[Federal Register Volume 79, Number 248 (Monday, December 29, 2014)]
[Rules and Regulations]
[Pages 77855-77856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30405]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026


Truth in Lending Act (Regulation Z) Adjustment to Asset-Size 
Exemption Threshold

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.

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SUMMARY: The Bureau is amending the official commentary that interprets 
the requirements of the Bureau's Regulation Z (Truth in Lending) to 
reflect a change in the asset size threshold for certain creditors to 
qualify for an exemption to the requirement to establish an escrow 
account for a higher-priced mortgage loan based on the annual 
percentage change in the average of the Consumer Price Index for Urban 
Wage Earners and Clerical Workers (CPI-W) for the 12-month period 
ending in November. The exemption threshold is adjusted to increase to 
$2.060 billion from $2.028 billion. The adjustment is based on the 1.1 
percent increase in the average of the CPI-W for the 12-month period 
ending in November 2014. Therefore, creditors with assets of $2.060 
billion or less as of December 31, 2014, are exempt, if other 
requirements of Regulation Z also are met, from establishing escrow 
accounts for higher-priced mortgage loans in 2015. The adjustment to 
the escrows exemption asset-size threshold will also increase a similar 
threshold for small-creditor portfolio and balloon-payment qualified 
mortgages. Balloon-payment qualified mortgages that satisfy all 
applicable criteria, including being made by creditors that do not 
exceed the asset-size threshold, are also excepted from the prohibition 
on balloon payments for high-cost mortgages.

DATES: This final rule is effective January 1, 2015.

FOR FURTHER INFORMATION CONTACT: James Wylie, Counsel, Office of 
Regulations, at (202) 435-7700.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(Dodd-Frank Act) amended TILA section 129D(a) to contain a general 
requirement that an escrow account be established by a creditor to pay 
for property taxes and insurance premiums for certain first-lien 
higher-priced mortgage loan transactions. Section 1461 of the Dodd-
Frank Act also generally permits an exemption from

[[Page 77856]]

the higher-priced mortgage loan escrow requirement for a creditor that: 
(1) Operates predominantly in rural or underserved areas; (2) together 
with all affiliates, has total annual mortgage loan originations that 
do not exceed a limit set by the Bureau; (3) retains its mortgage 
obligations in portfolio; and (4) meets any asset-size threshold and 
any other criteria as the Bureau may establish.
    In the 2013 Escrows Final Rule,\1\ the Bureau established such an 
asset-size threshold of $2,000,000,000, which would adjust 
automatically each year, based on the year-to-year change in the 
average of the CPI-W for each 12-month period ending in November, with 
rounding to the nearest million dollars.\2\ For 2014, the threshold was 
$2.028 billion. During the 12-month period ending in November 2014, the 
average of the CPI-W increased by 1.1 percent. As a result, the 
exemption threshold is increased to $2.060 billion for 2015. Thus, 
loans made by creditors with total assets of less than $2.060 billion 
as of December 31, 2014, that meet the other requirements of 12 CFR 
1026.35(b)(2)(iii) will be exempt in 2015 from the escrow-accounts 
requirement for higher-priced mortgage loans.
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    \1\ 78 FR 4726 (Jan. 22, 2013).
    \2\ See 12 CFR 1026.35(b)(2)(iii)(C).
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    The adjustment to the escrows exemption asset-size threshold will 
also increase the threshold for small-creditor portfolio and balloon-
payment qualified mortgages under Regulation Z. The requirements for 
small-creditor portfolio qualified mortgages at 12 CFR 
1026.43(e)(5)(i)(D) reference the asset threshold in 12 CFR 
1026.35(b)(2)(iii)(C). Likewise, the requirements for balloon-payment 
qualified mortgages at 12 CFR 1026.43(f)(1)(vi) references the asset 
threshold in 12 CFR 1026.35(b)(2)(iii)(C). Balloon-payment qualified 
mortgages that satisfy all applicable criteria in Sec. Sec.  
1026.43(f)(1)(i) through (vi) and 1026.43(f)(2), or the conditions set 
forth in Sec.  1026.43(e)(6), including being made by creditors that do 
not exceed the asset threshold in 12 CFR 1026.35(b)(2)(iii)(C), are 
also excepted from the prohibition on balloon payments for high-cost 
mortgages in 12 CFR 1026.32(d)(1)(ii)(C).

II. Procedural Requirements

A. Administrative Procedure Act

    Under the Administrative Procedure Act (APA), notice and 
opportunity for public comment are not required if the Bureau finds 
that notice and public comment are impracticable, unnecessary, or 
contrary to the public interest. 5 U.S.C. 553(b)(B). Pursuant to this 
final rule, comment 35(b)(2)(iii)-1 in Regulation Z is amended to 
update the exemption threshold. The amendment in this final rule is 
technical and nondiscretionary, and it merely applies the formula 
previously established in Regulation Z for determining any adjustments 
to the exemption threshold. For these reasons, the Bureau has 
determined that publishing a notice of proposed rulemaking and 
providing opportunity for public comment are unnecessary. Therefore, 
the amendment is adopted in final form.
    Section 553(d) of the APA generally requires publication of a final 
rule 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) interpretive 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). At a minimum, the Bureau believes the 
amendments fall under the third exception to section 553(d). The Bureau 
finds that there is good cause to make the amendments effective on 
January 1, 2015. The amendment in this notice is technical and non-
discretionary, and it applies the method previously established in the 
agency's regulations for automatic adjustments to the threshold.

B. Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a).

C. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR 1320), the agency reviewed this final rule. No collections 
of information pursuant to the Paperwork Reduction Act are contained in 
the final rule.

List of Subjects in 12 CFR Part 1026

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

Authority and Issuance

    For the reasons set forth 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 continues 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. In Supplement I to Part 1026--Official Interpretations, under 
Section 1026.35--Requirements for Higher-Priced Mortgage Loans, 
35(b)(2) Exemptions, Paragraph 35(b)(2)(iii), paragraph 1.iii is 
revised to read as follows:

SUPPLEMENT I TO PART 1026--OFFICIAL INTERPRETATIONS

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 1026.35--Requirements for Higher-Priced Mortgage Loans

* * * * *

35(b)(2) Exemptions

* * * * *

Paragraph 35(b)(2)(iii)

1. Requirements for exemption. * * *

* * * * *
    iii. As of the end of the preceding calendar year, the creditor 
had total assets that are less than the asset threshold for the 
relevant calendar year. For calendar year 2015, the asset threshold 
is $2,060,000,000. Creditors that had total assets of less than 
$2,060,000,000 on December 31, 2014, satisfy this criterion for 
purposes of the exemption during 2015. This asset threshold shall 
adjust automatically each year based on the year-to-year change in 
the average of the Consumer Price Index for Urban Wage Earners and 
Clerical Workers, not seasonally adjusted, for each 12-month period 
ending in November, with rounding to the nearest million dollars. 
The Bureau will publish notice of the asset threshold each year by 
amending this comment. For historical purposes, the prior asset 
thresholds were:
    A. For calendar year 2013, the asset threshold was 
$2,000,000,000. Creditors that had total assets of less than 
$2,000,000,000 on December 31, 2012, satisfied this criterion for 
purposes of the exemption during 2013.
    B. For calendar year 2014, the asset threshold was 
$2,028,000,000. Creditors that had total assets of less than 
$2,028,000,000 on December 31, 2013, satisfied this criterion for 
purposes of the exemption during 2014.
* * * * *

    Dated: December 15, 2014.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2014-30405 Filed 12-24-14; 8:45 am]
BILLING CODE 4810-AM-P