[Federal Register Volume 76, Number 118 (Monday, June 20, 2011)]
[Rules and Regulations]
[Pages 35723-35724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-15179]


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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1422]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule; staff commentary.

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SUMMARY: The Board is publishing a final rule amending the staff 
commentary that interprets the requirements of Regulation Z (Truth in 
Lending). The Board is required to adjust annually the dollar amount 
that triggers requirements for certain home mortgage loans bearing fees 
above a certain amount. The Home Ownership and Equity Protection Act of 
1994 (HOEPA) sets forth rules for home-secured loans in which the total 
points and fees payable by the consumer at or before loan consummation 
exceed the greater of $400 or 8 percent of the total loan amount. In 
keeping with the statute, the Board has annually adjusted the $400 
amount based on the annual percentage change reflected in the Consumer 
Price Index as reported on June 1. The adjusted dollar amount for 2012 
is $611.

DATES: Effective Date: January 1, 2012.

FOR FURTHER INFORMATION CONTACT: Nikita M. Pastor, Senior Attorney, 
Division of Consumer and Community Affairs, Board of Governors of the 
Federal Reserve System, at (202) 452-3667. For the users of 
Telecommunications Device for the Deaf (``TDD'') only, contact (202) 
263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

    The Truth in Lending Act (TILA; 15 U.S.C. 1601-1666j) requires 
creditors to disclose credit terms and the cost of consumer credit as 
an annual percentage rate. The act requires additional disclosures for 
loans secured by a consumer's home, and permits consumers to cancel 
certain transactions that involve their principal dwelling. TILA is 
implemented by the Board's Regulation Z (12 CFR part 226). The Board's 
official staff commentary (12 CFR part 226 (Supp. I)) interprets the 
regulation, and provides guidance to creditors in applying the 
regulation to specific transactions.
    In 1995, the Board published amendments to Regulation Z 
implementing HOEPA, contained in the Riegle Community Development and 
Regulatory Improvement Act of 1994, Public Law 103-325, 108 Stat. 2160 
(60 FR 15463). These amendments, contained in Sec. Sec.  226.32 and 
226.34 of the regulation, impose substantive limitations and additional 
disclosure requirements on certain closed-end home mortgage loans 
bearing rates or fees above a certain percentage or amount. As enacted, 
the statute requires creditors to comply with the HOEPA requirements if 
the total points and fees payable by the consumer at or before loan 
consummation exceed the greater of $400 or 8 percent of the total loan 
amount. TILA and Regulation Z provide that the $400 figure shall be 
adjusted annually on January 1 by the annual percentage change in the 
Consumer Price Index (CPI) that was reported on the preceding June 1. 
15 U.S.C. 1602(aa)(3) and 12 CFR 226.32(a)(1)(ii). The Board adjusted 
the $400 amount to $592 for the year 2011.
    The Bureau of Labor Statistics publishes consumer-based indices 
monthly, but does not report a CPI change on June 1; adjustments are 
reported in the middle of each month. The Board uses the CPI-U index, 
which is based on all urban consumers and represents approximately 87 
percent of the U.S. population, as the index for adjusting the $400 
dollar figure. The adjustment to the CPI-U index reported by the Bureau 
of Labor Statistics on May 13, 2011, was the CPI-U index in effect on 
June 1, and reflects the percentage change from April 2010 to April 
2011. The adjustment to the $400 figure below reflects a 3.2 percent 
increase in the CPI-U index for this period and is rounded to whole 
dollars for ease of compliance.
    The fee trigger being adjusted in this Federal Register notice 
pursuant to TILA section 103(aa) is used in determining whether a loan 
is covered by section 226.32 of Regulation Z. Such loans have generally 
been known as ``HOEPA loans.'' In July 2008, the Board revised 
Regulation Z to adopt additional protections for ``higher-priced'' 
loans, using its authority under TILA section 129(l)(2). Those 
revisions define a class of dwelling-secured transactions, described in 
section 226.35 of Regulation Z, using a threshold based on average 
market rates that the Board publishes on a regular basis. The 
adjustment published today does not affect the triggers adopted in July 
2008 for higher-priced loans.
    On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the ``Reform Act'') was enacted into law.\1\ Section 
1431 of the Reform Act revises the statutory fee trigger for HOEPA 
loans. The amendments made by Section 1431 of the Reform Act will be 
implemented in a future rulemaking. Accordingly, the adjustment to the 
fee trigger that is being published today will become effective on 
January 1, 2012 and will apply for one year, or until final rules under 
Section 1431 of the Reform Act become effective, whichever is earlier.
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    \1\ Public Law 111-203, 124 Stat. 1376.
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II. Adjustment and Commentary Revision

    Effective January 1, 2012, for purposes of determining whether a 
home mortgage transaction is covered by 12 CFR 226.32 (based on the 
total points and fees payable by the consumer at or before loan 
consummation), a loan is covered if the points and fees exceed the 
greater of $611 or 8 percent of the total loan amount. Comment 
32(a)(1)(ii)-2, which lists the adjustments for each year, is amended 
to reflect the dollar adjustment for 2012. Because the timing and 
method of the adjustment are set by statute, the Board finds that 
notice and public comment on the change are unnecessary. 5 U.S.C. 
553(b)(B).

III. Regulatory Flexibility Analysis

    The Board certifies that this amendment to Regulation Z will not 
have a significant economic impact on a substantial number of small 
entities. The only change is to increase the threshold for transactions 
requiring HOEPA disclosures. This change is mandated by statute.

[[Page 35724]]

List of Subjects in 12 CFR Part 226

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

    For the reasons set forth in the preamble, the Board amends 
Regulation Z, 12 CFR part 226, as set forth below:

PART 226--TRUTH IN LENDING (REGULATION Z)

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

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


0
2. In Supplement I to Part 226, under Section 226.32--Requirements for 
Certain Closed-End Home Mortgages, under Paragraph 32(a)(1)(ii), 
paragraph 2.xvii. is added to read as follows:

Supplement I to Part 226--Official Staff Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 226.32--Requirements for Certain Closed-End Home Mortgages 
32(a) Coverage

* * * * *

Paragraph 32(a)(1)(ii)

* * * * *
    2. * * *
    xvii. For 2012, $611, reflecting a 3.2 percent increase in the 
CPI-U from June 2010 to June 2011, rounded to the nearest whole 
dollar.
* * * * *


    By order of the Board of Governors of the Federal Reserve 
System, acting through the Director of the Division of Consumer and 
Community Affairs under delegated authority, June 13, 2011.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 2011-15179 Filed 6-17-11; 8:45 am]
BILLING CODE 6210-01-P