[Federal Register Volume 77, Number 226 (Friday, November 23, 2012)]
[Rules and Regulations]
[Pages 70105-70114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28341]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

[Docket No. CFPB-2012-0045]
RIN 3170-AA32


Delayed Implementation of Certain New Mortgage Disclosures

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
amending Regulation Z (Truth in Lending) to, in effect, delay 
implementation of certain new mortgage disclosure requirements in title 
XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act 
that would otherwise take effect on January 21, 2013. Instead, to avoid 
potential consumer confusion and reduce compliance burden for industry, 
the Bureau plans to implement these disclosures as part of the 
integrated mortgage disclosure forms proposed earlier this year, which 
combine certain disclosures that consumers receive in connection with 
applying for and closing on a mortgage loan under the Truth in Lending 
Act and the Real Estate Settlement Procedures Act. Accordingly, this 
rulemaking exempts persons from complying with these mortgage 
disclosure requirements and provides that such exemptions are intended 
to last only until the integrated mortgage disclosure forms take 
effect.

DATES: The rule is effective on November 23, 2012.

FOR FURTHER INFORMATION CONTACT: Michael G. Silver, Counsel; and 
Richard B. Horn, Senior Counsel, Office of Regulations, Consumer 
Financial Protection Bureau, 1700 G Street NW., Washington, DC 20552 at 
(202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Overview

A. Dodd-Frank Act

    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act), Public Law 111-203, amended the Real Estate 
Settlement Procedures Act of 1974 (RESPA) and the Truth in Lending Act 
(TILA) to mandate that the Bureau of Consumer Financial Protection 
(Bureau) establish a single disclosure scheme for use by lenders or 
creditors in complying with certain mortgage disclosure requirements 
under both statutes.\1\ Sections 1098 and 1100A of the Dodd-Frank Act 
amended RESPA section 4(a) and TILA section 105(b), respectively, to 
require that the Bureau publish a single, integrated disclosure for 
mortgage loan transactions (including real estate settlement cost 
statements) which includes the disclosure requirements of TILA and 
sections 4 and 5 of RESPA that, taken

[[Page 70106]]

together, may apply to a transaction that is subject to both or either 
provisions of law. 12 U.S.C. 2603(a); 15 U.S.C. 1604(b). Section 
1032(f) of the Dodd-Frank Act mandated that the Bureau propose for 
public comment rules and model disclosures that integrate the TILA and 
RESPA disclosures by July 21, 2012. 12 U.S.C. 5532(f). As noted below, 
the Bureau satisfied this statutory mandate and issued proposed rules 
and forms on July 9, 2012.\2\
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    \1\ RESPA and TILA historically have been implemented by 
regulations of the Department of Housing and Urban Development (HUD) 
under Regulation X and the Board of Governors of the Federal Reserve 
System (the Board) under Regulation Z, respectively. The Dodd-Frank 
Act generally consolidated and transferred these rulemaking 
authorities to the Bureau.
    \2\ See the Bureau's press release Consumer Financial Protection 
Bureau proposes ``Know Before You Owe'' mortgage forms (July 9, 
2012), available at http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-proposes-know-before-you-owe-mortgage-forms/; the Bureau's blog post Know Before You Owe: 
Introducing our proposed mortgage disclosure forms (July 9, 2012), 
available at http://www.consumerfinance.gov/blog/know-before-you-owe-introducing-our-proposed-mortgage-disclosure-forms/.
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    In addition to the integrated disclosure requirements in title X of 
the Dodd-Frank Act, various provisions of title XIV of the Dodd-Frank 
Act amend TILA, RESPA, and other consumer financial laws to impose new 
disclosure requirements for mortgage transactions (the Title XIV 
Disclosures). These provisions generally require disclosure of certain 
information when a consumer applies for a mortgage loan or shortly 
before consummation of the loan, around the same time that consumers 
will receive the TILA-RESPA integrated disclosures required by sections 
1032(f), 1098, and 1100A of the Dodd-Frank Act (the TILA-RESPA 
integrated disclosures), and after consummation of the loan if certain 
events occur. Dodd-Frank Act title XIV provisions generally take effect 
within 18 months after the designated transfer date (i.e., by January 
21, 2013) unless final rules implementing those requirements are issued 
on or before that date and provide for a different effective date 
pursuant to Dodd-Frank Act section 1400(c)(3).\3\
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    \3\ Dodd-Frank Act section 1400(c)(3) is codified at 15 U.S.C. 
1601 note.
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    The Title XIV Disclosures generally include the following:
     Warning regarding negative amortization features. Dodd-
Frank Act section 1414(a); TILA section 129C(f)(1).\4\
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    \4\ Dodd-Frank Act section 1414(a) also added to TILA new 
section 129C(f)(2), which requires first-time borrowers for certain 
residential mortgage loans that could result in negative 
amortization to provide the creditor with documentation to 
demonstrate that the consumer received homeownership counseling from 
organizations or counselors certified as competent to provide such 
counseling by HUD. That provision is implemented in the Bureau's 
proposal to implement Dodd-Frank Act requirements expanding 
protections for ``high-cost'' mortgage loans under the Home 
Ownership and Equity Protection Act of 1994 (HOEPA), pursuant to 
TILA sections 103(bb) and 129, as amended by Dodd-Frank Act sections 
1431 through 1433 (the 2012 HOEPA Proposal). 77 FR 49090 (Aug. 15, 
2012). The 2012 HOEPA Proposal also implements the requirement of 
RESPA section 5(c), added by section 1450 of the Dodd-Frank Act, 
that lenders provide borrowers with a list of certified 
homeownership counselors. The Bureau expects to issue a final rule 
related to the 2012 HOEPA Proposal on or before January 21, 2013.
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     Disclosure of State law anti-deficiency protections. Dodd-
Frank Act section 1414(c); TILA section 129C(g)(2) and (3).
     Disclosure regarding creditor's partial payment policy 
prior to consummation and, for new creditors, after consummation. Dodd-
Frank Act section 1414(d); TILA section 129C(h).
     Disclosure regarding mandatory escrow or impound accounts. 
Dodd-Frank Act section 1461(a); TILA section 129D(h).
     Disclosure prior to consummation regarding waiver of 
escrow in connection with the transaction. Dodd-Frank Act section 1462; 
TILA section 129D(j)(1)(A).
     Disclosure regarding cancellation of escrow after 
consummation. Dodd-Frank Act section 1462; TILA section 129D(j)(1)(B).
     Disclosure of monthly payment, including escrow, at 
initial and fully-indexed rate for variable-rate residential mortgage 
loan transactions. Dodd-Frank Act section 1419; TILA section 
128(a)(16).
     Repayment analysis disclosure to include amount of escrow 
payments for taxes and insurance. Dodd-Frank Act section 1465; TILA 
128(b)(4).
     Disclosure of aggregate amount of settlement charges, 
amount of charges included in the loan and the amount of such charges 
the borrower must pay at closing, the approximate amount of the 
wholesale rate of funds, and the aggregate amount of other fees or 
required payments in connection with a residential mortgage loan. Dodd-
Frank Act section 1419; TILA section 128(a)(17).
     Disclosure of aggregate amount of mortgage originator fees 
and the amount of fees paid by the consumer and the creditor. Dodd-
Frank Act section 1419; TILA section 128(a)(18).
     Disclosure of total interest as a percentage of principal. 
Dodd-Frank Act section 1419; TILA section 128(a)(19).
     Optional disclosure of appraisal management company fees. 
Dodd-Frank Act section 1475; RESPA section 4(c).
     Disclosure regarding notice of reset of hybrid adjustable 
rate mortgage. Dodd-Frank Act section 1418(a); TILA section 128A(b).
     Loan originator identifier requirement. Dodd-Frank section 
1402(a)(2); TILA section 129B(b)(1)(B).
     Consumer notification regarding appraisals for higher-risk 
mortgages. Dodd-Frank Act section 1471; TILA section 129H(d).
     Consumer notification regarding the right to receive an 
appraisal copy. Dodd-Frank Act section 1474; Equal Credit Opportunity 
Act (ECOA) section 701(e)(5).
    As noted in the list above, the Title XIV Disclosures include 
certain disclosures that may need to be given both before and after 
consummation. For example, the Title XIV Disclosures include 
disclosures regarding a creditor's policy for acceptance of partial 
loan payments both before consummation and, for persons who 
subsequently become creditors for the transaction, after consummation 
as required by new TILA section 129C(h), added by Dodd-Frank Act 
section 1414(d).\5\ In addition, the Title XIV Disclosures include 
disclosures for consumers who waive or cancel escrow services both 
before and after consummation, added by Dodd-Frank Act section 1462. 
Specifically, new TILA section 129D(j)(1)(A) requires a creditor or 
servicer to provide a disclosure with the information set forth under 
TILA section 129D(j)(2) when an impound, trust, or other type of 
account for the payment of property taxes, insurance premiums, or other 
purposes relating to real property securing a consumer credit 
transaction is not established in connection with the transaction (the 
Pre-Consummation Escrow Waiver Disclosure). New TILA section 
129D(j)(1)(B) requires a creditor or servicer to provide disclosures 
post-consummation with the information set forth under TILA section 
129D(j)(2) when a consumer chooses, and provides written notice of the 
choice, to close his or her escrow account established in connection 
with a consumer credit transaction secured by real property in 
accordance with any statute, regulation, or contractual agreement (the 
Post-Consummation Escrow Cancellation Disclosure). 15 U.S.C. 
1639d(j)(1)(A),

[[Page 70107]]

1639d(j)(1)(B). The statute sets forth an identical set of information 
for both of these disclosures.\6\
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    \5\ As it stated in the TILA-RESPA Integration Proposal, the 
Bureau believes that to give effect to the legislative purpose of 
section 1414(d) of the Dodd-Frank Act, the disclosure requirements 
of TILA section 129C(h) should apply without regard to whether the 
person would be a ``creditor'' under TILA and Regulation Z. See 77 
FR 51116, 51265. For these reasons, in the TILA-RESPA Integration 
Proposal, the Bureau proposed to retain the term ``covered person'' 
under Sec.  1026.39(a)(1) and its definition, which would subject 
such covered persons to the proposed disclosure requirements. Id. As 
in the TILA-RESPA Integration Proposal, in this final rule the 
Bureau is temporarily exempting ``persons'' (as defined in 
Regulation Z) rather than ``creditors'' from compliance with the 
provisions of TILA section 129C(h), which includes covered persons.
    \6\ The information set forth under TILA section 129D(j)(2) 
includes information concerning any applicable fees or costs 
associated with either the non-establishment of the escrow account 
at the time of the transaction, or any subsequent closure of the 
account; a clear and prominent statement that the consumer is 
responsible for personally and directly paying the non-escrowed 
items, in addition to paying the mortgage loan payment, in the 
absence of any such account, and the fact that the costs for taxes, 
insurance, and related fees can be substantial; a clear explanation 
of the consequences of any failure to pay non-escrowed items, 
including the possible requirement for the forced placement of 
insurance by the creditor or servicers and the potentially higher 
cost (including any potential commission payments to the servicer) 
or reduced coverage for the consumer in the event of any such 
creditor-placed insurance; and other information the Bureau 
determines is necessary for consumer protection. 15 U.S.C. 
1639d(j)(2).
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B. TILA-RESPA Integration Proposal

    On July 9, 2012, the Bureau issued a proposal requesting comment on 
proposed rules and forms to integrate certain disclosure requirements 
of TILA and RESPA for most closed-end consumer credit transactions 
secured by real property (the TILA-RESPA Integration Proposal), as 
required by sections 1032(f), 1098, and 1100A of the Dodd-Frank Act.\7\ 
The proposed rule would amend the Bureau's Regulation X, 12 CFR part 
1024, and Regulation Z, 12 CFR part 1026. The proposal was published in 
the Federal Register on August 23, 2012. 77 FR 51116 (Aug. 23, 2012).
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    \7\ See the Bureau's press release Consumer Financial Protection 
Bureau proposes ``Know Before You Owe'' mortgage forms (July 9, 
2012), available at http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-proposes-know-before-you-owe-mortgage-forms/; the Bureau's blog post Know Before You Owe: 
Introducing our proposed mortgage disclosure forms (July 9, 2012), 
available at http://www.consumerfinance.gov/blog/know-before-you-owe-introducing-our-proposed-mortgage-disclosure-forms/.
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    Among other things, the TILA-RESPA Integration Proposal requested 
comment on an amendment to Sec.  1026.1(c) of Regulation Z that would 
temporarily exempt persons from compliance with the following Title XIV 
Disclosures (collectively, the Affected Title XIV Disclosures) so that 
the disclosures could instead be incorporated into the TILA-RESPA 
integrated disclosures that would be finalized in the future:
     Warning regarding negative amortization features. Dodd-
Frank Act section 1414(a); TILA section 129C(f)(1).
     Disclosure of State law anti-deficiency protections. Dodd-
Frank Act section 1414(c); TILA section 129C(g)(2) and (3).
     Disclosure regarding creditor's partial payment policy 
prior to consummation and, for new creditors, after consummation. Dodd-
Frank Act section 1414(d); TILA section 129C(h).
     Disclosure regarding mandatory escrow or impound accounts. 
Dodd-Frank Act section 1461(a); TILA section 129D(h).
     Disclosure prior to consummation regarding waiver of 
escrow in connection with the transaction. Dodd-Frank Act section 1462; 
TILA section 129D(j)(1)(A).
     Disclosure of monthly payment, including escrow, at 
initial and fully-indexed rate for variable-rate residential mortgage 
loan transactions. Dodd-Frank Act section 1419; TILA section 
128(a)(16).
     Repayment analysis disclosure to include amount of escrow 
payments for taxes and insurance. Dodd-Frank Act section 1465; TILA 
128(b)(4).
     Disclosure of aggregate amount of settlement charges, 
amount of charges included in the loan and the amount of such charges 
the borrower must pay at closing, the approximate amount of the 
wholesale rate of funds, and the aggregate amount of other fees or 
required payments in connection with a residential mortgage loan. Dodd-
Frank Act section 1419; TILA section 128(a)(17).
     Disclosure of aggregate amount of mortgage originator fees 
and the amount of fees paid by the consumer and the creditor. Dodd-
Frank Act section 1419; TILA section 128(a)(18).
     Disclosure of total interest as a percentage of principal. 
Dodd-Frank Act section 1419; TILA section 128(a)(19).
     Optional disclosure of appraisal management company fees. 
Dodd-Frank Act section 1475; RESPA section 4(c).
    The TILA-RESPA Integration Proposal provided for a bifurcated 
comment process. Comments regarding the proposed amendments to Sec.  
1026.1(c) were required to have been received on or before September 7, 
2012. For all other proposed amendments and comments pursuant to the 
Paperwork Reduction Act, comments were required to have been received 
on or before November 6, 2012.\8\
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    \8\ In its initial Federal Register notice, the Bureau also 
applied the September 7, 2012 deadline to comments on the proposed 
amendments to the definition of finance charge in Sec.  1026.4. On 
August 31, 2012, however, the Bureau issued a notice extending the 
deadline for such comments to November 6, 2012. See the Bureau's 
blog post, More time for comments on proposed changes to the 
definition of the finance charge (August 31, 2012), available at 
http://www.consumerfinance.gov/blog/more-time-for-comments-on-proposed-changes-to-the-definition-of-the-finance-charge/. The 
extension was published in the Federal Register on September 6, 
2012. See 77 FR 54843 (Sept. 6, 2012). It did not change the comment 
period for any other aspects of the TILA-RESPA Integration Proposal, 
which, as noted above, ended November 6, 2012.
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C. 2011 Escrows Proposal

    Sections 1461 and 1462 of the Dodd-Frank Act create new TILA 
section 129D, which substantially codifies requirements that the Board 
had previously adopted in Regulation Z regarding escrow requirements 
for higher-priced mortgage loans, but also adds disclosure requirements 
and lengthens the period for which escrow accounts are required. 15 
U.S.C. 1639d. On March 2, 2011, the Board proposed amendments to 
Regulation Z implementing certain requirements of sections 1461 and 
1462 of the Dodd-Frank Act. 76 FR 11598 (Mar. 2, 2011) (2011 Escrows 
Proposal). The Board proposed, among other things, to implement the 
disclosure requirements under TILA section 129D(j)(1) in Regulation Z 
under a new Sec.  226.19(f)(2)(ii) and Sec.  226.20(d) of the Board's 
Regulation Z, including both the Pre-Consummation Escrow Waiver 
Disclosure and the Post-Consummation Escrow Cancellation Disclosure.
    The comment period for the 2011 Escrows Proposal closed on May 2, 
2011. The Board did not finalize the 2011 Escrows Proposal. Subsequent 
to the issuance of the 2011 Escrows Proposal, the authority for 
finalizing the proposal was transferred to the Bureau pursuant to the 
Dodd-Frank Act.\9\
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    \9\ Effective July 21, 2011, the Dodd-Frank Act generally 
transferred rulemaking authority for TILA to the Bureau (except for 
certain rulemaking authority over motor vehicle dealers that remains 
with the Board). See sections 1061 and 1100A of the Dodd-Frank Act.
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II. Summary of Proposed Rule and Comments

A. Affected Title XIV Disclosures

    As described above, the Affected Title XIV Disclosures impose 
certain new disclosure requirements for mortgage transactions. Section 
1400(c)(3) of the Dodd-Frank Act \10\ provides that, if regulations 
implementing the Affected Title XIV Disclosures are not issued on the 
date that is 18 months after the designated transfer date (i.e., by 
January 21, 2013), the statutory requirements will take effect on that 
date.
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    \10\ Codified at 15 U.S.C. 1601 note.
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    The Bureau provided in the TILA-RESPA Integration Proposal that it 
believed that implementing integrated disclosures that satisfy the 
applicable sections of TILA and RESPA and the Affected Title XIV 
Disclosures would benefit consumers and facilitate compliance for 
industry with TILA and RESPA. The Bureau provided further that 
consumers would benefit from a consolidated disclosure that conveys 
loan terms and costs to consumers in a

[[Page 70108]]

coordinated way, and industry would benefit by integrating two sets of 
overlapping disclosures into a single form and by avoiding regulatory 
burden associated with revising systems and practices multiple times. 
77 FR 51116, 51133.
    However, given the broad scope and complexity of TILA-RESPA 
Integration Proposal and the 120-day comment period provided, the 
Bureau stated that it believed a final rule would not be issued by 
January 21, 2013. The Bureau was concerned that absent a final rule 
implementing the Affected Title XIV Disclosures, institutions would 
have to comply with those disclosures beginning January 21, 2013 due to 
the statutory requirement that any section of Dodd-Frank Act title XIV 
for which regulations have not been issued by January 21, 2013 are 
self-effectuating as of that date. The Bureau stated that this likely 
would result in widely varying approaches to compliance in the absence 
of regulatory guidance, creating confusion for consumers, and would 
impose a significant burden on industry. For example, this could result 
in a consumer who shops for a mortgage loan receiving different 
disclosures from different creditors. The Bureau noted that it believed 
such disclosures would not only be unhelpful to consumers, but likely 
would be confusing since the same disclosures would be provided in 
widely different ways, and, moreover, implementing the Affected Title 
XIV Disclosures separately from the TILA-RESPA integrated disclosures 
would increase compliance costs and burdens on industry. The Bureau 
also noted in the TILA-RESPA Integration Proposal that nothing in the 
Dodd-Frank Act itself or its legislative history suggests that Congress 
contemplated how the separate requirements in titles X and XIV would 
work together.\11\
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    \11\ As the Bureau stated in the TILA-RESPA Integration 
Proposal, certain of the Affected Title XIV Disclosures indicate 
that Congress did not intend for those disclosure requirements and 
the TILA-RESPA integrated disclosures to operate independently. For 
example, Dodd-Frank Act section 1419 amended paragraphs (a)(16) 
through (19) of TILA section 128 to require additional content on 
the disclosure provided to consumers within three days of 
application and in final form at or before consummation. 15 U.S.C. 
1638(a)(16) through (19). Pursuant to TILA section 128(b)(1), for 
residential mortgage transactions, all disclosures required by TILA 
section 128(a) must be ``conspicuously segregated'' from all other 
information provided in connection with the transaction. 15 U.S.C. 
1638(b)(1). Therefore, the Bureau stated that these sections are 
directly implicated by the integrated TILA-RESPA requirement. 77 FR 
51116, 51133.
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    Accordingly, in the TILA-RESPA Integration Proposal, the Bureau 
proposed to implement the Affected Title XIV Disclosures for purposes 
of Dodd-Frank Act section 1400(c) by providing a temporary exemption 
from the requirement to comply with such requirements such that they 
would not become self-effective on January 21, 2013, and instead would 
be required at the time the TILA-RESPA integrated disclosure 
requirements become effective.\12\ The Bureau proposed such temporary 
exemption pursuant to its authority under TILA sections 105(a) and 
105(f), RESPA section 19(a), Dodd-Frank Act section 1032(a) and, for 
residential mortgage loans, Dodd-Frank Act section 1405(b). The Bureau 
explained that fully implementing the Affected Title XIV Disclosures as 
part of the broader integrated TILA-RESPA rulemaking, rather than 
issuing rules implementing each requirement individually or allowing 
those statutory provisions to take effect by operation of law, will 
improve the overall effectiveness of the integrated disclosures for 
consumers and reduce burden on industry.
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    \12\ Id.
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    Specifically, as set forth in the section-by-section analysis to 
proposed Sec.  1026.1(c) in the TILA-RESPA Integration Proposal, the 
Bureau proposed to delay those requirements by temporarily exempting 
persons from the requirement to comply on January 21, 2013.\13\ The 
Bureau stated in the TILA-RESPA Integration Proposal that it would 
remove this regulatory exemption in the final rule implementing the 
TILA-RESPA integrated disclosures. The proposed exemption would be, in 
effect, a delay of the effective date of the Affected Title XIV 
Disclosures.
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    \13\ 77 FR 51116, 51134.
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B. Other Title XIV Disclosures

    The Bureau proposed to exclude the following Title XIV Disclosures 
from the list of Affected Title XIV Disclosures in the TILA-RESPA 
Integration Proposal, stating they would be implemented in separate 
rulemakings:
     Disclosure regarding notice of reset of hybrid adjustable 
rate mortgage. Dodd-Frank Act section 1418(a); TILA section 128A(b).
     Loan originator identifier requirement. Dodd-Frank section 
1402(a)(2); TILA section 129B(b)(1)(B).
     Consumer notification regarding appraisals for higher-risk 
mortgages. Dodd-Frank Act section 1471; TILA section 129H(d).
     Consumer notification regarding the right to receive an 
appraisal copy. Dodd-Frank Act section 1474; ECOA section 701(e)(5).
     Post-Consummation Escrow Cancellation Disclosure. Dodd-
Frank Act section 1462; TILA section 129D(j)(1)(B).
    The Bureau stated generally that these disclosures were expected to 
be proposed separately in summer 2012 and finalized by January 21, 
2013. However, the Post-Consummation Escrow Cancellation Disclosure was 
excluded from the list of Affected Title XIV Disclosures, in part, 
because the Bureau stated it ``will be implemented by final rule 
pursuant to an outstanding proposal published by the Board,'' referring 
to the Board's 2011 Escrows Proposal.\14\
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    \14\ 77 FR 51116, 51134.
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    The Bureau proposed to delay the Affected Title XIV Disclosures to 
the fullest extent those requirements could apply under the statutory 
provisions, including to transactions not covered by the proposed 
integrated disclosure provisions, including open-end credit plans, 
transactions secured by dwellings that are not real property, and 
reverse mortgages. The Bureau specifically solicited comment on this 
scope of the exemption of the Affected Title XIV Disclosures. The 
Bureau also solicited comment on whether the regulatory exemption 
should sunset on a specific date, rather than provide an exemption 
until a final rule for the integrated disclosures becomes effective.

C. Comments on the Proposed Amendments to Section 1026.1(c)

    As of September 7, 2012, the Bureau had received nearly 500 
comments on the TILA-RESPA Integration Proposal from depository 
institutions, credit unions, settlement agents, mortgage brokers, 
mortgage brokerage companies, industry trade groups, consumers, 
consumer advocacy organizations, a State attorney general, Government-
Sponsored Enterprises (GSEs), and other sources. More than 20 of these 
comments specifically addressed the Bureau's proposed delay of the 
Affected Title XIV Disclosures, and those commenters were unanimously 
supportive of a temporary exemption from the Affected Title XIV 
Disclosures until the TILA-RESPA integrated disclosure rulemaking is 
finalized. Several industry commenters and their trade groups stated 
that this approach would result in disclosures that are more useful for 
consumers and would facilitate compliance for financial institutions by 
delaying compliance until a comprehensive implementation of all such 
rules could be accomplished. A State attorney general commented in 
support of this delayed implementation

[[Page 70109]]

of the Affected Title XIV Disclosures, stating that it would allow 
business entities the time to make extensive changes to their software 
and retrain staff in order to comply with the new integrated disclosure 
requirements.
    A number of commenters urged the Bureau to delay implementation of 
other Title XIV Disclosures or otherwise addressed the Title XIV 
Disclosures more generally. One mortgage company expressly urged the 
Bureau to delay implementation of the other Title XIV Disclosures 
(which include the Post-Consummation Escrow Cancellation Disclosure) in 
addition to the Affected Title XIV Disclosures. A national trade 
association for credit unions encouraged the Bureau to use its 
exemption authority under the Dodd-Frank Act, TILA, and RESPA to the 
fullest extent permissible to relieve regulatory burdens for credit 
unions. Several state-level trade associations for credit unions urged 
the Bureau to finalize all Regulation Z rulemakings at the same time. A 
GSE noted the benefits of implementing rules in a manner that would 
necessitate only a one-time change for software and other systems. One 
trade association supported the proposal to delay implementation of the 
Affected Title XIV Disclosures and urged the Bureau to clarify in the 
final rule its reasoning for exercising its exemption authority under 
section 1032(a) of the Dodd-Frank Act to specifically incorporate the 
considerations in section 1032(c) of the Dodd-Frank Act. Two trade 
associations commented that the Bureau should make clear that proposed 
Sec.  1026.1(c) is a rule in ``final form'' pursuant to section 
1400(c)(1) of the Dodd-Frank Act and that such a rule prevents the 
triggering of section 1400(c)(3) of the Dodd-Frank Act.
    Several industry trade associations were opposed to a sunset of the 
regulatory exemption on a specific date and instead, were in favor of 
the exemption existing until the TILA-RESPA integrated disclosures 
final rule becomes effective. These industry trade group commenters 
were concerned that a specific sunset date may precede the effective 
date for the TILA-RESPA integration final rule. Removing the exemption 
at the same time as implementing the TILA-RESPA integrated disclosures 
would, in their view, reduce unnecessary disruption and provide 
regulatory certainty.
    In addition, the Bureau did not receive any comments in favor of 
limiting the scope of the temporary exemptions, such that the 
disclosure requirements would become self-effective for the types of 
loans that are not subject to the TILA-RESPA integrated disclosure 
requirements in the TILA-RESPA Integration Proposal. One national trade 
association representing the reverse mortgage industry commented in 
support of exemptions from the Affected Title XIV Disclosures for 
reverse mortgage loans. A national trade association representing banks 
and bank holding companies that provide retail financial services 
commented that the exemption should also apply to the fullest extent 
under the statute, and not be limited to the loans subject the TILA-
RESPA integrated disclosure requirements as proposed. The trade 
association specifically stated that many banks use similar systems for 
home equity lines of credit, reverse mortgages, and loans secured by 
dwellings that are not real property and noted that including them in 
the exemption would allow banks to implement the disclosure 
requirements in a coordinated manner. A trade association representing 
financial institutions in a particular State also commented in favor of 
the full scope of the temporary exemption.

D. Board's 2011 Escrows Proposal for the Post-Consummation Escrow 
Cancellation Disclosure

    The 2011 Escrows Proposal proposed to implement the Pre-
Consummation Escrow Waiver Disclosure required under TILA section 
129D(j)(1)(A) and the Post-Consummation Escrow Cancellation Disclosure 
required under TILA section 129D(j)(1)(B).\15\ The content requirements 
set forth in TILA section 129D(j)(2) are the same for the Pre-
Consummation Escrow Waiver Disclosure and the Post-Consummation Escrow 
Cancellation Disclosure. The 2011 Escrows Proposal proposed model forms 
for both disclosures. Under the 2011 Escrows Proposal, the disclosures 
would be required to be delivered at least three business days before 
consummation or cancellation of the existing escrow account after 
consummation, as applicable. The proposed disclosures would explain 
what an escrow account is; how it works; and the risk of not having an 
escrow account. It also would state the potential consequences of 
failing to pay home-related costs such as taxes and insurance in the 
absence of an escrow account. In addition, it would state why there 
will be no escrow account or why it is being cancelled, as applicable; 
the amount of any fee imposed for not having an escrow account; and how 
the consumer can request that an escrow account be established or left 
in place, along with any deadline for such requests.\16\
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    \15\ 76 FR 11598.
    \16\ 76 FR 11598, 11599.
---------------------------------------------------------------------------

    The Board received approximately 70 comments to the 2011 Escrows 
Proposal, of which roughly a dozen addressed the timing of the 
implementation of the Post-Consummation Escrow Cancellation Disclosure. 
Specifically, national industry trade associations, State industry 
trade associations, large depository institutions, and community banks 
urged the Board to delay implementation of the Dodd-Frank Act escrow 
disclosure requirements until the Bureau had authority over the 
disclosures or until the Bureau could finalize the escrow disclosure 
requirements along with the TILA-RESPA integrated disclosures. These 
commenters stated that harmonizing the rulemakings would allow for a 
comprehensive approach and avoid duplicative forms and repetitive 
rulemakings. One industry trade association commented that it would be 
``premature'' and ``potentially counterproductive'' to issue new escrow 
rules prior to the completion of the TILA-RESPA integrated disclosures, 
and therefore recommended that the Board delay finalizing the escrow 
rules to allow the Bureau to incorporate the Dodd-Frank Act's escrow 
amendments into the TILA-RESPA integrated disclosures.
    As noted above, the Bureau proposed, as part of the TILA-RESPA 
Integration Proposal, to provide a temporary exemption from compliance 
with the TILA section 129D(j)(1)(A), which requires the Pre-
Consummation Escrow Waiver Disclosure. The Bureau did not propose to 
effectively delay the Post-Consummation Escrow Cancellation Disclosure 
in the TILA-RESPA Integration Proposal, and instead stated it would 
implement the statute, TILA section 129D(j)(1)(B), by final rule 
pursuant to the Board's 2011 Escrows Proposal. Absent the Bureau's 
issuance of a final rule implementing TILA section 129D(j)(1)(B) by 
January 21, 2013, the provision would go into effect as of such date by 
operation of law under the Dodd-Frank Act section 1400(c)(3).\17\
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    \17\ As described under part IV below, the Bureau considers an 
exemption from the disclosure requirement under TILA section 
129D(j)(1)(B), such as that proposed in the TILA-RESPA Integration 
Proposal for the Affected Title XIV Disclosures, to be the issuance 
of a regulation implementing that provision for purposes of Dodd-
Frank Act section 1400(c)(3).

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[[Page 70110]]

III. Summary of the Final Rule

    The final rule implements the Affected Title XIV Disclosures and 
the Post-Consummation Escrow Cancellation Disclosure in Sec.  1026.1(c) 
of Regulation Z and provides for a temporary exemption for persons from 
these statutory disclosure requirements. The Bureau is issuing this 
final rule implementing the Affected Title XIV Disclosures and the 
Post-Consummation Escrow Cancellation Disclosure prior to the statutory 
provisions becoming self-effectuating on January 21, 2013. Accordingly, 
persons will not be required to comply with these statutory disclosure 
requirements until such time as the Bureau removes the exemption, which 
it plans to do in the final rule for the TILA-RESPA integrated 
disclosures, and such removal takes effect.

IV. Legal Authority

    The Bureau is exercising its authority under and consistent with 
TILA section 105(a) and (f), RESPA section 19(a), Dodd-Frank section 
1032(a), and, for residential mortgage loans, Dodd-Frank Act section 
1405(b) to, in effect, delay the effective date of the Affected Title 
XIV Disclosures and the Post-Consummation Escrow Cancellation 
Disclosure by exempting regulated persons from these provisions until a 
final rule for the TILA-RESPA integrated disclosures mandated by Dodd-
Frank Act sections 1032(f), 1098 and 1100A takes effect. 15 U.S.C. 
1604(a), 1604(f); 12 U.S.C. 2617(a); 12 U.S.C. 5532(a); 15 U.S.C. 1601 
note. TILA section 105(a) gives the Bureau authority to adjust or 
except from the disclosure requirements of TILA all or any class of 
transactions to effectuate the purposes of TILA, to prevent 
circumvention or evasion thereof, or facilitate compliance therewith. 
As set forth above and below, delaying the Affected Title XIV 
Disclosures and the Post-Consummation Escrow Cancellation Disclosure 
until such time as a final rule implementing the TILA-RESPA integrated 
disclosures takes effect achieves the purpose of TILA to promote the 
informed use of credit through a more effective, consolidated 
disclosure, and facilitates compliance by reducing regulatory burden 
associated with revising systems and practices multiple times and 
providing multiple disclosures to consumers.
    The Bureau is also exercising exemption authority pursuant to TILA 
section 105(f). The Bureau has considered the factors in TILA section 
105(f) and believes that an exemption is appropriate under that 
provision. Specifically, the Bureau believes that the exemption is 
appropriate for all affected borrowers, regardless of their other 
financial arrangements and financial sophistication and the importance 
of the loan to them. Similarly, the Bureau believes that the exemption 
is appropriate for all affected loans, regardless of the amount of the 
loan and whether the loan is secured by the principal residence of the 
consumer. Furthermore, the Bureau believes that, on balance, the 
exemption will simplify the credit process without undermining the goal 
of consumer protection or denying important benefits to consumers.
    As discussed above, the Bureau believes that the exemption overall 
provides a benefit to consumers by facilitating a more effective, 
consolidated disclosure scheme. Absent an exemption, the Affected Title 
XIV Disclosures and the Post-Consummation Escrow Cancellation 
Disclosure would complicate and hinder the mortgage lending process 
because consumers would receive inconsistent disclosures and, likely, 
numerous additional pages of Federal disclosures that do not work 
together in a meaningful, synchronized way. The Bureau also believes 
that the credit process could be more expensive and complicated if the 
Affected Title XIV Disclosures and the Post-Consummation Escrow 
Cancellation Disclosure take effect independent of the larger TILA-
RESPA integration rulemaking because industry would be required to 
revise systems and practices multiple times. The Bureau has also 
considered the status of mortgage borrowers in issuing the exemptions, 
and believes the exemption is appropriate to improve the informed use 
of credit. The Bureau does not believe that the goal of consumer 
protection would be undermined by the exemption, because of the risk 
that layering the Affected Title XIV Disclosures and the Post-
Consummation Escrow Cancellation Disclosure on top of existing mandated 
disclosures would lead to consumer confusion. The exemption allows the 
Bureau to coordinate the changes in a way that improves overall 
consumer understanding of the disclosures.
    RESPA section 19(a) provides the Bureau with authority to grant 
reasonable exemptions for classes of transactions from the requirements 
of RESPA as necessary to achieve the purposes of RESPA. 12 U.S.C. 
2617(a). As discussed above, one purpose of RESPA is to achieve more 
effective advance disclosure to home buyers and sellers of settlement 
costs. RESPA section 2(b)(1); 12 U.S.C. 2601(b). Delaying the optional 
disclosure of the appraisal management company fee and the fee paid to 
the appraiser provided for by Dodd-Frank Act section 1475 (amending 
RESPA section 4(c)) until such time as a final rule implementing the 
TILA-RESPA integrated disclosures takes effect will result in a more 
effective disclosure and improve consumer understanding, as discussed 
above.
    Section 1405(b) of the Dodd-Frank Act additionally gives the Bureau 
authority to exempt from or modify disclosure requirements, in whole or 
in part, for any class of residential mortgage loans if the Bureau 
determines that the exemption or modification is in the interest of 
consumers and the public. 15 U.S.C. 1601 note. As discussed above, 
implementing the Affected Title XIV Disclosures and the Post-
Consummation Escrow Cancellation Disclosure with the TILA-RESPA 
integrated disclosures is in the interest of consumers because it 
allows the Bureau to coordinate the changes mandated by the Dodd-Frank 
Act in a way that synchronizes and harmonizes the disclosures, which in 
turn will improve overall consumer understanding of the disclosures. 
Further, implementing the Affected Title XIV Disclosures and the Post-
Consummation Escrow Cancellation Disclosure as part of the integrated 
disclosure rulemaking is in the public interest because it produces a 
more efficient regulatory scheme by incorporating multiple, potentially 
confusing disclosures into clear and understandable forms through 
consumer testing.
    Consistent with section 1032(a) of the Dodd-Frank Act,\18\ 
implementing the Affected Title XIV Disclosures and the Post-
Consummation Escrow Cancellation Disclosure together with

[[Page 70111]]

the TILA-RESPA integrated disclosures would ensure that the features of 
consumer credit transactions secured by real property are fully, 
accurately, and effectively disclosed to consumers in a manner that 
permits consumers to understand the costs, benefits, and risks 
associated with the product or service, in light of the facts and 
circumstances. 12 U.S.C. 5532(a). The Bureau believes that implementing 
a single, consolidated disclosure will benefit consumers and facilitate 
compliance with TILA and RESPA.
---------------------------------------------------------------------------

    \18\ As the Bureau stated in the TILA-RESPA Integration 
Proposal, Dodd-Frank Act section 1032(c) provides that, in 
prescribing rules pursuant to section 1032, the Bureau ``shall 
consider available evidence about consumer awareness, understanding 
of, and responses to disclosures or communications about the risks, 
costs, and benefits of consumer financial products or services.'' 12 
U.S.C. 5532(c). Consistent with Dodd-Frank Act section 1032(a), in 
developing this final rule to delay implementation of the Affected 
Title XIV Disclosures and the Post-Consummation Escrow Cancellation 
Disclosure, the Bureau considered available studies, reports, and 
other evidence about consumer awareness, understanding of, and 
responses to disclosures or communications about the risks, costs, 
and benefits of consumer financial products or services, including 
the evidence developed through its consumer testing of the TILA-
RESPA integrated disclosures as well as prior testing done by the 
Board and HUD regarding TILA and RESPA disclosures. See parts II and 
III of the TILA-RESPA Integration Proposal. For the reasons 
discussed in this final rule, the Bureau has considered available 
evidence pursuant to Dodd-Frank Act section 1032(c).
---------------------------------------------------------------------------

    For these reasons, the Bureau is issuing this final rule to delay 
the Affected Title XIV Disclosures and the Post-Consummation Escrow 
Cancellation Disclosure until the Bureau issues a final rule 
implementing the TILA-RESPA integrated disclosures required by sections 
1032(f), 1098, and 1100A of the Dodd-Frank Act and such rule takes 
effect. The Bureau considers the adoption of these amendments to Sec.  
1026.1(c) as prescribing the rules in final form for the Affected Title 
XIV Disclosures and the Post-Consummation Escrow Cancellation 
Disclosure pursuant to Dodd-Frank Act section 1400(c)(1)(A), to the 
extent regulations are required to be prescribed, and the effective 
date of the final rule as satisfying Dodd-Frank Act section 
1400(c)(1)(B). The Bureau views this final rule as issuing regulations 
for purposes of Dodd-Frank Act section 1400(c)(3); therefore, the 
Affected Title XIV Disclosures and Post-Consummation Escrow 
Cancellation Disclosure do not take effect by operation of law with 
respect to any transaction covered by TILA or RESPA on January 21, 
2013.
    This final rule will be effective on the date of publication in the 
Federal Register. Under section 553(d) of the Administrative Procedure 
Act (APA), the required publication or service of a substantive rule 
shall be made not less than 30 days before its effective date, except 
for (1) a substantive rule which grants or recognizes an exemption or 
relieves a restriction; (2) interpretative rules and statements of 
policy; or (3) as otherwise provided by the agency for good cause found 
and published with the rule. 5 U.S.C. 553(d). As discussed in part III 
above and part V below, this final rule provides for a temporary 
exemption from the Affected Title XIV Disclosures and the Post-
Consummation Escrow Cancellation Disclosure such that they would not 
become self-effective on January 21, 2013, and instead would be 
required at the time the TILA-RESPA integrated disclosures become 
effective. Therefore, under section 553(d)(1) of the APA, the Bureau is 
publishing this final rule less than 30 days before its effective date 
because it is a substantive rule which grants or recognizes an 
exemption or relieves a restriction. 5 U.S.C. 553(d)(1).

V. Section-by-Section Analysis of Final Rule

    In the TILA-RESPA Integration Proposal, the Bureau proposed to 
exempt persons temporarily from the disclosure requirements of the 
Affected Title XIV Disclosures (i.e., sections 128(a)(16) through (19), 
128(b)(4), 129C(f)(1), 129C(g)(2) and (3), 129C(h), 129D(h), and 
129D(j)(1)(A) of TILA and section 4(c) of RESPA), until regulations 
implementing the integrated disclosures required by sections 1032(f), 
1098, and 1100A of the Dodd-Frank Act take effect. 15 U.S.C. 
1638(a)(16)-(19), 1638(b)(4), 1639c(f)(1), 1639c(g), 1639c(h), 
1639d(h), and 1639d(j)(1)(A); 12 U.S.C. 2604(c); 12 U.S.C. 5532(f); 12 
U.S.C. 2603; 15 U.S.C. 1604. The TILA-RESPA Integration Proposal 
provided for implementation of the exemption in proposed Sec.  
1026.1(c)(5) by stating that no person is required to provide the 
disclosures required by the statutory provisions listed above. Proposed 
comment 1(c)(5)-1 explained that Sec.  1026.1(c)(5) implements the 
above-listed provisions of TILA and RESPA added by the Dodd-Frank Act 
by exempting persons from the disclosure requirements of those 
sections. The comment proposed to clarify that the exemptions provided 
in proposed Sec.  1026.1(c)(5) are intended to be temporary and will 
apply only until compliance with the regulations implementing the 
integrated disclosures required by section 1032(f) of the Dodd-Frank 
Act become mandatory. Proposed comment 1(c)(5)-1 also clarified that 
the exemption in proposed Sec.  1026.1(c)(5) does not exempt any person 
from any other requirement of Regulation Z, Regulation X, or of TILA or 
RESPA.
    The Bureau has considered the comments addressing the proposed 
amendments to Sec.  1026.1(c), which are summarized in part II.C, 
above. Based on those comments and its own analysis, the Bureau has 
determined that it will adopt the proposed amendments to Sec.  
1026.1(c), with only one substantive change and the technical changes 
described below.

1. Post-Consummation Escrow Cancellation Disclosure

    Although the Post-Consummation Escrow Cancellation Disclosure was 
not included in the Affected Title XIV Disclosures in the TILA-RESPA 
Integration Proposal, the Bureau nevertheless received comment 
requesting that it delay implementation of this disclosure, as 
described above. Furthermore, as discussed above, the Board received 
similar requests from commenters on its 2011 Escrows Proposal, which is 
now the Bureau's responsibility.
    The Bureau has considered the comments received by the Board and 
the Bureau and believes that, for the reasons given by the commenters 
and the reasons described in part II above, delaying implementation of 
the Post-Consummation Escrow Cancellation Disclosure and coordinating 
such implementation with that of the TILA-RESPA integrated disclosures 
is in the interest of industry and consumers alike. As discussed in 
part II above, the Dodd-Frank Act statutory requirements for the 
content of the Pre-Consummation Escrow Waiver Disclosure and the Post-
Consummation Escrow Cancellation Disclosure are the same, and the model 
forms proposed in the Board's 2011 Escrows Proposal contained similar 
language for both disclosures. The Bureau tested language for the Pre-
Consummation Escrow Waiver Disclosure at its consumer testing conducted 
in connection with the TILA-RESPA Integration Proposal and proposed to 
integrate this disclosure into the Closing Disclosure (which integrates 
the final TILA disclosure and the RESPA settlement statement).\19\ 
Implementing the Post-Consummation Escrow Cancellation Disclosure along 
with the TILA-RESPA integrated disclosures will allow the Bureau to use 
feedback it has received from consumer testing conducted prior to the 
TILA-RESPA Integration Proposal, the comments on that proposal, and any 
consumer testing conducted subsequent to the proposal to harmonize the 
content and format of the Post-Consummation Escrow Cancellation 
Disclosure, the Pre-Consummation Escrow Waiver Disclosure, and the 
TILA-RESPA integrated disclosures. Consumers, therefore, would benefit 
from a more fully integrated and synchronized overall mortgage 
disclosure scheme, and industry would benefit from a more coordinated 
implementation of the overall mortgage disclosure scheme mandated by 
the Dodd-Frank Act and implemented by the Bureau. The Bureau also notes 
that no commenters supported the finalization of the Post-Consummation 
Escrow Cancellation

[[Page 70112]]

Disclosure with the planned finalization of the Board's 2011 Escrows 
Proposal on or before January 21, 2013, and no commenters supported 
allowing the Post-Consummation Escrow Cancellation Disclosure to take 
effect by operation of law on that date.
---------------------------------------------------------------------------

    \19\ For a report on the Bureau's consumer testing, see Kleimann 
Communication Group, Inc., Know Before You Owe: Evolution of the 
Integrated TILA-RESPA Disclosures (July 2012), available at http://files.consumerfinance.gov/f/201207_cfpb_report_tila-respa-testing.pdf.
---------------------------------------------------------------------------

    In light of the considerations discussed above, including the 
comments submitted to the Board and the Bureau in support of a 
temporary exemption from compliance, the Bureau is modifying the 
proposed amendments to Sec.  1026.1(c) to exempt persons from 
compliance with the Post-Consummation Escrow Cancellation Disclosure in 
addition to the Affected Title XIV Disclosures. Accordingly, the Bureau 
is adding a reference in Sec.  1026.1(c)(5) and associated commentary 
to TILA section 129D(j)(1)(B).

2. Technical Changes

    In addition, in the final rule the Bureau is making three technical 
changes to Sec.  1026.1 and its commentary. First, in Sec.  1026.1(a), 
reference has been added to reflect the implementation of certain 
provisions of RESPA. This technical change relates to the fact that the 
optional disclosure of appraisal management company fees and fees paid 
to appraisers under RESPA section 4(c) (as added by Dodd-Frank Act 
section 1475) is being implemented in Regulation Z, rather than 
Regulation X, by exempting persons from the disclosure requirements of 
that section.
    Second, in comment 1(c)(5)-1, references have been added to Dodd-
Frank Act sections 1098 and 1100A, which amend RESPA section 4(a) and 
TILA section 105(b), respectively, in addition to the proposed 
comment's reference to Dodd-Frank Act section 1032(f). This technical 
change reflects the fact that sections 1098 and 1100A of the Dodd-Frank 
Act also mandate the TILA-RESPA integrated disclosures. Third, the 
Bureau has amended Sec.  1026.1(a) to make clear that the Office of 
Management and Budget control number listed applies only to Bureau 
respondents.

VI. Section 1022(b)(2) Analysis

    Section VII of the TILA-RESPA Integration Proposal contained the 
Bureau's preliminary analysis under section 1022(b)(2)(A) of the Dodd-
Frank Act of the potential benefits and costs of the proposed rule to 
consumers and covered persons (as defined in Dodd-Frank Act section 
1002(6), 12 U.S.C. 5481(6)), including the potential reduction of 
access by consumers to consumer financial products or services; the 
impact on depository institutions and credit unions with $10 billion or 
less in total assets as described in section 1026 of the Dodd-Frank 
Act; and the impact on consumers in rural areas (the Preliminary 
Section 1022(b)(2) Analysis).\20\ In the Preliminary Section 1022(b)(2) 
Analysis, the Bureau addressed the impact of the proposed delay of the 
Affected Title XIV Disclosures on covered persons and consumers. See 
section VII.D.8 of the TILA-RESPA Integration Proposal. There, the 
Bureau noted that the proposed rule would exempt creditors temporarily 
from compliance with certain new disclosure requirements added to TILA 
and RESPA by the Dodd-Frank Act until such final rule takes effect. 
Although the Dodd-Frank Act does not specifically require inclusion of 
the Affected Title XIV Disclosures in the TILA-RESPA integrated 
disclosures, the Bureau stated in the TILA-RESPA Integration Proposal 
that it believes these disclosures should be included in the integrated 
disclosures because doing so would improve the overall effectiveness of 
the integrated disclosures, which may benefit consumers and covered 
persons, and also reduce burden on covered persons. See 77 FR 51116, 
51279. The Bureau further stated that making the requirements to 
provide the Affected Title XIV Disclosures become effective 
simultaneously with the TILA-RESPA integrated disclosures would avoid 
unnecessary regulatory burden by preventing creditors from having to 
implement multiple iterations of disclosure rules. Lastly, the Bureau 
stated that it did not anticipate additional costs to covered persons 
as a result of delayed implementation of the Affected Title XIV 
Disclosures, although covered persons may incur additional recurring 
costs associated with calculating and disclosing this additional 
information to consumers once the implementing rules take effect. See 
77 FR 51116, 51279-80. As discussed above, this final rule effectively 
delays implementation of certain disclosure requirements and thus, 
consumers will not receive the information provided in such disclosures 
as early as they would have if the statutory requirements had become 
self-effective pursuant to Dodd-Frank Act section 1400(c). However, the 
Bureau believes that these disclosures are of lesser value to consumers 
without the comprehensive reform of the integrated TILA-RESPA 
disclosures. In addition, any benefits that consumers would derive from 
allowing the statutory requirements to take effect prior to the TILA-
RESPA integrated disclosures would only accrue during the time between 
when the requirements would take effect and when the TILA-RESPA 
integrated disclosure requirements would be finalized.
---------------------------------------------------------------------------

    \20\ See 77 FR 51116, 51267. The Bureau stated that in 
developing the proposed rule, the Bureau had considered potential 
benefits, costs, and impacts, and had consulted or offered to 
consult with the prudential regulators, the Department of Housing 
and Urban Development, and the Federal Trade Commission, including 
regarding consistency with any prudential, market, or systemic 
objectives administered by such agencies. The Bureau also held 
discussions with or solicited feedback from the United States 
Department of Agriculture Rural Housing Service, the Farm Credit 
Administration, the Federal Housing Administration, the Federal 
Housing Finance Agency, and the Department of Veterans Affairs 
regarding the potential impacts of the proposed rule on those 
entities' loan programs. Id. In addition, prior to finalizing the 
rule, the Bureau consulted or offered to consult with the 
appropriate prudential regulators and Federal agencies regarding 
this final rule.
---------------------------------------------------------------------------

    The baseline for analysis in this final Dodd-Frank Act section 
1022(b)(2) analysis is a post-statutory baseline analysis. The 
Preliminary Section 1022(b)(2) Analysis used a pre-statutory baseline, 
i.e., it analyzed the benefits, costs, and impacts of the proposed 
temporary exemption against a pre-statutory baseline. The Bureau 
believes a post-statutory baseline more fully informs the rulemaking 
and is more appropriate for the distinct nature of this final rule--to 
prevent effectively certain statutory disclosure requirements from 
becoming self-effective. The Bureau has discretion in future 
rulemakings to choose the most appropriate baseline for each particular 
rulemaking.
    The Bureau did not receive any comments on the Bureau's Preliminary 
Section 1022(b)(2) Analysis regarding the effect of the proposed delay 
of implementing the Affected Title XIV Disclosures on covered persons 
and consumers. The Bureau also believes that delaying implementation of 
the Post-Consummation Escrow Cancellation Disclosure and, instead, 
implementing the disclosure along with the TILA-RESPA integrated 
disclosures would avoid unnecessary regulatory burden by preventing 
covered persons from having to implement multiple iterations of 
disclosure rules. The Bureau does not anticipate additional costs to 
covered persons as a result of such delayed implementation of the Post-
Consummation Escrow Cancellation Disclosure, although covered persons 
may incur additional recurring costs associated with calculating and 
disclosing this additional information to consumers once the 
implementing rules take effect.
    In light of this, the Bureau concludes, using a post-statutory 
baseline, that the

[[Page 70113]]

final rule will have the benefits, costs, and impacts on covered 
persons and consumers that were discussed in the Preliminary Section 
1022(b)(2) Analysis. This final rule does not have the potential to 
reduce access by consumers to consumer financial products or services, 
as it will not increase costs on covered persons. In addition, as noted 
above, because this rule effectively delays the implementation of 
disclosure requirements, it will cause no additional costs on 
depository institutions and credit unions with $10 billion or less in 
total assets, as described in section 1026 of the Dodd-Frank Act. 
Further, it will have no significant or adverse impact on consumers in 
rural areas, as it does not increase costs for covered persons or 
consumers. The Bureau believes that delaying the implementation of the 
Affected Title XIV Disclosures and the Post-Consummation Escrow 
Cancellation Disclosure will eliminate the costs that covered persons 
would have incurred if they had to implement the disclosure provisions 
multiple times, i.e., if these statutory provisions had taken effect by 
operation of law pursuant to Dodd-Frank Act section 1400(c)(3) and were 
also later implemented through the TILA-RESPA integration final rule 
(including potential increased compliance costs due to uncertainty of 
complying with statutory provisions without implementing regulations).

VII. Regulatory Flexibility Act

    The Bureau's TILA-RESPA Integration Proposal included an initial 
regulatory flexibility analysis (IRFA) discussing the potential impact 
of the Bureau's regulations on small entities, including small 
businesses, under the Regulatory Flexibility Act (RFA). See 77 FR 
51116, 51282. Among other issues, the IRFA discussed how the proposed 
rule would exempt creditors temporarily from compliance with certain 
new disclosure requirements added to TILA and RESPA by the Dodd-Frank 
Act until the integrated TILA-RESPA rule takes effect. See 77 FR 51116, 
51293. The Bureau stated in the IRFA that, although the Dodd-Frank Act 
does not specifically require inclusion of all of these new disclosures 
in the integrated disclosures, the Bureau believes these disclosures 
should be included in the integrated disclosures because doing so would 
improve the overall effectiveness of the integrated disclosures, which 
may benefit consumers and covered persons that are small entities, and 
also reduce burden on covered persons that are small entities. The 
Bureau provided in the IRFA that finalizing the rules implementing 
these title XIV disclosures simultaneously with the final TILA-RESPA 
rule would avoid unnecessary regulatory burden by preventing creditors 
that are small entities from having to implement multiple iterations of 
disclosure rules. The Bureau stated in the IRFA that it does not 
anticipate additional costs to covered persons as a result of delayed 
implementation of the new disclosure requirements, although small 
entities may incur additional recurring costs associated with 
calculating and disclosing this additional information to consumers 
once the implementing rules take effect. Id. The Bureau also noted in 
the IRFA that incorporating the Affected Title XIV Disclosures into the 
TILA-RESPA integrated disclosures was being proposed to avoid 
duplication, overlaps, and conflicts. See 77 FR 51116, 51294.
    The Bureau did not receive any comments on the conclusions that the 
Bureau made in the IRFA regarding the effect on small entities of the 
proposed delay of implementing the Affected Title XIV Disclosures. The 
Bureau also believes that delaying implementation of the Post-
Consummation Escrow Cancellation Disclosure to implement it 
simultaneously with the TILA-RESPA integration final rulemaking will 
avoid unnecessary regulatory burden by preventing covered persons that 
are small entities from having to implement multiple iterations of 
disclosure rules. The Bureau does not anticipate additional costs as a 
result of delayed implementation of the Post-Consummation Escrow 
Cancellation Disclosure, although small entities may incur additional 
recurring costs associated with calculating and disclosing this 
additional information to consumers once the implementing rules take 
effect. Id. The Bureau also believes that synchronizing the format and 
content of the Post-Consummation Escrow Cancellation Disclosure with 
the Pre-Consummation Escrow Waiver Disclosure and the integrated TILA-
RESPA disclosures avoids duplication, overlaps, and conflicts with 
other Federal rules. See 77 FR 51116, 51294.
    Accordingly, because this final rule, which the Bureau is issuing 
separately from the other parts of the TILA-RESPA Integration Proposal, 
will not create additional costs for covered persons that are small 
entities, the undersigned certifies that it will not have a significant 
economic impact on a substantial number of small entities. Therefore, 
an analysis under the RFA is not required for this final rule. However, 
the factors required in such an analysis are addressed below for 
informational purposes.
    The Bureau has concluded that the final rule will impose, subject 
to a post-statutory baseline, the impacts on small entities that were 
discussed in the IRFA. The delay of the implementation of the Affected 
Title XIV Disclosures and the Post-Consummation Escrow Cancellation 
Disclosure, so that they may be implemented with the integrated TILA-
RESPA disclosures, will improve the integrated disclosures, which may 
benefit consumers and small entities, and avoid unnecessary regulatory 
burden by preventing covered persons that are small entities from 
having to implement multiple iterations of disclosure rules.
    As described in the TILA-RESPA Integration Proposal, the Bureau 
estimates the final rule to affect small entities that are engaged in 
closed-end mortgage transactions that are commercial banks and savings 
associations, credit unions, non-bank mortgage lenders, mortgage 
brokers, and settlement agents, totaling about 26,000 small 
entities.\21\ This rule provides an exemption and, therefore, does not 
contain any reporting, recordkeeping, or other requirements. The Bureau 
has reviewed possible steps to minimize the impact on small entities in 
connection with the TILA-RESPA Integration Proposal. As the nature of 
this final rule is an exemption, it is itself a step taken to minimize 
impact on small entities (as opposed to the alternative of letting the 
statutory disclosure provisions become self-effective). The final rule 
covers all small entities subject to the statutory provisions, because 
the final rule applies to persons generally.
---------------------------------------------------------------------------

    \21\ See 77 FR 51116, 51285-6.
---------------------------------------------------------------------------

    In sum, this final rule will eliminate the costs that covered small 
entities would have incurred if they had to implement the disclosure 
provisions multiple times, i.e., if these statutory provisions had 
taken effect by operation of law pursuant to Dodd-Frank Act section 
1400(c)(3) and were also later implemented through the TILA-RESPA 
integration final rule (including potential increased compliance costs 
due to uncertainty of complying with statutory provisions without 
implementing regulations).

VIII. Paperwork Reduction Act

    The Bureau has determined that this final rule does not impose any 
new recordkeeping, reporting, or disclosure requirements on covered 
persons or members of the public that would be collections of 
information requiring OMB approval under the Paperwork Reduction Act 
(PRA), 44 U.S.C. 3501, et seq. Rather, the final rule defers certain

[[Page 70114]]

information collection requirements subject to the PRA until such time 
as the TILA-RESPA integrated disclosure final rule, and the 
corresponding information collection requirements, becomes effective. 
The Bureau did not receive any comments related to this exemption under 
the PRA.

List of Subjects in 12 CFR Part 1026

    Advertising, Consumer protection, Credit, Credit unions, Mortgages, 
National banks, Recordkeeping requirements, Reporting, Savings 
associations, Truth in lending.

Authority and Issuance

    For the reasons stated in the preamble, the Bureau amends 
Regulation Z, 12 CFR part 1026, as set forth below:

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
1. The authority citation for part 1026 is revised to read as follows:

    Authority: 12 U.S.C. 2601; 2603-2605, 2607, 2609, 2617, 5511, 
5512, 5532, 5581; 15 U.S.C. 1601 et seq.



0
2. Section 1026.1 is amended by revising paragraph (a) and adding 
paragraph (c)(5) to read as follows:


Sec.  1026.1  Authority, purpose, coverage, organization, enforcement, 
and liability.

    (a) Authority. This part, known as Regulation Z, is issued by the 
Bureau of Consumer Financial Protection to implement the Federal Truth 
in Lending Act, which is contained in title I of the Consumer Credit 
Protection Act, as amended (15 U.S.C. 1601 et seq.). This part also 
implements title XII, section 1204 of the Competitive Equality Banking 
Act of 1987 (Pub. L. 100-86, 101 Stat. 552). Furthermore, this part 
implements certain provisions of the Real Estate Settlement Procedures 
Act of 1974, as amended (12 U.S.C. 2601 et seq.). The Bureau's 
information-collection requirements contained in this part have been 
approved by the Office of Management and Budget under the provisions of 
44 U.S.C. 3501 et seq. and have been assigned OMB No. 3170-0015 (Truth 
in Lending).
* * * * *
    (c) * * *
    (5) No person is required to provide the disclosures required by 
sections 128(a)(16) through (19), 128(b)(4), 129C(f)(1), 129C(g)(2) and 
(3), 129C(h), 129D(h), 129D(j)(1)(A), or 129D(j)(1)(B) of the Truth in 
Lending Act or section 4(c) of the Real Estate Settlement Procedures 
Act.
* * * * *

0
3. In Supplement I to Part 1026:
    A. Under Section 1026.1--Authority, Purpose, Coverage, 
Organization, Enforcement and Liability, under subheading 1(c) 
Coverage, add in alphanumerical order the subheading Paragraph 1(c)(5) 
and paragraph 1. under that subheading.
    The additions read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Subpart A--General

Section 1026.1--Authority, Purpose, Coverage, Organization, Enforcement 
and Liability 1(c) Coverage

* * * * *
    Paragraph 1(c)(5).
    1. Temporary exemption. Section 1026.1(c)(5) implements sections 
128(a)(16) through (19), 128(b)(4), 129C(f)(1), 129C(g)(2) and (3), 
129C(h), 129D(h), 129D(j)(1)(A), and 129D(j)(1)(B) of the Truth in 
Lending Act and section 4(c) of the Real Estate Settlement Procedures 
Act, by exempting persons from the disclosure requirements of those 
sections. These exemptions are intended to be temporary, lasting only 
until regulations implementing the integrated disclosures required by 
sections 1032(f), 1098, and 1100A of the Dodd-Frank Act (12 U.S.C. 
5532(f), 12 U.S.C. 2603(a), 15 U.S.C. 1604(b)) become mandatory. 
Section 1026.1(c)(5) does not exempt any person from any other 
requirement of this part, Regulation X (12 CFR part 1024), the Truth in 
Lending Act, or the Real Estate Settlement Procedures Act.
* * * * *

    Dated: November 13, 2012.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2012-28341 Filed 11-21-12; 8:45 am]
BILLING CODE 4810-AM-P