[Federal Register Volume 75, Number 185 (Friday, September 24, 2010)]
[Rules and Regulations]
[Pages 58489-58504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20664]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Docket No. R-1378]


Regulation Z; Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule; official staff commentary.

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SUMMARY: The Board is publishing final rules amending Regulation Z 
(Truth in Lending). The final 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.
    Consistent with the statute, the final rule requires a purchaser or 
assignee that acquires a loan to provide the disclosures in writing no 
later than 30 days after the date on which the loan was sold, 
transferred or assigned. Certain exceptions may apply if the covered 
person transfers or assigns the loan to another party on or before the 
30th day.

DATES: Effective Date. This final rule is effective on January 1, 2011.
    Mandatory Compliance Date. The mandatory compliance date is January 
1, 2011. Covered persons may immediately comply with this amendment or 
continue to comply with 12 CFR 226.39 until the mandatory compliance 
date.

FOR FURTHER INFORMATION CONTACT: Jelena McWilliams, Attorney, or Paul 
Mondor, Senior 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. 
TILA 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 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 it acquired the loan. 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.
    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 otherwise 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). In November 2009, the Board issued an interim rule that 
was effective immediately upon publication, so that parties subject to 
the rule would have guidance on how to interpret and comply with the 
statutory requirements. 74 FR 60143, Nov. 20, 2009.
    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 Final Rule

    The final rule requires an acquiring party to provide the 
disclosures in writing no later than 30 days after the date on which 
the loan was sold, transferred or assigned. Under the final rule, the 
disclosures must state (1) The name, address, and telephone number of 
the new owner; (2) the transfer date; (3) the name, address, and 
telephone number of an agent or other party authorized to receive the 
consumer's rescission notice and resolves issues concerning the 
consumer's payments on the loan (if other than owner); and (4) where 
the transfer of ownership is recorded.
    Consistent with the statute and legislative intent, the 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

[[Page 58490]]

purchase or other transfer or assignment. A person is covered by the 
rule if it acquires legal title to the debt obligation. Although TILA 
and Regulation Z generally apply only to persons to whom the credit 
obligation is initially made payable and that regularly engage in 
extending consumer credit, Section 404(a) and the final rule apply to 
persons that acquire mortgage loans without regard to whether they also 
extend consumer credit by originating mortgage loans. However, the 
final rule applies only to persons that acquire more than one mortgage 
loan in any 12-month period. 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.
    To prevent the confusion that could result if consumers receive 
disclosures from multiple parties or outdated contact information for 
parties that no longer own their loan, the final rule provides three 
exceptions. Under the 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. The disclosures need not be 
given, however, if the covered person transfers or assigns all of its 
interest in the loan to another party on or before that date. For 
example, a covered person that acquires a mortgage loan on March 15 
must mail or deliver the disclosures on or before April 14. However, if 
the covered person sells or assigns the loan to a third party on April 
14 (or earlier), the covered person need not provide the disclosures, 
but subsequent purchasers would have to comply with the rule. If the 
covered person transfers a partial interest in the loan on or before 
the 30th day following its acquisition and retains a partial interest 
in the loan, the covered person would have to comply with the rule 
unless one of the other exceptions applies.
    A second exception applies when the owner of the mortgage loan 
transfers the legal title in a transaction that is subject to a 
repurchase agreement. In that case, the disclosures are not required if 
the transferor is obligated to repurchase the loan. This exception also 
applies when the acquiring party obtains a loan through an intermediary 
party instead of the transferor that is obligated to repurchase the 
loan. If the transferor does not repurchase the mortgage loan, the 
acquiring party must make the disclosures within 30 days after the date 
that the transaction is recognized as an acquisition on its own books 
and records.
    A third exception applies when the covered person acquires only a 
partial interest in the loan and the party authorized to resolve issues 
concerning the consumer's payments on the loan or receive the 
rescission notice on behalf of a current owner does not change as a 
result of the transfer.

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(a) 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(a) 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 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).
    After considering the comments received and based on its experience 
in implementing and enforcing Regulation Z, for the reasons discussed 
in this notice the Board is using its rulemaking authority under TILA 
Section 105(a) and (f) to implement Section 404(a) of the 2009 Act.

IV. Overview of Comments Received

    In response to the interim rule, the Board received thirty-five 
comment letters. Twenty letters were received from financial 
institutions, financial services trade associations and law firms 
representing the financial industry. Three letters were received from 
consumer groups, and twelve letters were received from individual 
consumers.
    Financial institutions and financial services trade associations 
generally supported the interim rule because it clarifies statutory 
requirements and offers guidance to creditors and other parties that 
acquire mortgage loans. A few of these commenters stated that the Board 
should narrow the scope of the rule's coverage and broaden the 
exceptions. Three industry commenters sought an exemption for transfers 
that occur as a result of a corporate merger, acquisition, or 
reorganization. One commenter representing industry requested that the 
Board expand the exemption applicable to repurchase agreements to other 
short-term purchase arrangements even if the transferor is not 
obligated to repurchase the loan.
    Consumer groups generally supported the interim rule because it 
ensures consumers will receive meaningful information in a timely 
manner. However, consumer advocates sought to expand the scope of the 
rule's coverage and narrow the scope of exceptions to provide 
additional consumer protection. Individual consumers that commented 
generally supported the interim rule. The comments are discussed in 
more detail below in part V of the Supplementary Information.

V. Section-by-Section Analysis

Section 226.39--Mortgage Transfer Disclosures

39(a) Scope
Interim Rule
    Section 226.39(a) defines the scope of the interim rule's coverage. 
Under the interim rule, the disclosure requirements of Sec.  226.39 
apply to any ``covered person'' with certain exceptions specified in 
the rule. For purposes of the interim rule, a ``covered person'' 
includes any person (as defined in Sec.  226.2(a)(22)) that acquires 
more than one existing mortgage loan in any 12-month period. Consistent 
with the statute, the interim rule applies to all consumer mortgage 
transactions secured by the principal dwelling of a consumer, whether 
the transaction is a closed-end mortgage loan or an extension of credit 
under an open-end plan.
    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 requirements 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

[[Page 58491]]

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. In issuing the interim rule, the Board 
declined to limit Section 404(a) to parties that originate consumer 
loans because such an interpretation would exempt a significant 
percentage of mortgage transfers to persons that purchase loans in the 
secondary market but do not extend consumer credit and are not 
``creditors'' for purposes of other provisions of Regulation Z.
    The interim rule also clarified that Section 404(a) does not alter 
the definition of ``creditor'' as 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. Accordingly, in 
describing the persons subject to the requirements of Sec.  226.39, the 
interim rule uses the term ``covered person'' rather than the term 
``creditor.''
    Under the interim rule, the disclosure requirements under 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. In issuing the 
interim rule, the Board indicated that it found nothing in the 
legislative history indicating that Section 404(a) was intended to 
apply more broadly than the general TILA and Regulation Z requirements. 
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 transfer to another family 
member or to a trust for estate planning purposes, or to another person 
if the original note holder dies. The Board determined that a formal 
notice under Section 404(a) was 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 interim rule excludes 
persons who are not regularly engaged in the business of purchasing or 
investing in consumer mortgages loans, are involved in such 
transactions only infrequently, and would not have systems in place to 
comply.
    Consistent with the legislative purpose, 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 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 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 acquire legal title in the underlying mortgage loan, is 
not covered by Sec.  226.39. See 155 Cong. Rec. S5098-99 (daily ed. May 
5, 2009). The interim rule also clarifies that the disclosures are 
required under Sec.  226.39 for transfers that occur as a result of a 
corporate merger, acquisition, or reorganization when ownership of the 
loan is transferred to a different legal entity.
    Section 131(f) of TILA addresses the treatment of loan servicers 
under 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. 
Accordingly, the requirements of Sec.  226.39 under the interim rule do 
not apply to a loan servicer if the servicer holds legal title to the 
loan solely for administrative convenience.
Public Comment
    The Board solicited comment on the definition of a ``covered 
person'' and whether the scope of the interim rule's coverage is 
appropriate, or whether a different standard should apply in 
determining which persons must comply with the disclosure requirements 
of Sec.  226.39. Comment was specifically requested on whether the 
Board should use the same Regulation Z standard used to determine 
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.
    The Board received several comments that addressed the scope of the 
rule. A few industry commenters stated that the rule should cover only 
persons that acquire more than five mortgage loans in the preceding or 
current calendar year based on the standard used to determine whether a 
person is a [l'dquo]creditor'' for purposes of Regulation Z. These 
commenters stated that a threshold of one loan in 12 months is too low.
    One financial institution commenter requested that the Board exempt 
transfers that occur in connection with a merger of entities with no 
accompanying change in the servicing of the mortgage loan. The 
commenter stated that a merger results in a mortgage loan being 
combined with the assets of another entity, rather than being sold or 
transferred. An industry trade group requested that the Board exempt 
transfers that occur as a result of a merger of entities with no 
accompanying change in either the name or the contact information for 
the covered person. The commenter also stated that some corporate 
reorganizations or asset sales may not allow enough advance planning 
for the acquiring party to produce and deliver the disclosures required 
by Sec.  226.39 in a timely manner. This commenter suggested that the 
final rule should contain a general exemption for transfers that occur 
as a result of a merger, or to provide a longer compliance period for 
such transfers.
    Consumer group commenters stated that the rule should cover any 
person that acquires a mortgage loan, without exception. They also 
asserted that transfers to servicers that hold legal title solely for 
administrative convenience should be covered. These commenters stated 
that if the rule exempts servicers that take legal title solely for 
administrative convenience, the rule should also clarify that 
submitting a rescission notice to the servicer should be effective as 
to the actual holder. They also requested that the final rule address 
the remedies available in court when a violation occurs.
Final Rule
    The final rule adopts the same definition of ``covered person'' 
used in the interim rule. Under the final rule, a ``covered person'' 
includes any person (as defined in Sec.  226.2(a)(22)) that acquires 
more than one existing mortgage loan in any 12-month period.
    Like the interim rule, the final rule exempts individual transfers 
because

[[Page 58492]]

the potential benefit of covering such transactions would not outweigh 
the likely burden on persons who do not regularly engage in mortgage 
transactions. Generally, TILA only covers parties that regularly engage 
in consumer credit transactions who are expected to have the capacity 
to put systems in place to ensure compliance with the rules. The Board 
believes that persons who engage in a single transaction should not be 
expected to comply. Moreover, the Board believes that the disclosures 
required under Sec.  226.39 are not needed in situations involving 
individual transfers because the acquiring party is directly involved 
with the borrower and has an incentive to ensure that the borrower 
knows where to send loan payments.
    Like the interim rule, the final rule clarifies that, to become a 
``covered person'' subject to the disclosure requirements under Sec.  
226.39, a person must become the owner of an existing mortgage loan by 
acquiring legal title to the loan. Comment 39(a)(1)-2(i) is added in 
the final rule to clarify that a party may become a covered person by 
acquiring a partial interest in a mortgage loan. Comment 39(a)(1)-2(ii) 
is added in the final rule to clarify that all persons that jointly 
acquire legal title to the loan are subject to the disclosure 
requirements of Sec.  226.39. Multiple persons are deemed to jointly 
acquire legal title if each acquires a partial interest in the loan 
pursuant to the same agreement or they otherwise act in concert to 
acquire their interest in the loan. Comment 39(a)(1)-2(iii) is added to 
clarify that an acquiring party that is a separate legal entity from 
the transferor must provide the disclosures required by Sec.  226.39 
even if the parties are affiliated entities.
    The final rule, like the interim rule, does not apply to persons 
who acquire only a beneficial interest 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. The final rule also does 
not apply to a party that assumes the credit risk without acquiring 
legal title to the loans such as an investor who purchases mortgage-
backed securities.
    Consistent with TILA Section 131(f), the final rule does not apply 
to a party servicing the mortgage loan if the obligation was assigned 
to the servicer solely for administrative convenience. Consumer group 
commenters requested that, if the final rule exempts transfers to 
servicers for administrative convenience, it should provide that 
consumers may submit a rescission notice to the servicer. The Board is 
addressing this issue concerning consumers' ability to send rescission 
notices to the servicer in a separate proposed rule published elsewhere 
in today's Federal Register (Docket No. R-1390). Consumer group 
commenters also requested that the final rule set forth appropriate 
remedies for violations of the disclosures requirements under Sec.  
226.39. The Board notes that a determination of court remedies is 
outside of the scope of this rulemaking. Nonetheless, in using the term 
``covered person'' rather than ``creditor'' in Sec.  226.39, the Board 
is not determining whether or not TILA Section 130 applies. The Board 
notes that Section 404(a) of the 2009 Act specifically adds TILA 
Section 131(g) to the list of sections covered under TILA Section 130.
    The Board does not believe that an exemption for transfers that 
occur as a result of a corporate merger, acquisition, or reorganization 
is appropriate when there is a transfer of ownership to a different 
legal entity. The final rule is consistent with the legislative goal 
that consumers be notified of transfers that would require them to seek 
assistance from or assert their rights against a different legal 
entity, even if the parties are affiliated entities. The fact that a 
merger results in a mortgage loan being combined with the assets of 
another entity is not dispositive of whether the disclosure 
requirements under Sec.  226.39 are triggered. If legal title in the 
loan is held by the same legal entity before and after the merger, 
there is no transfer of title and the disclosure requirements of Sec.  
226.39 are not triggered. Thus, combining assets with another entity is 
not in itself dispositive of whether the disclosures under Sec.  226.39 
are required.
    The Board also believes that a longer compliance period for 
transfers that occur as a result of a merger, acquisition or 
reorganization would not be appropriate under the statute. Consistent 
with the statute and the interim rule, the final rule requires the 
purchaser or assignee that acquires the loan to provide the disclosures 
in writing no later than 30 days after the date on which the loan is 
sold, transferred or assigned.
39(b) Disclosure Required
Interim Rule
    Section 226.39(b) contains the general requirement for covered 
persons to provide the disclosures required under Section 404(a) of the 
2009 Act, unless one of the exceptions specified in Sec.  226.39(c) 
applies. Under the interim rule, 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. Under the interim 
rule, the date on which the covered person acquires the loan is the 
acquisition date 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 on behalf of all 
covered persons. 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. This is consistent with the rule generally 
applicable to TILA disclosures. See TILA Section 121(a) and Sec.  
226.17(d) of Regulation Z.
    The disclosure requirements of Sec.  226.39 apply when the 
acquiring party is a separate legal entity from the transferor, even if 
the parties are affiliated entities. If there are multiple transfers, 
the regulation allows multiple covered persons to combine their 
disclosures in a single document, provided that the disclosure meets 
the applicable timing requirements for each person. Comment 39(b)-2 
provides guidance on how multiple parties may provide a single 
disclosure.
Public Comment
    Consumer group commenters opposed the provision in the interim rule 
allowing covered persons to provide the disclosures to any consumer who 
is primarily liable on the loan. They suggested that the final rules 
instead require a covered person to provide the disclosure to every 
consumer who is liable on the mortgage loan and any person entitled to 
rescind. In addition to obligors, other persons may have a right to 
rescind if their ownership interest in their principal dwelling will be 
subject to the creditor's security interest.
    One industry commenter suggested that the final rule should provide 
more flexibility in determining the acquisition date. This commenter 
stated that covered persons may use an electronic mortgage registry 
that automatically generates and provides the disclosures when the 
transferor enters the closing date for the transfer and the acquirer 
confirms the acquisition. Because the transferor and the acquirer may 
not recognize the same date of transfer due to differences in their 
accounting systems, the commenter suggested that the disclosure should 
be permitted to state either the acquisition date recognized on the 
purchaser's books, or the date recognized on the transferor's books.
    Two other industry commenters asked the Board to clarify that 
disclosures

[[Page 58493]]

required by Sec.  226.39 may be combined with other materials or 
disclosures, including notices of mortgage servicing transfers required 
by RESPA, 12 U.S.C. 2601 et seq.
Final Rule
    The final rule clarifies that the disclosures required by Sec.  
226.39 must be provided clearly and conspicuously in writing, in a form 
that the consumer may keep. Consistent with the standard that applies 
to other disclosures under Regulation Z, the disclosures also may be 
provided to the consumer in electronic form, subject to compliance with 
the consumer consent and other applicable provisions of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act), 15 U.S.C. 
7001 et seq. The final rule also clarifies that the disclosures under 
Sec.  226.39 can be combined with other materials or disclosures, 
including the transfer of servicing notices required by RESPA so long 
as the combined disclosure satisfies the timing and other requirements 
in Sec.  226.39.
    Consistent with the interim rule, the final rule allows a covered 
person to provide notice to any consumer primarily liable on the 
obligation. Because Sec.  226.39 applies to loans secured by the 
consumer's principal dwelling, additional copies sent to multiple 
obligors would typically be delivered to the same address, and would 
not significantly enhance consumer protection. Requiring covered 
persons to also deliver the disclosures to non-obligors who may be 
entitled to rescind would create operational difficulties because the 
party acquiring the loan would not necessarily know which parties other 
than the obligor had an interest in the property and a right to rescind 
at the time the credit was initially extended.
    Section 404(a) requires that disclosures be provided ``not later 
than 30 days after the date on which the mortgage loan is sold or 
otherwise transferred or assigned to a third party.'' Public Law 111-
22, 123 Stat. 1632. The interim rule refers to the date of transfer as 
the ``acquisition date'' which is defined in the interim rule as ``the 
date of acquisition recognized in the books and records of the 
acquiring party.'' The Board recognizes that different entities may use 
different accounting methods so that the date of transfer on the 
transferor's books might differ from the date of acquisition on the 
purchaser's books. To facilitate compliance, the final rule has been 
revised to clarify that the disclosures must be provided on or before 
the 30th day following the ``date of transfer'' which may be either the 
acquisition date recognized by the transferee, or the date recognized 
by the transferor. Similarly, either date may be stated on the 
disclosure as the date of transfer.
    Multiple transfers. Like the interim rule, Sec.  226.39(b)(4) of 
the final rule provides that, if a mortgage loan is acquired by one 
covered person and subsequently transferred to another covered person, 
a single disclosure may be provided on behalf of both covered persons 
if the disclosure satisfies the timing and content requirements 
applicable to each covered person. For example, if a covered person 
acquires a loan on March 15 with the intent to assign it to another 
entity on April 30, the covered person could mail a single disclosure 
on or before April 14, providing information for both entities, and 
indicating when the subsequent transfer is expected to occur. No 
comments were received on this aspect of the rule.
    The Board recognizes, however, that in this circumstance, the exact 
date of a subsequent transfer may not be known at the time the 
disclosure is provided. Consistent with the standard in current Sec.  
226.31(d)(2), the date on which one covered person expects to transfer 
the loan to another covered person may be estimated when the exact 
information is unknown at the time the disclosure is made. Comment 
39(b)(4)-2 has been added for clarification. The comment further states 
that information is unknown if it is not reasonably available to the 
covered person at the time the disclosure is made. The ``reasonably 
available'' standard requires that the covered person, acting in good 
faith, exercise due diligence in obtaining information. The commentary 
provides that a covered person normally may rely on the representations 
of other parties in obtaining information, and may make the disclosure 
using an estimated date based on information known at the time the 
disclosure is made, even though more precise information will be 
available at a later date. For example, if the covered person acquires 
the loan on March 15, a disclosure may be provided on April 1 stating 
that the loan will be assigned to another entity ``on or around'' April 
30, even if the covered person expects to obtain information before 
April 14 about the expected transfer date.
    Comment 39(b)(4)-3 clarifies that even if one covered person 
provides the disclosures for another, each person has a duty to ensure 
that disclosures related to its acquisition are accurate and provided 
in a timely manner unless an exception in Sec.  226.39(c) applies.
    Multiple covered persons. Comment 39(b)(5)-1 in the final rule 
clarifies that multiple covered persons who jointly acquire the loan in 
a single transaction must provide a single disclosure that satisfies 
the timing requirements for each person. If multiple covered persons 
jointly acquire the loan and complete the acquisition on separate 
dates, a single disclosure must be provided on behalf of all persons on 
or before the 30th calendar day following the earliest acquisition 
date.
    Comment 39(b)(5)-2 further clarifies that if multiple covered 
persons each acquire a partial interest in the loan in separate and 
unrelated agreements and not jointly, each covered person has a duty to 
ensure that disclosures related to its acquisition are accurate and 
provided in a timely manner, unless an exception in Sec.  226.39(c) 
applies. The parties may, but are not required to, provide a single 
disclosure that satisfies the timing and content requirements 
applicable to each covered person. Comment 39(b)(5)-3 clarifies that a 
single disclosure provided on behalf of multiple covered persons must 
satisfy the timing and content requirements applicable to each covered 
person unless an exception in Sec.  226.39(c) applies. Comment 
39(b)(5)-4 provides that even though one person provides the 
disclosures for another covered person, each has a duty to ensure that 
disclosures related to its acquisition are accurate and provided in a 
timely manner unless an exception in Sec.  226.39(c) applies.
39(c) Exceptions
Interim Rule
    Section 226.39(c) of the interim rule contains two exceptions to 
the disclosure requirements. Under Sec.  226.39(c)(1), a covered person 
need not provide the disclosures if it transfers or assigns the loan to 
another party on or before the 30th calendar date following the date 
that it acquired the loan. This provision was adopted 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). For example, if a 
mortgage loan is originated on March 1 and the original creditor sells 
the loan to a covered person on March 15, the covered person would not 
be required to provide the disclosures if the loan is subsequently sold 
to a third party on or before April 14 under this exception.
    The Board stated in the interim rule that this exception is 
necessary and proper to effectuate the purposes of Section 404(a) and 
to facilitate compliance. This exception seeks to

[[Page 58494]]

prevent the confusion that could result if consumers receive outdated 
contact information for parties that no longer own their loans. 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 disclosures sent by temporary holders 
would provide information that most consumers are unlikely to need or 
use. Moreover, the disclosures from temporary holders could create 
information overload for many consumers and hinder their ability to 
determine which party should be contacted to address a concern. Thus, 
the Board adopted the exception in Sec.  226.39(c)(1) pursuant to TILA 
Section 105(a) to effectuate TILA's purposes and facilitate compliance.
    The Board also considered the relevant statutory factors in TILA 
Section 105(f). The Board found that use of Section 105(f) is 
appropriate because the disclosure of ownership interests that are held 
less than 30 days would not provide a meaningful benefit to consumers 
in the form of useful information or consumer protection. Requiring 
temporary holders to provide the disclosures would complicate 
compliance and impose unnecessary burden and expense that would not be 
outweighed by the benefits to consumers.\2\
---------------------------------------------------------------------------

    \2\ 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.
---------------------------------------------------------------------------

    Section 226.39(c)(2) of the interim rule contains a second 
exception to the disclosure requirements of Sec.  226.39. In some 
cases, the original creditor or owner of the mortgage loan may sell or 
transfer the legal title to the loan to a third party to secure 
business financing. This is generally done in connection with a 
repurchase agreement that obligates the original creditor or owner to 
repurchase the loan. Under Sec.  226.39(c)(2) of the interim rule, if 
the original creditor or owner has a repurchase obligation and does not 
recognize the transaction as a sale of the loan on its books and 
records, 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 on its books and 
records.
    This exception was 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 transfers subject to a repurchase 
agreement in Sec.  226.39(c)(2) was intended to prevent consumer 
confusion that could arise from the receipt of outdated disclosures. 
The Board found that requiring disclosures for these transactions would 
not provide a meaningful benefit to consumers in the form of useful 
information or protection. Without an exemption for these transactions, 
consumers would receive two notices: One at the time legal title in the 
loan is transferred, and another when the loan is repurchased shortly 
after. Thus, the disclosure of transfers subject to repurchase 
agreements would complicate compliance and impose unnecessary burden 
and expense for covered persons that would not be outweighed by the 
benefits to consumers.
Public Comment
    The Board requested comment on whether the exemption in Sec.  
226.39(c)(1) is appropriate and whether a 30-day period should be 
shorter or longer. Consumer group commenters stated that the 30-day 
exception is appropriate so long as the subsequent owners are required 
to disclose information about any prior owner who did not provide the 
disclosure. These commenters suggested that the final rule clarify that 
each covered person must disclose a full chain of title so that all 
transfers of ownership throughout the history of the loan are listed in 
each disclosure. Consumer advocates also stated that, if the 30-day 
period is lengthened in the final rule, the rule should provide that 
(1) no foreclosure action is permitted without first providing 
information to the consumer about the current holder of the note and 
mortgage, and (2) no foreclosure action is permitted in the name of a 
party that no longer owns the loan.
    Industry commenters generally supported the exception in Sec.  
226.39(c)(1). Several industry commenters stated that a 30-day period 
is too short because it fails to capture many short-term acquisitions 
that may be finalized shortly after the 30th day. These commenters 
requested that 30 days be changed to at least 60 days and preferably 90 
days, so that a covered person that transfers or assigns the loan to 
another party on or before the 60th or 90th day would not be required 
to deliver the disclosures. A few industry commenters stated that 
listing all previous owners in every disclosure would increase the risk 
of consumers contacting an incorrect party that no longer owns their 
loan.
    The Board also requested comment on whether the exception in Sec.  
226.39(c)(2) for transfers that are subject to a repurchase agreement 
is appropriate. Consumer group commenters opposed the exception. They 
believe that a disclosures should be provided with the initial transfer 
and a second disclosure should be provided when the transferor 
repurchases the loan. One industry trade association asked the Board to 
clarify that loans transferred under a repurchase agreement are exempt 
from the disclosure requirements under Sec.  226.39 regardless of how 
the loan is recognized on the seller's books and records because the 
acquiring party may not have that information. One industry commenter 
stated that the exception for repurchase agreements in Sec.  
226.39(c)(2) of the interim rule is too narrow. This commenter 
suggested that the final rule clarify that the exception applies even 
if the loan is acquired from an intermediary as long as the prior 
holder is obligated to repurchase the loan. According to the commenter, 
this set of transactions usually takes between 5 days and 90 days to 
complete, during which time the original creditor continues to 
recognize the loan on its books and records.
    A law firm that represents secondary market participants urged the 
Board to exempt certain short-term acquisitions even if they are not 
subject to a repurchase agreement. This commenter stated that under 
some financing arrangements, the acquiring party enters into a 
commitment to acquire the loan, then aggregate it with other loans, and 
subsequently transfer a pool of mortgage loans to a third party. 
However, the acquiring party's commitment to transfer the loans it 
acquires to a third party does not apply to any particular mortgage 
loan; rather, it applies to the type of loan described in the purchase 
agreement. Because the transfer to the third party might take longer 
than 30 days, the acquiring party cannot rely on the exception in Sec.  
226.39(c)(1) for these transactions. The commenter suggested that the 
final rule should exempt these kinds of transfers from the disclosure 
requirements of Sec.  226.39, or, alternatively, expand the exception 
in

[[Page 58495]]

Sec.  226.39(c)(1) from 30 to 60 days to accommodate these 
transactions.
    Several industry commenters requested additional exceptions. A 
credit union and a credit union trade association suggested that the 
final rule should exempt transfers of partial ownership interests to 
multiple covered persons in accordance with participation agreements. 
According to one commenter, the originating credit union retains at 
least ten percent of the interest in the underlying loan, and the 
participants generally designate a single agent to handle all matters 
concerning the consumer's inquiries about the loan, including 
rescission and modification. For example, if the consumer sends a 
notice of rescission to the appointed agent, the notice is deemed to be 
received by all participants. These commenters suggested that 
disclosures under Sec.  226.39 should not be required if the 
originating entity retains an interest in the underlying loan, and the 
agent does not change as a result of the transfer. These commenters 
also stated that consumers may be confused by a disclosure stating that 
a portion of their loan has been transferred to one or more entities 
when the originating creditor still holds a partial interest and the 
agent has not changed.
    One industry commenter requested that the Board exempt the 
assignment of a mortgage loan that is initiated by the consumer in 
connection with a refinancing by the assignee. This commenter explained 
that in some states, the refinancing lender may purchase the existing 
mortgage loan and enter into a modification agreement with the consumer 
to avoid certain costs associated with a new extension of credit. In 
this commenter's view, since the consumer initiated the transaction 
with the assignee and receives the disclosures from the new lender at 
closing, it may confuse the consumer to receive another set of 
disclosures within 30 days after the loan is modified. The commenter 
also expressed concerns about the unnecessary cost and burden of the 
additional disclosures.
Final Rule
    The final rule retains the exceptions in Sec.  226.39(c)(1) and (2) 
of the interim rule and also provides an additional exception which is 
contained in new Sec.  226.39(c)(3). With respect to Sec.  
226.39(c)(1), the Board has retained the exception for covered persons 
that do not hold a loan for more than 30 calendar days after acquiring 
it. The Board recognizes that under some short-term financing 
arrangements, the covered persons may acquire the loan only 
temporarily, but for a period that exceeds 30 days. However, the Board 
believes that lengthening the 30-day period would undermine the 
legislative purpose. A 60-day exemption would cause some parties to 
wait up to 60 days before determining whether to make the disclosure 
for a particular loan or claim an exemption. The exemption contained in 
the final rule is consistent with the legislative intent that consumers 
receive the disclosure within 30 days after a transfer occurs, while 
eliminating disclosures from parties that no longer own the loan.
    Comment 39(c)(1)-1 has been revised to clarify that a covered 
person is not required to provide the disclosures required under Sec.  
226.39 if it sells, transfers or assigns all of its interest in the 
mortgage loan on or before the 30th calendar day following the date 
that it acquired the mortgage loan. Comment 39(c)(1)-2 has been added 
in the final rule to address transfers of a partial interest in the 
mortgage loan. It clarifies that a covered person that transfers only a 
partial interest in the loan on or before the 30th calendar day 
following the date that it acquired the loan must comply with the 
disclosure requirements so long as it retains a partial interest in the 
loan on the 30th day.
    The final rule does not require a covered person to disclose 
information about former holders of legal title. The Board is concerned 
that a disclosure reflecting the full chain of ownership would be 
complex and could create unnecessary confusion for consumers trying to 
determine what party to contact about their loan. Moreover, such a 
requirement would impose a duty on a covered person to verify the 
identity of all prior owners or risk liability for providing an 
incorrect disclosure. It is unclear whether assignees would routinely 
have access to this information within their own records.
    The final rule also retains the exception in Sec.  226.39(c)(2) of 
the interim rule which covers transfers subject to a repurchase 
agreement. However, in response to commenters' requests, the final rule 
does not require the transferor who is obligated to repurchase the loan 
to continue to recognize the loan as an asset on its books and records. 
While most repurchase arrangements are structured so that the 
transferor does not recognize the sale of the asset on its books and 
records, the Board recognizes that the acquiring party may not know how 
the transferor treats the asset on its books. Under the final rule, if 
the original owner does not repurchase the loan, the acquiring party 
must provide the disclosures within 30 calendar days after it 
recognizes the loan as an asset on its own the books and records.
    The final rule has been modified to address a concern raised by one 
commenter about transactions involving intermediaries. Comment 
39(c)(2)-2 is added to the final rule to clarify that the exception for 
transfers subject to a repurchase agreement applies even when the 
covered person acquires the loan from an intermediary party who is not 
the party obligated to repurchase the loan.
    Consumer group commenters asked the Board to require disclosures 
when a loan is transferred subject to a repurchase agreement and when 
the repurchase occurs. The Board believes that the disclosure of all 
transfers subject to repurchase agreements would impose unnecessary 
burden and expense for covered persons that would not be outweighed by 
the benefits to consumers.
    The final rule does not exempt short-term acquisitions for longer 
than 30 days that are not subject to a repurchase agreement, as 
requested by one commenter. These financing arrangements differ from 
repurchase arrangements in that the original creditor is under no 
obligation to repurchase the loan. Moreover, the specific loan is not 
subject to a purchase commitment even though it may be the type of loan 
described in the purchase agreement. The Board does not believe that a 
covered person should be exempt from the disclosure requirements if the 
transferor is not obligated to repurchase the loan. In addition, 
compliance with the exemption requested by the commenter would be 
difficult to enforce because the individual loan covered by the 
exception is not subject to a specific repurchase agreement by any 
other party.
    The final rule includes an additional exception designated as Sec.  
226.39(c)(3), which was not included in the interim rule, in response 
to commenters' requests to exempt covered persons that acquire partial 
interests in the loan. The exemption in Sec.  226.39(c)(3) applies to a 
covered person that acquires only a partial interest in the loan if the 
party authorized to receive the consumer's notice of the right to 
rescind and resolve issues concerning the consumer's payments on the 
loan does not change as a result of the transfer. This exception is 
adopted pursuant to the Board's authority in TILA Sections 105(a) and 
105(f). As with the exceptions in Sec.  226.39(c)(1) and (2), the 
exception for transfers of a partial interest in Sec.  226.39(c)(3) is 
intended to prevent consumer confusion that could arise from the 
receipt of multiple disclosures.

[[Page 58496]]

    The Board believes that Section 105(f) is appropriate for the 
exception in Sec.  226.39(c)(3) because the disclosure of a partial 
ownership interest would not provide a meaningful benefit to consumers 
in the form of useful information or consumer protection. Requiring 
such disclosures would complicate compliance and impose unnecessary 
burden and expense that would not be outweighed by the benefits to 
consumers. The legislative history reflects that the statute was 
intended to ensure that consumers know the identity of the party they 
can contact to rescind or seek to modify the loan terms. The Board 
believes that the exception in Sec.  226.39(c)(3) will not undermine 
the legislative purpose of Section 404(a) so long as the transfer of a 
partial interest does not result in a change for these purposes. The 
Board believes that disclosures regarding transfers of partial 
interests could create consumer confusion. However, if as a result of 
the transfer of a partial interest in the loan, a different agent or 
party is authorized to receive the rescission notice and resolve issues 
concerning the consumer's payments, the disclosures under Sec.  226.39 
must be provided. Comment 39(c)(3)-2 is added to the final rule to 
provide examples of when disclosures would be required in connection 
with a transfer of a partial interest in the loan.
    The final rule does not provide an exception for transfers 
initiated by consumers who seek to refinance their mortgage loans. A 
covered person's compliance with such a rule would be difficult to 
determine because it would depends on a case by case factual 
determination. To ease the compliance burden, the covered person has 
the option to provide the disclosures required by Sec.  226.39 along 
with other disclosures at the time of refinancing instead of 30 days 
later.
39(d) Content of Required Disclosures
    Section 226.39(d) of the interim rule sets forth the contents of 
the disclosure 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.
Identifying the Loan
    Interim rule. Under the interim rule, the disclosures required by 
Sec.  226.39 must identify the loan that was acquired or transferred. 
The interim rule provides flexibility for covered persons to determine 
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. The covered person might instead identify the loan by 
specifying the date on which the credit was extended and the original 
amount of the loan or credit line.
    Public comment. One industry commentator stated that providing the 
account number alone should be sufficient for consumers to identify the 
loan, and would reduce the risk of mailing sensitive information. The 
commentator suggested that the final rule should clarify that the 
account number alone (or other identifying information already provided 
to the consumer) is adequate to identify the loan.
    Final rule. To provide flexibility and ease compliance while 
protecting consumer's confidential information, the final rule provides 
that a covered person may use any information that would reasonably 
inform a consumer which loan was acquired or transferred. Comment 
39(d)-1 in the interim rule has been retained and provides examples 
that are merely illustrations, including that the covered person may 
identify the loan by stating the address of the mortgages property 
along with the account number, or just the loan number previously 
disclosed to the consumer.
Name, Address, and Telephone Number of Covered Person
    Interim rule. Section 226.39(d)(1) implements the requirement that 
covered persons provide their name, address and telephone number. Under 
the interim rule, the party identified must be a covered person who 
owns the mortgage loan, regardless of whether another party services 
the loan or is 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 person.
    Public comment. The Board specifically solicited comments on 
whether the identification of multiple parties might confuse consumers 
and whether the final rule should limit the number of covered persons 
identified. One industry commenter asserted that providing information 
for multiple covered persons would confuse consumers, and that the 
disclosure should contain only the address and telephone number of one 
covered person authorized to receive payments and handle questions 
about the loan.
    Final rule. Like the interim rule, the final rule requires covered 
persons to state their name, address and telephone number on the 
disclosure. Under Sec.  226.39(b)(4) in the final rule, if a mortgage 
loan is acquired by a covered person and subsequently transferred to 
another covered person, a single disclosure may be provided on behalf 
of both persons so long as the disclosure satisfies the timing and 
content requirements applicable to each person. Section 226.39(d)(1) of 
the final rule specifies that a single disclosure provided for multiple 
transfers must state the name, address, and telephone number of each 
covered person.
    Section 226.39(b)(5) of the final rule provides that, if multiple 
covered persons jointly acquire the loan, a single disclosure must be 
provided on behalf of all covered persons. Section 226.39(d)(1) of the 
final rule provides that the single disclosure must provide the name, 
address and telephone number of each covered person unless one of the 
covered persons has been authorized in accordance with Sec.  
226.39(d)(3) to receive the consumer's notice of the right to rescind 
and to resolve issues concerning the consumer's payments on the loan. 
In that case, the disclosure may state the name, address and telephone 
number only for that covered persons.
    The Board recognizes that transfers occur under a variety of 
circumstances and, in case of multiple covered persons, it may not 
always be clear which covered person should be identified to best 
effectuate the legislative goal, particularly if none of them serves as 
agent or servicer. Based on comments received, it is the Board's 
understanding that most transfers of partial interests to multiple 
parties in a joint acquisition generally involve a transfer to a single 
entity created specifically to facilitate the transaction. In that 
case, only the name of that single entity that acquires legal title to 
the loan may be shown as the owner on the disclosure. However, to the 
extent that partial interests in the loan are held by multiple persons 
that jointly acquire the loan, the name, address and telephone

[[Page 58497]]

number of each covered person must be provided on the disclosure.
    Providing contact information for multiple covered persons when 
there are multiple transactions under Sec.  226.39(b)(4) should not 
create confusion because disclosure of the date of transfer for each 
covered person should clarify which covered party currently owns the 
loan. The final rule also provides additional flexibility when multiple 
covered persons that jointly acquire the loan are identified under 
Sec.  226.39(b)(5). Section 226.39(d)(1) of the final rule has been 
revised so that contact information need only be provided for one 
covered person if that person is also authorized in accordance with 
Sec.  226.39(d)(3) to receive the rescission notice and resolve issues 
concerning the consumer's payments on the loan. If no covered person is 
authorized for these purposes, the disclosure must state the name, 
address and telephone number for all covered persons.
    Similarly, comment 39(d)(1)(ii)-2 has been added to clarify that if 
multiple covered persons acquire partial interests in the loan in 
separate transactions and not jointly, each covered person has to 
comply with the disclosure requirements under Sec.  226.39 by providing 
its name, address and telephone number.
Acquisition Date
    Interim rule. Section 226.39(d)(2) in the interim rule requires 
disclosure of the date that the covered person acquired the loan, which 
is ``the date of acquisition recognized in the books and records of the 
acquiring party.''
    Public comment. One industry commenter noted that the date of 
acquisition on the purchaser's books may not be same date recognized on 
the transferor's books. This commenter requested that the purchaser be 
permitted to disclose either the acquisition date recognized on the 
purchaser's books or the date recognized on the transferor's books.
    Final rule. To facilitate compliance, the final rule permits a 
covered person to disclose either the date of acquisition recognized in 
the books and records of the acquiring party, or the date of transfer 
recognized in the books and records of the transferring party, as 
discussed above. The date disclosed in the notice would also be used to 
determine if the disclosure was provided in a timely manner.
Agent's Contact Information
    Interim rule. 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. Under the interim 
rule, the disclosure 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 under Sec.  
226.39(d)(3) if the consumer can use the information for the covered 
persons provided under paragraph Sec.  226.39(d)(1) for these purposes. 
The interim rule does not require that a covered person designate an 
agent or other party, but merely requires that contact information be 
disclosed when there is such an agent, so that consumers can direct 
their inquiries to the appropriate party.
    The interim rule also recognizes that separate entities may be 
authorized by the owner of the loan to act on its behalf for different 
purposes. The interim rule requires a covered person to identify the 
party authorized to receive legal notices to ensure that consumers have 
sufficient information to assert legal claims, including a right to 
rescind the loan, if applicable. If the covered person appoints a 
different agent to resolve loan servicing issues, contact information 
must be provided for each agent, and the disclosure must state the 
extent to which the authority of each agent differs. For example, the 
disclosure should indicate if only one of the agents is authorized to 
receive legal notices or only one is authorized to resolve issues 
concerning payments.
    Under the interim rule, a covered person may comply with Sec.  
226.39(d)(3) by providing only the name and telephone number of the 
agent or authorized party if the consumer can use the telephone number 
to obtain that party's address. Comment was solicited on whether the 
rule should require that the address be included in the disclosure.
    Public comment. Consumer group commenters stated that the agent's 
address should be required in the disclosure because borrowers may 
mistakenly use the telephone number to rescind, which must be done in 
writing. They also requested that the Board require more information to 
be disclosed about the consumer's right to file qualified written 
requests under RESPA.
    Several industry groups stated that the requirement to identify an 
agent or person authorized to receive ``legal notice'' is too vague, 
and noted that the rules for serving legal process vary by type of 
action and jurisdiction. They asserted that the general reference to 
``legal notice'' would create compliance difficulties.
    Several industry commenters stated that disclosing multiple 
contacts for different purposes would increase the risk that consumers 
may contact the wrong party. One industry commenter suggested that the 
Board require the identification of an agent or person authorized to 
receive ``rescission and modification requests,'' and, if no such 
person has been authorized, the owner should be required to state that 
such requests should be directed to the owner. Another industry 
commenter was concerned that covered persons would be required to list 
all agents, and noted that the statute does not reference rescission 
claims.
    Final rule. The final rule is revised to require a covered person 
to provide the name, address and telephone number for the agent or 
other party having authority to receive a rescission notice and resolve 
issues concerning the consumer's payments on the loan. Section 
226.39(d)(3) does not require a covered person to list contact 
information for an agent or other party if the consumer can use the 
covered person's contact information for these purposes. If multiple 
agents are listed on the disclosure, the disclosure must state which 
one is authorized to receive the rescission notice and which one is 
authorized to resolve issues concerning the consumer's payments on the 
loan. The Board is requiring that the agent's address be included on 
the disclosure to avoid consumer confusion about the need to provide a 
written notice regarding rescission.
    To facilitate compliance and simplify the disclosure, comment 
39(d)(3)-1 provides that, if an agent or other party is authorized to 
receive the rescission notice and resolve issues concerning the 
consumer's payments on the loan, the disclosure need only state that 
the consumer may contact that agent regarding any questions concerning 
consumer's account without specifically mentioning rescission or 
payment issues.
Recording Location
    Interim rule. Section 404(a) and the interim rule require 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

[[Page 58498]]

recorded at the time the disclosure is sent.
    Under the interim rule, 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. A 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, under the interim rule it is 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.''
    Under the interim rule, 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 solicited comment on whether 
disclosure of the location where the security interest is recorded 
should be required.
    Public comment. Consumer group commenters generally supported the 
approach in the interim rule, and asked the Board to require disclosure 
of the location where the security interest is filed. One industry 
trade association commented that requiring a disclosure regarding the 
filing of the security interest would impose considerable burden and 
cost, and stated that the disclosure required by the interim rule is 
sufficient. Another industry trade association agreed that most 
borrowers are already aware of the location where the security interest 
is recorded, and requiring a more specific disclosure would place 
considerable burden on the industry since most loan servicers do not 
have easy access to this information in their servicing systems.
    Final rule. The final rule is substantially the same as the interim 
rule, with some modifications for clarity. Section 226.39(d)(4) 
requires the covered person to disclose where transfer of ownership of 
the debt to the covered person is or may be recorded, or, 
alternatively, that the transfer of ownership has not been recorded in 
public records at the time the disclosure is provided. Comment 
39(d)(4)-1 clarifies that the disclosure may state that the transfer of 
ownership of the debt has not been recorded in public records at the 
time the disclosure is provided, if that is the case, or that it 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.
    As stated in the interim rule, the Board believes that Sec.  
226.39(d)(4) appropriately addresses the operational issues regarding 
the land recording process and provides the necessary flexibility for 
compliance purposes without impairing the legislative purpose. The 
Board adopted this approach after considering the relative costs and 
benefits of requiring that the disclosure provide more detailed 
information. Industry representatives stated 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.
39(e) Optional disclosures
Interim Rule
    Section 226.39(e) of the interim rule states that a covered person 
may, at its option, provide with the disclosures ``any other relevant 
information'' regarding the transaction. For example, the covered 
person may choose to inform consumers that the location where they 
should send mortgage payments has not changed. The Board solicited 
comment on whether the rule should include any additional disclosure 
requirements.
Public Comment
    Two industry trade associations requested the Board to specify in 
the final rule that the disclosure requirements may include a statement 
requiring the consumer to contact only the authorized agent, such as 
the servicer, rather than the covered party. These commenters expressed 
concerns that consumers may seek to contact a covered person that 
invests in the loan but does not have the capacity to handle consumer 
inquiries
Final Rule
    Consistent with the statute and the interim rule, the final rule 
permits covered persons, in their sole discretion, to include 
additional information that they might deem relevant or helpful to 
consumers. The Board believes that it would be inconsistent with the 
statutory goal to permit covered persons to disclose that the consumer 
is not permitted to use the contact information provided for the 
covered person.

V. Final Regulatory Flexibility Analysis

    In accordance with Section 4 of the Regulatory Flexibility Act 
(RFA), 5 U.S.C. 601 et seq., the Board is publishing a final regulatory 
flexibility analysis for the final rule. The RFA generally requires an 
agency to assess the impact a rule is expected to have on small 
entities.\3\ However, under Section 605(b) of the RFA, 5 U.S.C. 605(b), 
the regulatory flexibility analysis otherwise required under Section 
604 of the RFA is not required if an agency certifies that the rule 
will not have a significant economic impact on a substantial number of 
small entities and stated the factual basis for such certification.
---------------------------------------------------------------------------

    \3\ Under standards the U.S. Small Business Administration sets 
(SBA), an entity is considered ``small'' if it had $175 million or 
less in assets for banks and other depository institutions; and $6.5 
million or less in revenues for non-bank mortgage lenders, mortgage 
brokers, and loan servicers. U.S. Small Business Administration, 
Table of Small Business Size Standards Matched to North American 
Industry Classification System Codes, available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.
---------------------------------------------------------------------------

    The Board continues to believe that this final rule will not have a 
significant economic impact on a substantial number of small entities. 
The final rule is narrowly designed to implement the statutory 
amendments to TILA made by Section 404(a) of the 2009 Act. Covered 
persons, including small entities, had to comply with Section 404(a) 
immediately upon its enactment on May 20, 2009, whether or not the 
Board amends Regulation Z to conform the regulation to the statute. The 
Board's final rule is intended to provide guidance to persons covered 
by the rule on how to interpret and comply with the statutory 
requirements, and to ensure that consumers receive meaningful notices 
consistent with the legislative goal.

A. Reasons for the Final Rule

    As indicated above, the 2009 Act was signed into law on May 20, 
2009. Section 404(a) amended TILA to establish a new requirement for 
notifying consumers of the sale, assignment, or other transfer of their 
mortgage loans. This requirement

[[Page 58499]]

became effective immediately upon enactment on May 20, 2009, and did 
not require the issuance of implementing regulations.
    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 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 the 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 content of the disclosure. Consistent with the statute, the 
final rule requires that the disclosure contain the following: (1) The 
name, address, and telephone number of the covered person who owns the 
mortgage loan; (2) the date of transfer; (3) the name, address and 
telephone number of an agent or other party authorized to act on behalf 
of the owner; and (4) where the transfer of ownership of the debt is or 
may be recorded.

C. Statement of Objectives and Legal Basis

    The SUPPLEMENTARY INFORMATION sets forth the objectives and the 
legal basis for the final rule. The legal basis for the 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 Final Rule Applies

    The final rule applies 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 final rules if they acquire 
more than one mortgage loan in a 12-month period. Based on March 2010 
call report data, approximately 8,845 small institutions would be 
subject to the final rule. Approximately 15,658 depository institutions 
in the United States filed call report data, approximately 11,148 of 
which had total domestic assets of $175 million or less and thus were 
considered small entities for purposes of the Regulatory Flexibility 
Act. Of 3,898 banks, 523 thrifts and 6,727 credit unions that filed 
call report data and were considered small entities, 3,776 banks, 496 
thrifts, and 4,573 credit unions, totaling 8,845 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 11,148 
institutions identified above as small entities acquired mortgage loans 
in 2009. Although an estimated 8,845 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 8,388 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 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 of small entities 
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 (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.

[[Page 58500]]

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 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 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 covered persons. 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 on 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 disclosure 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 receiving multiple 
disclosures.

F. Other Federal Rules

    The Board has not identified other rules that conflict with the 
final 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 must disclose their contact 
information and are subject to consumer calls regarding administration 
of payment information.

G. Significant Alternatives to the Final Rule

    As noted above, the 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 objectives. The Board did not receive 
comment on any significant alternatives that would minimize the impact 
of the final rule on small entities.

VI. Effective Date

    This final rule will become effective on October 25, 2010, however, 
compliance with the final rule will not become mandatory until January 
1, 2011. Prior to the mandatory compliance date, covered persons 
continue to be subject to the statutory requirements but have the 
option to comply with either the interim rule or this final rule. This 
should facilitate compliance by covered persons who might need to 
revise their disclosures or implement other changes under the final 
rule. Specifically, under the interim rule, the required disclosure 
need to state only the name and telephone number for an agent that is 
authorized to receive legal notices on behalf of the owner, so long as 
the telephone number can be used to obtain the agent's address. Under 
the final rule, however, the agent's address must be included on the 
disclosure. This may require some secondary market purchasers to revise 
their disclosure forms. The Board believes that it is reasonable to 
afford covered persons until January 1, 2011 to implement the changes 
required by the final rule.
    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.'' The Board 
finds, however, that the legislative mandate represented by Section 
404(a) is inconsistent with the significant delay that would be imposed 
under the literal language of Section 105(d). In enacting Section 
404(a), the Congress imposed disclosure requirements that became 
mandatory immediately, without any requirement for implementing 
regulations. Thus, the disclosure requirements imposed by Section 
404(a) have been mandatory since May 20, 2009.
    The Board has clear authority under TILA Section 105(a) to issue 
implementing rules, including rules that interpret the statutory 
requirements and establish exceptions. The Board believes that the 
Congress did not intend to permit the Board to issue rules to implement 
Section 404(a) and clarify a covered persons' compliance duty while 
also allowing the issuance of such rules to delay implementation of 
Section 404(a) which, on its face, was effective immediately upon 
enactment. Accordingly, the Board issued interim rules in November 2009 
that became effective upon publication. The Board finds that the public 
interest is best served by making these final rules effective in the 
manner described above, which gives effect to the legislative intent of 
Section 404(a) rather than the provisions of TILA Section 105(d).

VII. 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 
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

[[Page 58501]]

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.
    As mentioned in the preamble, on November 20, 2009, a notice of 
interim final rulemaking was published in the Federal Register (74 FR 
60143). The comment period for this notice expired January 19, 2010. No 
comments specifically addressing the burden estimate were received; 
therefore, the burden estimates will remain unchanged as published in 
the notice. The final rule will increase the total annual burden under 
Regulation Z by 9,248 hours from 1,488,114 \4\ to 1,497,362 hours.
---------------------------------------------------------------------------

    \4\ The burden estimate for this final rulemaking includes 
burden addressing changes to implement provisions of the Credit Card 
Accountability Responsibility and Disclosure (CCARD) Act of 2009 
(Docket no. R-1370) (75 FR 7658), however, it does not include the 
burden addressing changes to implement the following provisions 
announced in separate rulemakings:
     Closed-End Mortgages (Docket No. R-1366) (74 FR 43232), 
or
     Home-Equity Lines of Credit (Docket No. R-1367) (74 FR 
43428).
---------------------------------------------------------------------------

    The other federal financial agencies: Office of the Comptroller of 
the Currency (OCC), 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 are permitted, but are not required, 
to use the Federal Reserve's burden estimation methodology. Using the 
Federal Reserve's method, the total current estimated annual burden for 
the approximately 16,200 domestically chartered commercial banks, 
thrifts, and federal credit unions and U.S. branches and agencies of 
foreign banks supervised by the Federal Reserve, OCC, OTS, FDIC, and 
NCUA under TILA would be approximately 19,610,245 hours. The new 
requirement will impose a one-time increase in the estimated annual 
burden for such institutions by 648,000 hours to 20,258,245 hours. On a 
continuing basis the new requirement will impose an increase in the 
estimated annual burden by 1,555,200 to 21,165,445 hours. The above 
estimates represent an average across all respondents; the Federal 
Reserve expects 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, 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 follows:

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); Pub. L. 111-24 Sec.  2, 123 Stat. 1734.

Subpart E--Special Rules for Certain Home Mortgage Transactions

0
2. Revise Sec.  226.39 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 title 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, each covered person is subject to the requirements of 
this section and shall mail or deliver the disclosures required by this 
section to the consumer on or before the 30th calendar day following 
the date of transfer.
    (1) Form of disclosures. The disclosures required by this section 
shall be provided clearly and conspicuously in writing, in a form that 
the consumer may keep. The disclosures required by this section may be 
provided to the consumer in electronic form, subject to compliance with 
the consumer consent and other applicable provisions of the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act) (15 U.S.C. 
7001 et seq.).
    (2) The date of transfer. For purposes of this section, the date of 
transfer to the covered person may, at the covered person's option, be 
either the date of acquisition recognized in the books and records of 
the acquiring party, or the date of transfer recognized in the books 
and records of the transferring party.
    (3) Multiple consumers. If more than one consumer is liable on the 
obligation, a covered person may mail or deliver the disclosures to any 
consumer who is primarily liable.
    (4) Multiple transfers. If a mortgage loan is acquired by a covered 
person and subsequently sold, assigned, or otherwise transferred to 
another covered person, a single disclosure may be provided on behalf 
of both covered

[[Page 58502]]

persons if the disclosure satisfies the timing and content requirements 
applicable to each covered person.
    (5) Multiple covered persons. If an acquisition involves multiple 
covered persons who jointly acquire the loan, a single disclosure must 
be provided on behalf of all covered persons.
    (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 
which shall be the date of transfer recognized for purposes of 
paragraph (b)(2) of this section;
    (2) The mortgage loan is transferred to the covered person in 
connection with a repurchase agreement that obligates the transferor to 
repurchase the loan. However, if the transferor does not repurchase the 
loan, the covered person must provide the disclosures required by this 
section within 30 days after the date that the transaction is 
recognized as an acquisition on its books and records; or
    (3) The covered person acquires only a partial interest in the loan 
and the party authorized to receive the consumer's notice of the right 
to rescind and resolve issues concerning the consumer's payments on the 
loan does not change as a result of the transfer of the partial 
interest.
    (d) Content of required disclosures. The disclosures required by 
this section shall identify the loan that was sold, assigned or 
otherwise transferred, and state the following:
    (1) The name, address, and telephone number of the covered person.
    (i) If a single disclosure is provided on behalf of more than one 
covered person, the information required by this paragraph shall be 
provided for each of them unless paragraph (d)(1)(ii) of this section 
applies.
    (ii) If a single disclosure is provided on behalf of more than one 
covered person and one of them has been authorized in accordance with 
paragraph (d)(3) of this section to receive the consumer's notice of 
the right to rescind and resolve issues concerning the consumer's 
payments on the loan, the information required by paragraph (d)(1) of 
this section may be provided only for that covered person.
    (2) The date of transfer.
    (3) The name, address and telephone number of an agent or party 
authorized to receive notice of the right to rescind 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.
    (4) Where transfer of ownership of the debt to the covered person 
is or may be recorded in public records, or, alternatively, that the 
transfer of ownership has not been recorded in public records at the 
time the disclosure is provided.
    (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, the entry for Section 
226.39--Mortgage Transfer Disclosures is revised 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 this section 
apply to any ``covered person'' that becomes the legal owner of an 
existing mortgage loan, whether through a purchase, or other 
transfer or assignment, 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 the 
disclosures under this section 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 this section, a person must become the owner of an 
existing mortgage loan by acquiring legal title to the debt 
obligation.
    i. Partial interest. A person may become a covered person by 
acquiring a partial interest in the mortgage loan. If the original 
creditor transfers a partial interest in the loan to one or more 
persons, all such transferees are covered persons under this 
section.
    ii. Joint acquisitions. All persons that jointly acquire legal 
title to the loan are covered persons under this section, and under 
Sec.  226.39(b)(5), a single disclosure must be provided on behalf 
of all such covered persons. Multiple persons are deemed to jointly 
acquire legal title to the loan if each acquires a partial interest 
in the loan pursuant to the same agreement or by otherwise acting in 
concert. See comments 39(b)(5)-1 and 39(d)(1)(ii)-1 regarding the 
disclosure requirements for multiple persons that jointly acquire a 
loan.
    iii. Affiliates. An acquiring party that is a separate legal 
entity from the transferor must provide the disclosures required by 
this section even if the parties are affiliated entities.
    3. Exclusions.
    i. Beneficial interest. Section 226.39 does not apply to a party 
that acquires only a beneficial interest or a security interest in 
the loan, or to a party that assumes the credit risk without 
acquiring legal title to the loan. For example, an investor that 
acquires mortgage-backed securities, pass-through certificates, or 
participation interests and does not acquire legal title in the 
underlying mortgage loans is not covered by this section.
    ii. Loan servicers. Pursuant to TILA Section 131(f)(2), the 
servicer of a mortgage loan is not the owner of the obligation for 
purposes of this section 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 this section 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 
closed-end or open-end consumer credit transactions secured by the 
principal dwelling of a consumer.
    39(b) Disclosure required.
    1. Generally. A covered person must mail or deliver the 
disclosures required by this section on or before the 30th calendar 
day following the date of transfer, unless an exception in Sec.  
226.39(c) applies. For example, if a covered person acquires a 
mortgage loan on March 15, the disclosure must be mailed or 
delivered on or before April 14.
    39(b)(1) Form of disclosure.
    1. Combining disclosures. The disclosures under this section can 
be combined with other materials or disclosures, including the 
transfer of servicing notices required by the Real Estate Settlement 
Procedure Act (12 U.S.C. 2601 et seq.) so long as the combined 
disclosure satisfies the timing and other requirements of this 
section.
    39(b)(4) Multiple transfers.
    1. Single disclosure for multiple transfers. A mortgage loan 
might be acquired by a covered person and subsequently transferred 
to another entity that is also a covered person required to provide 
the disclosures under this section. In such cases, a single 
disclosure may be provided on behalf of both covered persons instead 
of providing two separate disclosures if the disclosure satisfies 
the timing and content requirements applicable to each covered 
person. For example, if a covered person acquires a loan on March 15 
with the intent to assign the loan to another entity on April 30, 
the covered person could mail the disclosure on or before April 14 
to provide the required information for both entities and indicate 
when the subsequent transfer is expected to occur.
    2. Estimating the date. When a covered person provides the 
disclosure required by this section that also describes a subsequent 
transfer, the date of the subsequent transfer may be estimated when 
the exact date is unknown at the time the disclosure is made.

[[Page 58503]]

Information is unknown if it is not reasonably available to the 
covered person at the time the disclosure is made. The ``reasonably 
available'' standard requires that the covered person, acting in 
good faith, exercise due diligence in obtaining information. The 
covered person normally may rely on the representations of other 
parties in obtaining information. The covered person might make the 
disclosure using an estimated date even though the covered person 
knows that more precise information will be available in the future. 
For example, a covered person may provide a disclosure on March 31 
stating that it acquired the loan on March 15 and that a transfer to 
another entity is expected to occur ``on or around'' April 30, even 
if more precise information will be available by April 14.
    3. Duty to comply. Even though one covered person provides the 
disclosures for another covered person, each has a duty to ensure 
that disclosures related to its acquisition are accurate and 
provided in a timely manner unless an exception in Sec.  226.39(c) 
applies.
    39(b)(5) Multiple covered person.
    1. Single disclosure required. If multiple covered persons 
jointly acquire the loan, a single disclosure must be provided on 
behalf of all covered persons instead of providing separate 
disclosures. See comment 39(a)(1)-2(ii) regarding a joint 
acquisition of legal title, and comment 39(d)(1)(ii)-1 regarding the 
disclosure requirements for multiple persons that jointly acquire a 
loan. If multiple covered persons jointly acquire the loan and 
complete the acquisition on separate dates, a single disclosure must 
be provided on behalf of all persons on or before the 30th day 
following the earliest acquisition date. For examples, if covered 
persons A and B enter into an agreement with the original creditor 
to jointly acquire the loan, and complete the acquisition on March 
15 and March 25, respectively, a single disclosure must be provided 
on behalf of both persons on or before April 14. If the two 
acquisition dates are more than 30 days apart, a single disclosure 
must be provided on behalf of both persons on or before the 30th day 
following the earlier acquisition date, even though one person has 
not completed its acquisition. See comment 39(b)(4)-2 regarding use 
of an estimated date of transfer.
    2. Single disclosure not required. If multiple covered persons 
each acquire a partial interest in the loan pursuant to separate and 
unrelated agreements and not jointly, each covered person has a duty 
to ensure that disclosures related to its acquisition are accurate 
and provided in a timely manner unless an exception in Sec.  
226.39(c) applies. The parties may, but are not required to, provide 
a single disclosure that satisfies the timing and content 
requirements applicable to each covered person.
    3. Timing requirements. A single disclosure provided on behalf 
of multiple covered persons must satisfy the timing and content 
requirements applicable to each covered person unless an exception 
in Sec.  226.39(c) applies.
    4. Duty to comply. Even though one covered person provides the 
disclosures for another covered person, each has a duty to ensure 
that disclosures related to its acquisition are accurate and 
provided in a timely manner unless an exception in Sec.  226.39(c) 
applies. See comments 39(c)(1)-2, 39(c)(3)-1 and 39(c)(3)-2 
regarding transfers of a partial interest in the mortgage loan.
    39(c) Exceptions.
    Paragraph 39(c)(1).
    1. Transfer of all interest. A covered person is not required to 
provide the disclosures required by this section if it sells, 
assigns or otherwise transfers all of its interest in the mortgage 
loan on or before the 30th calendar day following the date that it 
acquired the loan. For example, if covered person A acquires the 
loan on March 15 and subsequently transfers all of its interest in 
the loan to covered person B on April 1, person A is not required to 
provide the disclosures required by this section. Person B, however, 
must provide the disclosures required by this section unless an 
exception in Sec.  226.39(c) applies.
    2. Transfer of partial interests. A covered person that 
subsequently transfers a partial interest in the loan is required to 
provide the disclosures required by this section if the covered 
person retains a partial interest in the loan on the 30th calendar 
day after it acquired the loan, unless an exception in Sec.  
226.39(c) applies. For example, if covered person A acquires the 
loan on March 15 and subsequently transfers fifty percent of its 
interest in the loan to covered person B on April 1, person A is 
required to provide the disclosures under this section if it retains 
a partial interest in the loan on April 14. Person B in this example 
must also provide the disclosures required under this section unless 
an exception in Sec.  226.39(c) applies. Either person A or person B 
could provide the disclosure on behalf of both of them if the 
disclosure satisfies the timing and content requirements applicable 
to each of them. In this example, a single disclosure for both 
covered persons would have to be provided on or before April 14 to 
satisfy the timing requirements for person A's acquisition of the 
loan on March 15. See comment 39(b)(4)-1 regarding a single 
disclosure for multiple transfers.
    Paragraph 39(c)(2).
    1. Repurchase agreements. The original creditor or owner of the 
mortgage loan might sell, assign or otherwise transfer legal title 
to the loan to secure temporary business financing under an 
agreement that obligates the original creditor or owner to 
repurchase the loan. The covered person that acquires the loan in 
connection with such a repurchase agreement is not required to 
provide disclosures under this section. However, if the transferor 
does not repurchase the mortgage loan, the acquiring party must 
provide the disclosures required by this section within 30 days 
after the date that the transaction is recognized as an acquisition 
on its books and records.
    2. Intermediary parties. The exception in Sec.  226.39(c)(2) 
applies regardless of whether the repurchase arrangement involves an 
intermediary party. For example, legal title to the loan may 
transfer from the original creditor to party A through party B as an 
intermediary. If the original creditor is obligated to repurchase 
the loan, neither party A nor party B is required to provide the 
disclosures under this section. However, if the original creditor 
does not repurchase the loan, party A must provide the disclosures 
required by this section within 30 days after the date that the 
transaction is recognized as an acquisition on its books and records 
unless another exception in Sec.  226.39(c) applies.
    Paragraph 39(c)(3).
    1. Acquisition of partial interests. This exception applies if 
the covered person acquires only a partial interest in the loan, and 
there is no change in the agent or person authorized to receive 
notice of the right to rescind and resolve issues concerning the 
consumer's payments. If, as a result of the transfer of a partial 
interest in the loan, a different agent or party is authorized to 
receive notice of the right to rescind and resolve issues concerning 
the consumer's payments, the disclosures under this section must be 
provided.
    2. Examples.
    i. A covered person is not required to provide the disclosures 
under this section if it acquires a partial interest in the loan 
from the original creditor who remains authorized to receive the 
notice of the right to rescind and resolve issues concerning the 
consumer's payments after the transfer.
    ii. The original creditor transfers fifty percent of its 
interest in the loan to covered person A. Person A does not provide 
the disclosures under this section because the exception in Sec.  
226.39(c)(3) applies. The creditor then transfers the remaining 
fifty percent of its interest in the loan to covered person B and 
does not retain any interest in the loan. Person B must provide the 
disclosures under this section.
    iii. The original creditor transfers fifty percent of its 
interest in the loan to covered person A and also authorizes party X 
as its agent to receive notice of the right to rescind and resolve 
issues concerning the consumer's payments on the loan. Since there 
is a change in an agent or party authorized to receive notice of the 
right to rescind and resolve issues concerning the consumer's 
payments, person A is required to provide the disclosures under this 
section. Person A then transfers all of its interest in the loan to 
covered person B. Person B is not required to provide the 
disclosures under this section if the original creditor retains a 
partial interest in the loan and party X retains the same authority.
    iv. The original creditor transfers all of its interest in the 
loan to covered person A. Person A provides the disclosures under 
this section and notifies the consumer that party X is authorized to 
receive notice of the right to rescind and resolve issues concerning 
the consumer's payments on the loan. Person A then transfers fifty 
percent of its interest in the loan to covered person B. Person B is 
not required to provide the disclosures under this section if person 
A retains a partial interest in the loan and party X retains the 
same authority.
    39(d) Content of required disclosures.
    1. Identifying the loan. The disclosures required by this 
section must identify the loan that was acquired or transferred. The

[[Page 58504]]

covered person has flexibility in determining what information to 
provide for this purpose and may use any information that would 
reasonably inform a consumer which loan was acquired or transferred. 
For example, the covered person may identify the loan by stating:
    i. The address of the mortgaged property along with the account 
number or loan number previously disclosed to the consumer, which 
may appear in a truncated format;
    ii. The account number alone, or other identifying number, if 
that number has been previously provided to the consumer, such as on 
a statement that the consumer receives monthly; or
    iii. The date on which the credit was extended and the original 
amount of the loan or credit line.
    Paragraph 39(d)(1).
    1. Identification of covered person. Section 226.39(d)(1) 
requires a covered person to provide its name, address, and 
telephone number. The party identified must be the covered person 
who owns the mortgage loan, regardless of whether another party 
services the loan or is the covered person's agent. In addition to 
providing its name, address and 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.

39(d)(1)(i)

    1. Multiple transfers, single disclosure. If a mortgage loan is 
acquired by a covered person and subsequently transferred to another 
covered person, a single disclosure may be provided on behalf of 
both covered persons instead of providing two separate disclosures 
as long as the disclosure satisfies the timing and content 
requirements applicable to each covered person. See comment 
39(b)(4)-1 regarding multiple transfers. A single disclosure for 
multiple transfers must state the name, address, and telephone 
number of each covered person unless Sec.  226.39(d)(1)(ii) applies.

39(d)(1)(ii)

    1. Multiple covered persons, single disclosure. If multiple 
covered persons jointly acquire the loan, a single disclosure must 
be provided on behalf of all covered persons instead of providing 
separate disclosures. The single disclosure must provide the name, 
address, and telephone number of each covered person unless Sec.  
226.39(d)(1)(ii) applies and one of the covered persons has been 
authorized in accordance with Sec.  226.39(d)(3) of this section to 
receive the consumer's notice of the right to rescind and resolve 
issues concerning the consumer's payments on the loan. In such 
cases, the information required by Sec.  226.39(d)(1) may be 
provided only for that covered person.
    2. Multiple covered persons, multiple disclosures. If multiple 
covered persons each acquire a partial interest in the loan in 
separate transactions and not jointly, each covered person must 
comply with the disclosure requirements of this section unless an 
exception in Sec.  226.39(c) applies. See comment 39(a)(1)-2(ii) 
regarding a joint acquisition of legal title, and comment 39(b)(5)-2 
regarding the disclosure requirements for multiple covered persons.
    Paragraph 39(d)(3).
    1. Identifying agents. Under Sec.  226.39(d)(3), the covered 
person must provide the name, address and telephone number for the 
agent or other party having authority to receive the notice of the 
right to rescind and resolve issues concerning the consumer's 
payments on the loan. If multiple persons are identified under this 
paragraph, the disclosure shall provide the name, address and 
telephone number for each and indicate the extent to which the 
authority of each person differs. Section 226.39(d)(3) does not 
require that a covered person designate an agent or other party, but 
if the consumer cannot contact the covered person for these 
purposes, the disclosure must provide the name, address and 
telephone number for an agent or other party that can address these 
matters. If an agent or other party is authorized to receive the 
notice of the right to rescind and resolve issues concerning the 
consumer's payments on the loan, the disclosure can state that the 
consumer may contact that agent regarding any questions concerning 
the consumer's account without specifically mentioning rescission or 
payment issues. However, 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 notice of the right to rescind, or 
only one of the agents is authorized to resolve issues concerning 
payments.
    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. Where recorded. Section 226.39(d)(4) requires the covered 
person to disclose where transfer of ownership of the debt to the 
covered person is recorded if it has been recorded in public 
records. Alternatively, the disclosure can state that the transfer 
of ownership of the debt has not been recorded in public records at 
the time the disclosure is provided, if that is the case, or the 
disclosure can state where the transfer may later be recorded. An 
exact address is not required and it would be sufficient, for 
example, to state that the transfer of ownership is 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. See comment 39(b)(1)-1 regarding combined 
disclosures.

    By order of the Board of Governors of the Federal Reserve 
System, August 13, 2010.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. 2010-20664 Filed 9-23-10; 8:45 am]
BILLING CODE 6210-01-P