty to ensure that disclosures related to its 
acquisition are accurate and provided in a timely manner.
    39(c) Exceptions.
    Paragraph 39(c)(1).
    1. Example. If a mortgage loan is originated on February 22nd 
and the original creditor sells the loan on March 1 to a covered 
person, under the exception in Sec.  226.39(c) the covered person 
would not be required to provide disclosures under Sec.  226.39 if 
the loan is sold or otherwise transferred or assigned to another 
party on or before March 31.
    Paragraph 39(c)(2).
    1. Repurchase agreements. The original creditor or owner of the 
mortgage loan might sell or transfer legal title to the loan to 
secure short-term business financing under an agreement where the 
original creditor or owner is also obligated to repurchase the loan 
within a brief period, typically a month or less. If the original 
creditor or owner does not recognize such transactions as a sale of 
the loan on its own books and records for accounting purposes, the 
transfer of the loan in connection with such a repurchase agreement 
is not covered by Sec.  226.39 and the acquiring party is not 
required to provide disclosures. However, if the transferor does not 
repurchase the mortgage loan, the acquiring party must make the 
disclosures required by Sec.  226.39 within 30 days after the date 
that the transaction is recognized as an acquisition in its books 
and records.
    39(d) Content of required disclosures.
    1. Identifying the loan. The disclosures required by this 
section should identify the loan that was acquired or transferred. 
The covered person has flexibility in determining what information 
to provide for this purpose. For example, the covered person may 
identify the loan by stating the address of the mortgaged property 
along with the account number or other identification number 
previously known to the consumer, which may appear in a truncated 
format. Alternatively, the covered person might identify the loan by 
specifying the date on which the credit was extended and the 
original amount of the loan or credit line.

[[Page 60153]]

    Paragraph 39(d)(1).
    1. Identification of covered person. Section 226.39(d)(1) 
requires acquiring parties to provide their name, address, and 
telephone number. The party identified must be the covered person 
who owns the mortgage loan, regardless of whether another party has 
been appointed to service the loan or otherwise serve as the covered 
person's agent. In addition to providing a postal address and a 
telephone number, the covered person may, at its option, provide an 
address for receiving electronic mail or an internet web site 
address but is not required to do so.
    Paragraph 39(d)(3).
    1. Identifying agents. Under Sec.  226.39(d)(3), the covered 
person must provide contact information for the agent or other party 
having authority to act on behalf of the covered person and who is 
authorized to receive legal notices on behalf of the covered person 
and resolve issues concerning the consumer's payments on the loan. 
Section 226.39(d)(3) does not require that a covered person 
designate an agent or other party, but if the consumer cannot use 
the covered person's contact information for these purposes the 
disclosure must provide contact information for an agent or other 
party that can address these matters. If multiple agents are listed 
on the disclosure, the disclosure shall state the extent to which 
the authority of each agent differs by indicating if only one of the 
agents is authorized to receive legal notices, or only one of the 
agents is authorized to resolve issues concerning payments. For 
purposes of Sec.  226.39(d)(3), it is sufficient to provide a 
telephone number as the contact information provided that consumers 
can use the telephone number to obtain the mailing address for the 
agent or other person identified.
    2. Other contact information. The covered person may also 
provide an agent's electronic mail address or internet web site 
address but is not required to do so.
    Paragraph 39(d)(4).
    1. Recording location. Section 226.39(d)(4) requires disclosure 
of the location where transfer of ownership of the debt to the 
covered person is recorded. If the transfer of ownership has not 
been recorded in public records at the time the disclosure is 
provided, the covered person complies with Sec.  226.39(d)(4) by 
stating this fact. Whether or not the transfer has been recorded at 
the time the disclosure is made, the disclosure may state that the 
transfer ``is or may be recorded'' at the specified location.
    2. Postal address not required. In disclosing the location where 
the transfer of ownership is recorded, the covered person is not 
required to provide a postal address for the governmental office 
where the covered person's ownership interest is recorded. The 
covered person also is not required to provide the name of the 
county or jurisdiction where the property is located. For example, 
it would be sufficient to disclose that the transaction is or may be 
recorded in the office of public land records or the recorder of 
deeds office ``for the county or local jurisdiction where the 
property is located.''
    39(e) Optional disclosures.
    1. Generally. Section 226.39(e) provides that covered persons 
may, at their option, include additional information about the 
mortgage transaction that they consider relevant or helpful to 
consumers. For example, the covered person may choose to inform 
consumers that the location where they should send mortgage payments 
has not changed.

    By order of the Board of Governors of the Federal Reserve 
System, November 13, 2009.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E9-27742 Filed 11-19-09; 8:45 am]
BILLING CODE 6210-01-P