[Federal Register Volume 80, Number 33 (Thursday, February 19, 2015)]
[Rules and Regulations]
[Pages 8767-8778]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-01321]



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  Federal Register / Vol. 80, No. 33 / Thursday, February 19, 2015 / 
Rules and Regulations  

[[Page 8767]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Parts 1024 and 1026

[Docket No. CFPB-2014-0028]
RIN 3170-AA48


Amendments to the 2013 Integrated Mortgage Disclosures Rule Under 
the Real Estate Settlement Procedures Act (Regulation X) and the Truth 
In Lending Act (Regulation Z) and the 2013 Loan Originator Rule Under 
the Truth in Lending Act (Regulation Z)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; Official Interpretations.

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SUMMARY: This final rule modifies the 2013 TILA-RESPA Final Rule. This 
rule extends the timing requirement for revised disclosures when 
consumers lock a rate or extend a rate lock after the Loan Estimate is 
provided and permits certain language related to construction loans for 
transactions involving new construction on the Loan Estimate. This rule 
also amends the 2013 Loan Originator Final Rule to provide for 
placement of the Nationwide Mortgage Licensing System and Registry ID 
(NMLSR ID) on the integrated disclosures. Additionally, the Bureau is 
making non-substantive corrections, including citation and cross-
reference updates and wording changes for clarification purposes, to 
various provisions of Regulations X and Z as amended or adopted by the 
2013 TILA-RESPA Final Rule.

DATES: The rule is effective August 1, 2015. The final rule applies to 
transactions for which the creditor or mortgage broker receives an 
application on or after August 1, 2015.

FOR FURTHER INFORMATION CONTACT: Jaydee DiGiovanni, Policy and 
Procedure Analyst; Richard Arculin and David Friend, Counsels; Office 
of Regulations at (202) 435-7700.

SUPPLEMENTARY INFORMATION: 

I. Summary of Final Rule

    In November 2013, pursuant to sections 1098 and 1100A of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), 
the Bureau issued the Integrated Mortgage Disclosures under the Real 
Estate Settlement Procedures Act (Regulation X) and the Truth in 
Lending Act (Regulation Z) (2013 TILA-RESPA Final Rule),\1\ combining 
certain disclosures that consumers receive in connection with applying 
for and closing on a mortgage loan.
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    \1\ 78 FR 79730 (Dec. 31, 2013).
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    On October 10, 2014, the Bureau proposed several amendments to 
Regulation Z provisions adopted by the 2013 TILA-RESPA Final Rule \2\ 
(the proposal):
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    \2\ 79 FR 64336 (Oct. 29, 2014).
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     To extend the timing requirement for creditors to provide 
a revised Loan Estimate to consumers when consumers lock a rate or 
extend a rate lock after the Loan Estimate is provided. The 2013 TILA-
RESPA Final Rule requires creditors to provide a revised Loan Estimate 
with the revised interest rate, the points disclosed pursuant to Sec.  
1026.37(f)(1), lender credits, and any other interest rate dependent 
charges and terms on the date the interest rate is locked. The Bureau 
proposed to extend the timing requirement to the next business day 
after the rate is locked.
     To provide for the placement on the Loan Estimate form of 
language relating to construction loans in transactions involving new 
construction that is required in order for creditors to redisclose 
estimated charges.
     To make non-substantive corrections, including minor 
wording changes, corrected or updated citations and cross-references, 
in the regulation and commentary adopted by the 2013 TILA-RESPA Final 
Rule.
     The Bureau also proposed to amend the 2013 Loan Originator 
Final Rule \3\ to provide for placement of the NMLSR ID on the 
integrated disclosures.
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    \3\ 78 FR 11280 (Feb. 15, 2013).
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    With respect to the proposal to allow creditors to redisclose the 
Loan Estimate one business day after the interest rate is locked, the 
Bureau is extending the timing requirement to three business days after 
the rate is locked. With respect to all other aspects of the proposal, 
the Bureau is adopting the amendments as proposed. The Bureau also is 
adopting additional, non-substantive corrections identified since the 
proposal was issued.

II. Background

A. The Integrated Disclosures Rulemaking

    In July 2010, the Dodd-Frank Act was enacted. The Dodd-Frank Act 
transferred rulemaking authority under both TILA and RESPA to the 
Bureau. In addition, Dodd-Frank Act sections 1032(f), 1098, and 1100A 
mandated that the Bureau establish a single disclosure scheme for use 
by lenders or creditors in complying with the disclosure requirements 
of both RESPA and TILA. Section 1098(2) of the Dodd-Frank Act amended 
RESPA section 4(a) to require that the Bureau publish a single, 
integrated disclosure for mortgage loan transactions, including ``the 
disclosure requirements of this section and section 5, in conjunction 
with the disclosure requirements of [TILA]. . . .'' \4\ Similarly, 
section 1100A(5) of the Dodd-Frank Act amended TILA section 105(b) to 
require that the Bureau publish a single, integrated disclosure for 
mortgage loan transactions, including ``the disclosure requirements of 
this title in conjunction with the disclosure requirements of [RESPA]. 
. . .'' \5\ The Dodd-Frank Act required the Bureau to issue for public 
comment rules and model disclosures that integrated the

[[Page 8768]]

TILA and RESPA disclosures by July 21, 2012.\6\
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    \4\ 12 U.S.C. 2603(a).
    \5\ 15 U.S.C. 1604(b). The amendments to RESPA and TILA 
mandating a ``single, integrated disclosure'' are among numerous 
conforming amendments to existing Federal laws found in subtitle H 
of the Consumer Financial Protection Act of 2010. Subtitle C of the 
Consumer Financial Protection Act, ``Specific Bureau Authorities,'' 
codified at 12 U.S.C. chapter 53, subchapter V, part C, contains a 
similar provision. Specifically, section 1032(f) of the Dodd-Frank 
Act provides that, by July 21, 2012, the Bureau ``shall propose for 
public comment rules and model disclosures that combine the 
disclosures required under [TILA] and sections 4 and 5 of [RESPA] 
into a single, integrated disclosure for mortgage loan transactions 
covered by those laws, unless the Bureau determines that any 
proposal issued by the [Board] and [HUD] carries out the same 
purpose.'' 12 U.S.C. 5532(f). The Bureau issued the 2012 TILA-RESPA 
Proposal pursuant to that mandate and the parallel mandates 
established by the conforming amendments to RESPA and TILA, 
discussed above.
    \6\ 12 U.S.C. 5532(f).
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    The Bureau issued proposed integrated disclosure forms and rules 
for public comment on July 9, 2012 (the 2012 TILA-RESPA Proposal).\7\ 
On December 31, 2013, more than 17 years after Congress first directed 
the Federal Reserve Board and the Department of Housing and Urban 
Development (HUD) to integrate the disclosures under TILA and RESPA, 
the Bureau published the 2013 TILA-RESPA Final Rule.\8\
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    \7\ See Press Release, Consumer Financial Protection Bureau, 
CFPB 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/; CFPB Mortgage Disclosure Team, CFPB Blog, 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/.
    \8\ 78 FR 79730 (Dec. 31, 2013).
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B. Implementation Support

    In early 2014, the Bureau initiated efforts to support industry 
implementation of the 2013 TILA-RESPA Final Rule. These on-going 
efforts include: (1) The publication of a plain-language compliance 
guide and guide to forms to help industry understand the new rules, 
including updates to the guides, as needed; (2) the publication of a 
readiness guide for institutions to evaluate their readiness and 
facilitate compliance with the new rules; (3) the publication of a 
disclosure timeline that illustrates the process and timing 
requirements of the new disclosure rules; (4) an ongoing series of 
webinars to address common interpretive questions; (5) roundtable 
meetings with industry, including creditors, settlement service 
providers, and technology vendors, to discuss implementation; (6) 
participation in conferences and forums; and (7) close collaboration 
with State and Federal regulators on implementation of the 2013 TILA-
RESPA Final Rule, including coordination on consistent examination 
procedures. More information regarding the Bureau's TILA-RESPA 
implementation initiative can be found on the Bureau's regulatory 
implementation Web site at www.consumerfinance.gov/regulatory-implementation.

III. Comments

    The Bureau received 31 comments from creditors, trade associations, 
technology vendors, and others in response to the October 10, 2014 
proposal to amend the 2013 TILA-RESPA Final Rule. Many of the comments 
discussed issues beyond the scope of the proposal. The Bureau discusses 
those comments that were responsive to the proposal in the section-by-
section analysis below. This final rule does not make any changes 
outside the scope of the proposal, other than additional, non-
substantive corrections identified since the proposal was issued.

IV. Legal Authority

    The Bureau is issuing this final rule pursuant to its authority 
under TILA, RESPA, and the Dodd-Frank Act. Section 1061 of the Dodd-
Frank Act transferred to the Bureau the ``consumer financial protection 
functions'' previously vested in certain other Federal agencies, 
including the Board's consumer protection functions relating to TILA 
mortgage disclosures and the HUD Secretary's consumer protection 
functions relating to RESPA.\9\ The term ``consumer financial 
protection function'' is defined to include ``all authority to 
prescribe rules or issue orders or guidelines pursuant to any Federal 
consumer financial law, including performing appropriate functions to 
promulgate and review such rules, orders, and guidelines.'' \10\ Title 
X of the Dodd-Frank Act, including section 1061 of the Dodd-Frank Act, 
along with TILA, RESPA, and certain subtitles and provisions of title 
XIV of the Dodd-Frank Act, are Federal consumer financial laws.\11\ 
Accordingly, the Bureau has authority to issue regulations pursuant to 
TILA and RESPA, including the disclosure requirements added to those 
statutes by title XIV of the Dodd-Frank Act, as well as title X of the 
Dodd-Frank Act.
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    \9\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376, section 1061(b)(7) (2010); 12 
U.S.C. 5581(b)(7).
    \10\ 12 U.S.C. 5581(a)(1).
    \11\ Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14) 
(defining ``Federal consumer financial law'' to include the 
``enumerated consumer laws'' and the provisions of title X of the 
Dodd-Frank Act); Dodd-Frank Act section 1002(12), 12 U.S.C. 5481(12) 
(defining ``enumerated consumer laws'' to include TILA and RESPA); 
Dodd-Frank Act section 1400(b), 15 U.S.C. 1601 note (defining 
``enumerated consumer laws'' to include certain subtitles and 
provisions of Title XIV).
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A. The Integrated Disclosure Mandate

    Section 1032(f) of the Dodd-Frank Act requires that, ``[n]ot later 
than one year after the designated transfer date [of July 21, 2011], 
the Bureau shall propose for public comment rules and model disclosures 
that combine the disclosures required under [TILA] and sections 4 and 5 
of [RESPA], into a single, integrated disclosure for mortgage loan 
transactions covered by those laws, unless the Bureau determines that 
any proposal issued by the [Board] and [HUD] carries out the same 
purpose.'' \12\ In addition, the Dodd-Frank Act amended section 105(b) 
of TILA and section 4(a) of RESPA to require the integration of the 
TILA disclosures and the disclosures required by sections 4 and 5 of 
RESPA.\13\ The purpose of the integrated disclosure is to facilitate 
compliance with the disclosure requirements of TILA and RESPA and to 
help the consumer understand the transaction by using readily 
understandable language to simplify the technical nature of the 
disclosures.\14\
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    \12\ 12 U.S.C. 5532(f).
    \13\ Section 1100A of the Dodd-Frank Act amended TILA section 
105(b) to provide that the ``Bureau shall publish a single, 
integrated disclosure for mortgage loan transactions (including real 
estate settlement cost statements) which includes the disclosure 
requirements of this title in conjunction with the disclosure 
requirements of the Real Estate Settlement Procedures Act of 1974 
that, taken together, may apply to a transaction that is subject to 
both or either provisions of law.'' 15 U.S.C. 1604(b). Section 1098 
of the Dodd-Frank Act amended RESPA section 4(a) to require the 
Bureau to publish a ``single, integrated disclosure for mortgage 
loan transactions (including real estate settlement cost statements) 
which includes the disclosure requirements of this section and 
section 5, in conjunction with the disclosure requirements of the 
Truth in Lending Act that, taken together, may apply to a 
transaction that is subject to both or either provisions of law.'' 
12 U.S.C. 2603(a).
    \14\ See Dodd-Frank Act sections 1098, 1100A.
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    Although Congress imposed this integrated disclosure requirement, 
it did not harmonize the underlying statutes. In particular, TILA and 
RESPA establish different timing requirements for disclosing mortgage 
credit terms and costs to consumers and require that those disclosures 
be provided by different parties. TILA generally requires that, within 
three business days of receiving the consumer's application and at 
least seven business days before consummation of certain mortgage 
transactions, creditors must provide consumers a good faith estimate of 
the costs of credit.\15\ If the annual percentage rate that was 
initially disclosed becomes inaccurate, TILA requires creditors to 
redisclose the information at least three business days before 
consummation.\16\ These disclosures must be provided in final form at 
consummation.\17\ RESPA also requires that the creditor or broker 
provide consumers with a good faith estimate of settlement charges no 
later

[[Page 8769]]

than three business days after receiving the consumer's application. 
However, unlike TILA, RESPA requires that, at or before settlement, 
``the person conducting the settlement'' (which may or may not be the 
creditor) provide the consumer with a statement that records all 
charges imposed upon the consumer in connection with the 
settlement.\18\
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    \15\ TILA section 128(b)(2)(A); 15 U.S.C. 1638(b)(2)(A). This 
requirement applies to extensions of credit that are both secured by 
a dwelling and subject to RESPA.
    \16\ TILA section 128(b)(2)(D); 15 U.S.C. 1638(b)(2)(D).
    \17\ TILA section 128(b)(2)(B)(ii); 15 U.S.C. 1638(b)(2)(B)(ii).
    \18\ RESPA sections 4(b), 5(c); 12 U.S.C. 2603(b), 2604(c).
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    The Dodd-Frank Act did not reconcile these and other statutory 
differences. Therefore, to meet the Dodd-Frank Act's mandate to 
integrate the disclosures required by TILA and RESPA, the Bureau was 
required to do so. Dodd-Frank Act section 1032(f), TILA section 105(b), 
and RESPA section 4(a) provide the Bureau with authority to issue 
regulations that reconcile certain provisions of TILA and RESPA to 
carry out Congress' mandate to integrate the statutory disclosure 
requirements.

B. Other Rulemaking and Exception Authorities

    This rule also relies on the rulemaking and exception authorities 
specifically granted to the Bureau by TILA, RESPA, and the Dodd-Frank 
Act, including the authorities discussed below.
Truth in Lending Act
    TILA section 105(a). As amended by the Dodd-Frank Act, TILA section 
105(a), 15 U.S.C. 1604(a), directs the Bureau to prescribe regulations 
to carry out the purposes of TILA and provides that such regulations 
may contain additional requirements, classifications, differentiations, 
or other provisions and may further provide for such adjustments and 
exceptions for all or any class of transactions that the Bureau judges 
are necessary or proper to effectuate the purposes of TILA, to prevent 
circumvention or evasion thereof, or to facilitate compliance 
therewith. A purpose of TILA is ``to assure a meaningful disclosure of 
credit terms so that the consumer will be able to compare more readily 
the various credit terms available to him and avoid the uninformed use 
of credit.'' \19\ This stated purpose is informed by Congress' finding 
that ``economic stabilization would be enhanced and the competition 
among the various financial institutions and other firms engaged in the 
extension of consumer credit would be strengthened by the informed use 
of credit[.]'' \20\ Thus, strengthened competition among financial 
institutions is a goal of TILA.
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    \19\ TILA section 102(a); 15 U.S.C. 1601(a).
    \20\ TILA section 102(a).
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    Historically, TILA section 105(a) has served as a broad source of 
authority for rules that promote the informed use of credit through 
required disclosures and substantive regulation of certain practices. 
Dodd-Frank Act section 1100A clarified the Bureau's section 105(a) 
authority by amending that section to provide express authority to 
prescribe regulations that contain ``additional requirements'' that the 
Bureau finds are necessary or proper to effectuate the purposes of 
TILA, to prevent circumvention or evasion thereof, or to facilitate 
compliance. This amendment clarified the Bureau's authority to 
prescribe requirements beyond those specifically listed in the statute 
that meet the standards outlined in TILA section 105(a). The Dodd-Frank 
Act also clarified the Bureau's rulemaking authority over certain high-
cost mortgages pursuant to section 105(a). As amended by the Dodd-Frank 
Act, TILA section 105(a) authority to make adjustments and exceptions 
to the requirements of TILA applies to all transactions subject to 
TILA, except with respect to the provisions of TILA section 129 that 
apply to the high-cost mortgages referred to in TILA section 103(bb), 
15 U.S.C. 1602(bb).\21\
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    \21\ 15 U.S.C. 1639. TILA section 129 contains requirements for 
certain high-cost mortgages, established by the Home Ownership and 
Equity Protection Act (HOEPA), which are commonly called HOEPA 
loans.
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    TILA section 129B(e). Dodd-Frank Act section 1405(a) amended TILA 
to add new section 129B(e), 15 U.S.C. 1639B(e). That section authorizes 
the Bureau to ``prohibit or condition terms, acts, or practices 
relating to residential mortgage loans that the Bureau finds to be 
abusive, unfair, deceptive, predatory, necessary or proper to ensure 
that responsible, affordable mortgage credit remains available to 
consumers in a manner consistent with the purposes of this section and 
section 129C [of TILA], necessary or proper to effectuate the purposes 
of this section and section 129C [of TILA], to prevent circumvention or 
evasion thereof, or to facilitate compliance with such sections, or are 
not in the interest of the borrower.'' In developing rules under TILA 
section 129B(e), the Bureau has considered the broad mandate of section 
129B.
Real Estate Settlement Procedures Act
    Section 19(a) of RESPA, 12 U.S.C. 2617(a), authorizes the Bureau to 
prescribe such rules and regulations and to make such interpretations 
and grant such reasonable exemptions for classes of transactions as may 
be necessary to achieve the purposes of RESPA. In enacting RESPA, 
Congress sought ``to insure that consumers . . . are provided with 
greater and more timely information on the nature and costs of the 
settlement process and protected from unnecessarily high settlement 
charges caused by certain abusive practices in some areas of the 
country.'' \22\ RESPA section 19(a) has served as a broad source of 
authority to prescribe disclosures and substantive requirements to 
carry out the purposes of RESPA.
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    \22\ RESPA section 2(a); 12 U.S.C. 2601(a).
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    In developing rules under RESPA section 19(a), the Bureau has 
considered the purposes of RESPA. One purpose of RESPA is ``to effect 
certain changes in the settlement process for residential real estate 
that will result in more effective advance disclosure to home buyers 
and sellers of settlement costs.'' \23\
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    \23\ RESPA section 2(b); 12 U.S.C. 2601(b).
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Dodd-Frank Act
    Dodd-Frank Act section 1021. Section 1021(a) of the Dodd-Frank Act 
provides that the Bureau shall seek to implement and, where applicable, 
enforce Federal consumer financial law consistently for the purpose of 
ensuring that all consumers have access to markets for consumer 
financial services and that markets for consumer financial products and 
services are fair, transparent, and competitive.\24\ In addition, 
section 1021(b) of the Dodd-Frank Act provides that the Bureau is 
authorized to exercise its authorities under Federal consumer financial 
law for the purposes of ensuring, with respect to consumer financial 
products and services, that, among other things: (1) Consumers are 
provided with timely and understandable information to make responsible 
decisions about financial transactions; (2) consumers are protected 
from unfair, deceptive, or abusive acts and practices and from 
discrimination; (3) outdated, unnecessary, or unduly burdensome 
regulations are regularly identified and addressed in order to reduce 
unwarranted regulatory burdens; (4) Federal consumer financial law is 
enforced consistently, without regard to the status of a person as a 
depository institution, in order to promote fair competition; and (5) 
markets for consumer financial products and services operate 
transparently and efficiently to facilitate access and

[[Page 8770]]

innovation.\25\ In developing this rulemaking, the Bureau has sought to 
ensure that it is consistent with the purposes of Dodd-Frank Act 
section 1021(a) and with the objectives of Dodd-Frank Act section 
1021(b), specifically including Dodd-Frank Act section 1021(b)(1) and 
(3).
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    \24\ 12 U.S.C. 5511(a).
    \25\ 12 U.S.C. 5511(b).
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    Dodd-Frank Act section 1022(b). Section 1022(b)(1) of the Dodd-
Frank Act authorizes the Bureau to prescribe rules ``as may be 
necessary or appropriate to enable the Bureau to administer and carry 
out the purposes and objectives of the Federal consumer financial laws, 
and to prevent evasions thereof.'' \26\ Section 1022(b)(2) of the Dodd-
Frank Act prescribes certain standards for rulemaking that the Bureau 
must follow in exercising its authority under section 1022(b)(1).\27\ 
As discussed above, TILA and RESPA are Federal consumer financial laws. 
Accordingly, in finalizing this rule, the Bureau is exercising its 
authority under Dodd-Frank Act section 1022(b) to prescribe rules under 
TILA, RESPA, and title X of the Dodd-Frank Act that carry out the 
purposes and objectives and prevent evasion of those laws. See part VI 
for a discussion of the Bureau's standards for rulemaking under Dodd-
Frank Act section 1022(b)(2).
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    \26\ 12 U.S.C. 5512(b)(1).
    \27\ 12 U.S.C. 5512(b)(2).
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    Dodd-Frank Act section 1032. Section 1032(a) of the Dodd-Frank Act 
provides that the Bureau ``may prescribe rules to ensure that the 
features of any consumer financial product or service, both initially 
and over the term of the product or service, 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.'' \28\ The 
authority granted to the Bureau in section 1032(a) is broad and 
empowers the Bureau to prescribe rules regarding the disclosure of the 
``features'' of consumer financial products and services generally. 
Accordingly, the Bureau may prescribe rules containing disclosure 
requirements even if other Federal consumer financial laws do not 
specifically require disclosure of such features.
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    \28\ 12 U.S.C. 5532(a).
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    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.'' \29\ Accordingly, in 
developing the 2013 TILA-RESPA Final Rule and amendments thereto under 
Dodd-Frank Act section 1032(a), 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. Moreover, the Bureau has considered the evidence developed 
through its consumer testing of the integrated disclosures as well as 
prior testing done by the Board and HUD regarding TILA and RESPA 
disclosures. See part III of the 2013 TILA-RESPA Final Rule for a 
discussion of the Bureau's consumer testing.\30\
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    \29\ 12 U.S.C. 5532(c).
    \30\ 78 FR 79730, 79741 (Dec. 31, 2013).
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    Dodd-Frank Act section 1405(b). Section 1405(b) of the Dodd-Frank 
Act provides that, ``[n]otwithstanding any other provision of [title 
XIV of the Dodd-Frank Act], in order to improve consumer awareness and 
understanding of transactions involving residential mortgage loans 
through the use of disclosures, the Bureau may, by rule, exempt from or 
modify disclosure requirements, in whole or in part, for any class of 
residential mortgage loans if the Bureau determines that such exemption 
or modification is in the interest of consumers and in the public 
interest.'' \31\ Section 1401 of the Dodd-Frank Act, which amends TILA 
section 103(cc)(5), 15 U.S.C. 1602(cc)(5), generally defines a 
residential mortgage loan as any consumer credit transaction that is 
secured by a mortgage on a dwelling or on residential real property 
that includes a dwelling other than an open-end credit plan or an 
extension of credit secured by a consumer's interest in a timeshare 
plan. Notably, the authority granted by section 1405(b) applies to 
``disclosure requirements'' generally and is not limited to a specific 
statute or statutes. Accordingly, Dodd-Frank Act section 1405(b) is a 
broad source of authority to exempt from or modify the disclosure 
requirements of TILA and RESPA.
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    \31\ 15 U.S.C. 1601 note.
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    In developing rules for residential mortgage loans under Dodd-Frank 
Act section 1405(b), the Bureau has considered the purposes of 
improving consumer awareness and understanding of transactions 
involving residential mortgage loans through the use of disclosures and 
the interests of consumers and the public.

V. Section-by-Section Analysis

A. General--Non-Substantive Corrections

    The Bureau proposed non-substantive corrections, including citation 
and cross-reference updates and wording changes for clarification 
purposes, in Regulation X and Regulation Z. The Bureau received 
comments that supported these proposed changes. The Bureau is adopting 
as proposed the non-substantive corrections to regulatory text in 
Sec. Sec.  1024.5(d), 1026.37(o), and 1026.38(e); commentary to 
Sec. Sec.  1026.37(b), (c), and (h) and 1026.38(a) and (e); and 
appendix H. The Bureau also is making non-substantive clarifications to 
the commentary to Sec.  1026.38(g) for the reasons discussed in the 
section-by-section analysis below, as well as other, non-substantive 
corrections and wording clarifications to regulatory text in Sec.  
1026.38(j) and (t).

B. Regulation Z

Section 1026.19--Certain Mortgage and Variable-Rate Transactions
19(e) Mortgage Loans Secured By Real Property--Early Disclosures
19(e)(3) Good Faith Determination For Estimates of Closing Costs
19(e)(3)(iv) Revised Estimates
19(e)(3)(iv)(D) Interest Rate Dependent Charges
Proposed Rule
    Pursuant to the Bureau's authority as described in the 2012 TILA-
RESPA Proposal \32\ and the 2013 TILA-RESPA Final Rule \33\, the Bureau 
proposed to amend Sec.  1026.19(e)(3)(iv)(D) to modify the timing 
requirement for creditors to provide a revised Loan Estimate to 
consumers when the interest rate is locked after the provision of the 
Loan Estimate. Section Sec.  1026.19(e)(3)(iv)(D), as adopted by the 
2013 TILA-RESPA Final Rule, requires creditors to provide the revised 
disclosure with the revised interest rate, the points disclosed 
pursuant to Sec.  1026.37(f)(1), lender credits, and any other interest 
rate dependent charges and terms on the date the interest rate is 
locked. The Bureau proposed to change the timing requirement to the 
next business day after the rate is locked. As discussed in detail 
below, this final rule amends Sec.  1026.19(e)(3)(iv)(D) to provide 
creditors with three business days, rather than one business day, to 
provide the revised Loan Estimate. This amendment harmonizes the timing 
requirement in Sec.  1026.19(e)(3)(iv)(D)

[[Page 8771]]

with other timing requirements for redisclosure adopted in the 2013 
TILA-RESPA Final Rule and is consistent with current law and practice 
pursuant to Sec.  1024.7(f)(5), under which creditors have three 
business days from rate lock to provide a revised Good Faith Estimate.
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    \32\ 77 FR 51116, 51165-51169 (Aug. 23, 2012).
    \33\ 78 FR 79730, 79816-79822 (Dec. 31, 2013).
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    As discussed in the proposal, the Bureau proposed to allow 
creditors an additional business day to provide the revised Loan 
Estimate because it received information suggesting that creditors may 
not control when a rate is locked to the same extent the Bureau 
believed when it issued the 2013 TILA-RESPA Final Rule. The Bureau also 
learned that operational challenges due to the same-day redisclosure 
requirement in Sec.  1026.19(e)(3)(iv)(D) could restrict the 
flexibility many creditors currently provide consumers to lock their 
interest rates and could result in creditors imposing time restrictions 
on when consumers may lock their rates (e.g., ``cut-off'' times). Given 
the potential consequences of losing the ability to reset the 
applicable tolerances for interest rate dependent charges pursuant to 
Sec.  1026.19(e)(3), the Bureau believes creditors could respond to the 
same-day timing requirement adopted by the 2013 TILA-RESPA Final Rule 
by limiting consumers' ability to lock rates at the time of their 
choice and imposing cut-off times that only allow consumers to lock 
interest rates on business days during preset hours. Accordingly, the 
Bureau reconsidered the same-day redisclosure requirement and proposed 
to amend Sec.  1026.19(e)(3)(iv)(D) and its commentary to adjust this 
timing requirement.
    Currently, some creditors permit the consumer, or loan originator 
working on behalf of the consumer, to lock the interest rate 
unilaterally at any point during a business day or even after normal 
business hours. The Bureau believes this flexibility is beneficial to 
consumers because it allows them to lock interest rates on a date and 
time of their choosing, without time restrictions imposed by the 
creditor. The same-day redisclosure requirement could reduce consumers' 
ability to determine when their rates are locked, if creditors respond 
by either imposing cut-off times after which consumers are unable to 
lock their interest rates until the next business day or refusing to 
lock the rate contractually until the business day after the consumer 
requests a rate lock.
    As explained in the proposal, the Bureau believes that, if 
creditors impose cut-off times, consumers would be limited to certain 
times of day that they or their representatives could lock interest 
rates. This could result in consumers, particularly those who are in 
different time zones than their creditors, missing the applicable time 
window to lock on a day of their choice and having to wait until the 
next business day to do so. Alternatively, the Bureau believes some 
creditors may be able to provide a revised Loan Estimate on the date 
that a rate lock agreement is formed if those creditors allow consumers 
to request the rate only at a time of the creditors' choosing and then 
later execute or form a binding agreement with the consumers. However, 
the Bureau believes this result could present other challenges to 
consumers. For example, consumers may be confused if they believe they 
are locking an interest rate at a certain time but in fact are merely 
requesting rates that are not contractually binding until the creditor 
accepts the request at some later time. Accordingly, the Bureau stated 
in the proposal that it believed the same-day redisclosure requirement 
warranted reconsideration because it could create implementation 
challenges to industry that may result in reduced consumer flexibility 
in locking or resetting floating interest rates.
    The Bureau maintained, however, that the same-day redisclosure 
requirement could benefit consumers by allowing them to have more time 
to evaluate the revised Loan Estimate. The Bureau also noted that 
creditors should be able to provide a revised Loan Estimate based on 
interest rate dependent charges more quickly in comparison to other 
types of redisclosures because creditors may not need to obtain 
information from other parties, such as third-party vendors. 
Accordingly, the Bureau proposed a next-business-day timing 
requirement, on the ground that providing for redisclosure on the next 
business day after the rate is locked could provide consumer benefits 
without the operational challenges to creditors presented by a same-day 
redisclosure requirement.
    The Bureau sought comment on whether consumers could be harmed if 
creditors were given until the next business day to provide a revised 
Loan Estimate or if consumers would benefit from the same-day 
requirement. Additionally, the Bureau sought comment on whether a 
single business day is sufficient for creditors to deliver or place in 
the mail a revised Loan Estimate while preventing any unintended 
consequences, such as restricting the timing flexibility of consumers 
to lock the interest rate, and whether consumers would be harmed if 
redisclosures were permitted more than one business day after the 
interest rate was locked.
Comments
    The Bureau received comments from industry trade associations, 
creditors, technology vendors, and other industry representatives 
addressing these proposed changes. All comments supported the proposal 
to relax the timing requirement, but most advocated for extending it to 
three business days. The Bureau received no comments that opposed the 
proposal or that raised concerns about extending the timing requirement 
beyond the next business day.
    Most commenters argued that a next-business-day requirement 
presents many of the same operational challenges to industry as a same-
day redisclosure requirement. For example, a credit union stated that 
one business day does not allow creditors sufficient time to address 
potential software issues or conduct quality control review of a 
revised Loan Estimate. Another industry commenter stated that it takes 
time to update fees and verify that the correct information is printed 
on the disclosures generated by older loan operating systems. A 
national banking trade association noted that consumers with ``self-
lock'' capability commonly make mistakes in locking rates or attempt to 
lock through an incorrect channel, which requires creditors to verify 
the consumer's intent to lock the rate. Consumers also may leave an 
ambiguous voicemail or email that the creditor needs to verify is a 
rate lock request. This commenter explained that a single business day 
is not always enough time for a creditor both to verify the consumer's 
intent and also to issue a revised disclosure. Consequently, a next-
business-day deadline could still result in creditors imposing cut-off 
times for consumers to lock interest rates.
    Additionally, trade associations, banks, and an individual industry 
commenter working for a creditor stated that smaller institutions in 
particular may have difficulty redisclosing on the next business day 
after the rate lock due to staffing level constraints. Commenters noted 
that, in some cases, a single individual may be responsible for 
creating the disclosures, and staffing levels may also be affected by 
inclement weather, Saturday business hours, and employee training. A 
credit union commenter noted that the next-business-day requirement 
could burden small lending operations that do not have a full-time 
employee to prepare disclosures on Saturdays and around the holidays. 
Accordingly, these small

[[Page 8772]]

creditors may require additional staff to meet the next-business-day 
delivery requirement.
    Commenters argued that expanding the timing requirement to three 
business days would facilitate compliance for industry and consumer 
understanding because it would provide consistent timing rules for 
redisclosures. A bank stated that the three-business-day timeframe is 
the standard in operating procedures and systems and is also well-
established among industry professionals. Commenters noted that a next-
business-day requirement for rate locks would result in different 
timing requirements for rate-lock-based redisclosure as opposed to 
other events that permit redisclosure, such as ``changed 
circumstances'' described in Sec.  1026.19(e)(3)(iv)(A). These other 
triggering events for redisclosure may occur around the time of a rate 
lock. Commenters noted that consumer confusion could result if a 
changed circumstance occurs on the same date that the rate is locked 
and the creditor needs to produce two different revised disclosures on 
two different dates. These commenters stated that the provision of two 
revised Loan Estimates to a consumer within the same week could cause 
confusion as to which Loan Estimate reflects the most recent and 
accurate information.
    Finally, commenters questioned the benefit to consumers of 
receiving a revised Loan Estimate for rate-lock-related changes two 
business days earlier than is required for other redisclosure events, 
such as ``changed circumstances'' described in Sec.  
1026.19(e)(3)(iv)(A). Commenters argued that allowing creditors two 
extra business days to provide a revised Loan Estimate does not pose 
risks or harms to consumers. A national banking trade association 
stated that consumers get little benefit from receiving the revised 
Loan Estimate earlier because a consumer has most likely completed the 
shopping process by the time the consumer requests a rate lock. These 
commenters generally asserted that the benefit to consumers, if any, of 
receiving the revised disclosure earlier does not outweigh the costs 
associated with the requirement to provide redisclosures by the next 
business day.
Final Rule
    The Bureau is adopting proposed Sec.  1026.19(e)(3)(iv)(D), 
modified to extend the timing requirement to no later than three 
business days after the date the interest rate is locked. The Bureau 
also is making conforming modifications to proposed comments 
19(e)(3)(iv)(D)-1 and 19(e)(4)(i)-2, which provide illustrations of the 
timing requirement.
    The Bureau considered the comments received and determined that 
extending the timing requirement to no later than three business days 
after the interest rate is locked will reduce the burden on industry 
and facilitate compliance without harming consumers, and also may 
provide benefits to consumers. The Bureau believes that creditors would 
experience operational challenges in providing redisclosures by the 
next business day that could be alleviated by extending the timing 
requirement for redisclosure to three business days. Moreover, 
extending the redisclosure deadline to three business days after the 
rate is locked harmonizes the timing requirement in Sec.  
1026.19(e)(3)(iv)(D) with the other timing requirements for 
redisclosure. Harmonizing the redisclosure requirements could 
facilitate compliance and compliance monitoring and could reduce 
consumer confusion. Furthermore, allowing creditors to have three 
business days from the date the rate is locked to issue a revised 
disclosure would enable small creditors with limited staffing levels to 
prepare and review revised disclosures without the difficulties and 
challenges that may have arisen under the proposed rule.
    The Bureau does not believe a risk of potential consumer harm 
arises in extending the period for redisclosure to three business days. 
While the Bureau expressed, in the preambles to the 2012 TILA-RESPA 
Proposal and the 2013 TILA-RESPA Final Rule, a concern about potential 
rent-seeking behavior through rate arbitrage (e.g., delaying the rate 
lock in order to increase the interest rate offered to the consumer or 
otherwise increase the spread between market interest rates and the 
rate offered the consumer), the Bureau also acknowledged that it had 
seen no evidence nor received any data or reports suggesting such a 
practice under the existing Regulation X disclosure practice, which 
employs a three-business-day deadline. The Bureau has not identified 
any risks to consumers--nor were any raised by commenters in response 
to the Bureau's request for comment on potential risks to consumers.
    Accordingly, the Bureau is adopting Sec.  1026.19(e)(3)(iv)(D) to 
state that, no later than three business days after the date the 
interest rate is locked, the creditor shall provide a revised version 
of the disclosures required under Sec.  1026.19(e)(1)(i) to the 
consumer with the revised interest rate, the points disclosed pursuant 
to Sec.  1026.37(f)(1), lender credits, and any other interest rate 
dependent charges and terms. The Bureau also is adopting modified 
versions of proposed comments 19(e)(3)(iv)(D)-1 and 19(e)(4)(i)-2 to 
reflect this change.
Section 1026.36--Prohibited Acts or Practices and Certain Requirements 
for Credit Secured by a Dwelling
36(g) Name and NMLSR ID on Loan Documents
36(g)(2)
36(g)(2)(ii)
    The Bureau proposed to amend Sec.  1026.36(g)(2)(ii) to conform to 
the requirements adopted by the 2013 Loan Originator Final Rule. 
Section 1026.36(g)(2) lists the specific loan documents that must 
contain the loan originator's name and NMLSR ID. When the Bureau issued 
the 2013 Loan Originator Final Rule in January 2013, it reserved Sec.  
1026.36(g)(2)(ii) for references to the integrated disclosures the 
Bureau was expecting to adopt in the final rule implementing the 2012 
TILA-RESPA Proposal. The disclosures referenced are those required by 
Sec.  1026.19(e) and (f) as adopted by the 2013 TILA-RESPA Final Rule.
    The Bureau proposed amending Sec.  1026.36(g)(2)(ii) to include the 
disclosures described in Sec.  1026.19(e) and (f), as adopted by the 
2013 TILA-RESPA Final Rule. The Bureau received comments from industry 
and trade associations in support of this proposed change and none that 
opposed it or suggested further modifications. Accordingly, the Bureau 
is adopting Sec.  1026.36(g)(2)(ii) as proposed.
Section 1026.37--Content of Disclosure for Certain Mortgage 
Transactions (Loan Estimate)
37(m) Other Considerations
Proposed Rule
    The Bureau proposed adding Sec.  1026.37(m)(8) to provide for a 
statement notifying the consumer that a revised disclosure may be 
provided for a construction loan in a transaction involving new 
construction where the creditor reasonably expects settlement to occur 
more than 60 days after the provision of the initial Loan Estimate.\34\ 
As explained in the proposal, Sec.  1026.19(e)(3)(iv)(F) provides that 
a creditor may issue revised disclosures at any time prior to 60 days 
before consummation if the original disclosure clearly and 
conspicuously states that a revised disclosure may be provided.

[[Page 8773]]

Except as provided by Sec.  1026.19(f), the creditor may not issue a 
revised disclosure if the original disclosure did not contain such a 
statement.
---------------------------------------------------------------------------

    \34\ Transactions covered by this provision are described in 
Sec.  1026.19(e)(3)(iv)(F) and comment 19(e)(3)(iv)(F)-1.
---------------------------------------------------------------------------

    The Bureau proposed to add new Sec.  1026.37(m)(8), under the 
master heading ``Additional Information About This Loan'' and the 
heading ``Other Considerations,'' and new comment 37(m)(8)-1 to state 
that placement of the language in this section of the form satisfies 
the ``clear and conspicuous'' standard set forth in Sec.  
1026.19(e)(3)(iv)(F). The Bureau stated that it believes the Sec.  
1026.19(e)(3)(iv)(F) language is appropriately placed in this part of 
the disclosure mandated by Sec.  1026.37, but sought comment on whether 
the language would be more appropriately placed elsewhere on the form.
Comments
    The Bureau received comments from trade associations, creditors, 
and a technology vendor. All commenters supported the proposal. 
Commenters generally stated that including the language concerning 
construction loans in transactions that involve a new construction on 
the Loan Estimate should facilitate construction lending. Most agreed 
with the proposed content and placement of the language. A few 
commenters made minor suggestions for additional clarity or suggested 
alternative placement on the form. For example, two trade associations 
recommended that the Bureau provide additional clarifying language on 
the nature of the disclosure, as well as additional clarification 
regarding placement on the form or provision of a sample disclosure 
illustrating this language on the form.
Final Rule
    The Bureau has considered the comments and is adopting Sec.  
1026.37(m)(8) and comment 37(m)(8)-1 as proposed, with minor wording 
changes for clarification. The Bureau believes that the proposed 
language and its placement is appropriate and allows creditors to 
preserve their ability to redisclose estimates for construction loans 
in transactions that involve a new construction, as provided in Sec.  
1026.19(e)(3)(iv)(F). With respect to the requests for additional 
clarifying language or a sample disclosure illustrating the language on 
the form, the Bureau does not believe that additional language or a new 
sample disclosure is necessary. The Bureau notes that proposed Sec.  
1026.37(m)(8) and comment 37(m)(8)-1 contain language already 
promulgated under Sec.  1026.19(e)(3)(iv)(F) and would not require any 
additional consumer testing. Further, comment 37(m)(8)-1 provides that 
placement of the new construction language in this section of the Loan 
Estimate satisfies the clear and conspicuous standard set forth in 
Sec.  1026.19(e)(3)(iv)(F).
Section 1026.38--Content of Disclosure for Certain Mortgage 
Transactions (Closing Disclosure)
38(g) Closing Cost Details; Other Costs
38(g)(2) Prepaids
    Section 1026.38(g)(2) requires creditors to disclose certain 
prepaid items disclosed on the Loan Estimate pursuant to Sec.  
1026.37(g)(2), including prepaid interest. Neither the regulation nor 
the model Closing Disclosure forms in appendix H provide for disclosure 
of the interest rate for prepaid interest. Rather, the model forms 
provide that prepaid interest is to be disclosed on the Closing 
Disclosure as a per diem sum amount along with a range of dates, 
without disclosing the applicable interest rate, prescribed as: 
``Prepaid Interest (___per day from _____to _____).''
    One industry commenter noted that comment 38(g)(2)-4, which 
describes the interest rate that should be used to calculate per diem 
interest, implies that the interest rate must be disclosed pursuant to 
Sec.  1026.38(g)(2). This commenter recommended that the Bureau clarify 
that creditors are not required to disclose an interest rate for 
purposes of this disclosure.
    The Bureau agrees that the interest rate should not be disclosed in 
the prepaid interest disclosure pursuant to Sec.  1026.38(g)(2). 
Rather, creditors should disclose amounts of prepaid interest as per 
diem sum amounts based on the interest rate disclosed under Sec.  
1026.38(b), which is determined by Sec.  1026.37(b). Accordingly, the 
Bureau is amending comment 38(g)(2)-4 to clarify that the comment 
addresses the interest rate that is used to determine amounts of 
prepaid interest, but does not require disclosure of the interest rate 
itself.

VI. Dodd-Frank Act Section 1022(b)(2)

A. Overview

    In developing this rule, the Bureau has considered potential 
benefits, costs, and impacts.\35\ The Bureau has consulted, or offered 
to consult with, the prudential regulators, the Securities and Exchange 
Commission, HUD, the Federal Housing Finance Agency, the Federal Trade 
Commission, the U.S. Department of Veterans Affairs, the U.S. 
Department of Agriculture, and the Department of the Treasury, 
including regarding consistency with any prudential, market, or 
systemic objectives administered by such agencies.
---------------------------------------------------------------------------

    \35\ Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act 
calls for the Bureau to consider the potential benefits and costs of 
a regulation to consumers and covered persons, 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 Bureau is adding or amending two main provisions in this rule. 
First, the Bureau is amending Sec.  1026.19(e)(3)(iv)(D) which, as 
adopted by the 2013 TILA-RESPA Final Rule, requires creditors to 
provide a revised version of the disclosures required under paragraph 
Sec.  1026.19(e)(1)(i) to the consumer with the revised interest rate, 
the points disclosed pursuant to Sec.  1026.37(f)(1), lender credits, 
and any other interest rate dependent charges and terms, on the date 
the rate is locked. As discussed in the section-by-section analysis 
above, the Bureau believes that this requirement, if unchanged, is 
likely to result in at least some creditors imposing cut-off times that 
only allow consumers to lock their interest rates only on business days 
and during preset hours due to the costs associated with providing the 
disclosure to the consumer on the date when the interest rate is 
locked. The Bureau believes that consumers are unlikely to choose 
creditors based on the creditors' policies regarding interest rate 
locks and, moreover, that consumers would be unlikely to know whether 
their creditors will allow interest rate locks at flexible times until 
the consumer actually attempts to lock the rate. Thus, consumers of 
creditors who will not allow locks at flexible times will experience 
inconvenience. Given that consumers are unlikely to know of this 
practice until they attempt to lock the rate, this practice is unlikely 
to be corrected or influenced by market competition.
    Given these concerns, the Bureau proposed to relax the same-day 
timing requirement and give creditors until the next business day after 
the rate is locked to provide a revised version of the disclosures to 
consumers. As described in the section-by-section analysis above, in 
light of the comments received, the Bureau is instead finalizing an 
amendment to the provision that affords creditors three business days 
after the rate is locked to provide a revised version of the 
disclosures.
    In response to the proposal, several commenters noted that the 
proposed next-business-day requirement presents many of the same 
operational challenges

[[Page 8774]]

to industry as a same-day redisclosure requirement. These commenters 
suggested that three business days would provide adequate time for 
creditors to issue revised disclosures, but that one business day would 
not. No commenters suggested that extending the timing requirement 
beyond the next business day would impact consumers adversely.
    The Bureau is adopting proposed Sec.  1026.19(e)(3)(iv)(D), 
modified to extend the timing requirement to no later than three 
business days after the date the interest rate is locked. The change 
will harmonize the timing requirement in Sec.  1026.19(e)(3)(iv)(D) 
with the other timing requirements for redisclosure and thus may 
facilitate compliance and compliance monitoring and also may reduce 
consumer confusion. Small creditors, in particular, may find it easier 
to comply with a three-day redisclosure timing requirement. Finally, 
the Bureau believes that the next-business-day requirement might not 
give creditors adequate time to confirm the consumer's intentions where 
the consumer's attempts to lock the rate through an incorrect channel, 
or the communication requesting a rate lock (e.g., a voicemail or email 
left with the creditor) is ambiguous. The Bureau does not possess the 
data necessary to estimate the impact of the change to three full 
business days quantitatively.
    Second, the Bureau is adding a new provision that allows for a 
specific statement related to construction loans in transactions 
involving new construction to be placed on the Loan Estimate. For these 
loans, the 2013 TILA-RESPA Final Rule requires that creditors include a 
statement on the Loan Estimate in order to preserve their ability to 
redisclose estimates prior to settlement. However, this language is 
found only in Sec.  1026.19(e)(3)(iv)(F), which governs timing and 
procedure, and no corresponding provision exists in the section that 
governs the content of the disclosures. Without this new provision, 
creditors will have lower incentives to originate these construction 
loans, especially if they believe that the Loan Estimate might need to 
be revised. Consumers either will not be able to get a commitment to 
fund construction loans until most of the uncertainty about the terms 
is resolved or creditors will price in a premium, to account for the 
creditor's inability to redisclose estimates after the initial 60 days.
    The Bureau believes that both amendments, extending the time for 
rate lock redisclosure and adding language on new construction loans, 
provide options that a financial institution is free to undertake or 
not to undertake, and thus present no cost to creditors. The Bureau 
believes that both provisions present some benefits to creditors. The 
Bureau believes that the first provision could present both benefits 
and costs to consumers, while the second provision presents benefits to 
consumers.

B. Potential Benefits and Costs to Consumers and Covered Persons 
Relaxing the Same-day Redisclosure Requirement for Interest Rate Locks

    This amendment provides an option to creditors: creditors may 
continue to provide revised disclosures on the date the rate is locked 
if they so choose. Therefore, some creditors will benefit from this 
amendment by not having to redisclose on the date the rate is locked, 
while other creditors may continue to redisclose on the date the rate 
is locked if they so choose, and are as well off as they would have 
been without this amendment. All creditors will enjoy increased 
flexibility. No creditors will face increased costs.
    Under the current rule, the Bureau believes that some creditors 
could continue offering flexible time periods for interest rate locks, 
but others, for example, might choose to impose cut-off times that only 
permit consumers to lock interest rates on business days and at times 
early in the day in order to ease their compliance costs. Other 
creditors might change their existing practices and allow consumers to 
request a rate lock at any time, but only contractually lock the 
interest rate on the business day after the consumer requests a rate 
lock, instead of on the date the rate lock is requested. Consumers of 
these creditors could benefit from this amendment through the increased 
convenience of being able to lock the interest rate at more flexible 
times.
    Consumers of creditors that would continue to allow flexibility in 
locking interest rates might experience a cost from the amendment: 
their revised Loan Estimate may not be provided until up to three 
business days later. However, some of these creditors may still provide 
a revised Loan Estimate on the date that the interest rate is locked, 
for example, because they have already put in place the system to 
provide the redisclosures on the date the rate is locked and do not 
want to change their systems. If the creditor does not provide the 
revised Loan Estimate until up to three business days later, then the 
potential consumer harm is the time difference between when the 
consumer would receive the revised disclosures.
    While the Bureau does not possess any data, and is not aware of a 
source to obtain data, that would enable it to report the quantitative 
effects of this amendment, it believes any harm to consumers from the 
extension of the rate-lock-redisclosure timing requirement is minor. 
Under current law and practice pursuant to Sec.  1024.7(f)(5), 
creditors have three business days from rate lock to redisclose, and 
the Bureau has not received any data or reports of consumer harm 
resulting from a three business day turnaround time for 
redisclosure.\36\
---------------------------------------------------------------------------

    \36\ See 77 FR 51116, 51173 (Aug. 23, 2012).
---------------------------------------------------------------------------

Specific Language on Construction Loans' Loan Estimates
    The Bureau believes that without this new provision, creditors that 
ordinarily originate construction loans in transactions involving a new 
construction would be forced either to originate only those 
construction loans for which the creditor is certain that no 
redisclosure prior to settlement will be necessary, or to price in the 
risk of having to cure any amounts charged over the estimates initially 
provided more than 60 days before settlement, absent some other type of 
a redisclosure triggering event. Creditors that choose the second 
option, including the estimated cost of cure in their pricing, risk 
miscalibrating the pricing and losing consumers to less risk-averse 
competitors or facing unanticipated costs if they are required to cure 
any amounts that the consumer is charged for settlement charges that 
exceed the initial estimated amounts. In all events, creditors risk 
losing consumers to other options. Accordingly, this new provision 
presents benefits to the creditors that decide to originate these 
construction loans and presents no costs.
    As noted above, under the current rule, a consumer who needs a 
construction loan may only be able to obtain a construction loan where 
the creditor has priced in the risk of having to cure any amounts 
charged over the estimates initially provided over 60 days before 
settlement, which would be a cost to consumers. On the other hand, 
without this new provision, the Loan Estimate would have provided 
consumers more certainty concerning loan terms and settlement costs 
because creditors would be limited in their ability to redisclose and 
change the terms or costs of the loan. Where creditors misgauged the 
initial Loan Estimate, consumers might be entitled to receive a cure. 
However, the Bureau

[[Page 8775]]

believes that these benefits to consumers are marginal, given that 
construction loans are inherently volatile and subject to events beyond 
the creditor's control. As a result, the Bureau believes that creditors 
barred from redisclosing a Loan Estimate provided more than 60 days 
prior to consummation would be less likely to originate such loans and 
that any increased certainty, where creditors were willing to commit to 
new construction loans well in advance of consummation, would come at 
the price of increased costs to consumers.
    The Bureau does not possess any data, and is not aware of a source 
to obtain data, that would enable it to report the number of 
transactions affected or to quantify the extent of creditor and 
consumer benefits.

C. Impact on Covered Persons With No More Than $10 Billion in Assets

    The amendment regarding interest rate locks could have two 
particular effects on covered persons with no more than $10 billion in 
assets. First, covered persons with no more than $10 billion in assets 
are more likely to benefit from this provision to the extent that 
redisclosure of the Loan Estimate on the date the interest rate is 
locked may require software and business processes upgrade costs. 
Larger covered persons are more likely to originate a sufficient number 
of transactions to make it worth implementing these changes, as opposed 
to choosing to offer interest rate locks to consumers only at set times 
during business hours.
    In addition, creditors located in more than one time zone might 
have to offer a shorter preset adjustment time to some customers (for 
example, if the location of the rate lock operation is in the Eastern 
Time zone), but covered persons with no more than $10 billion in assets 
are more likely to be located in a single time zone. From this 
perspective, covered persons with no more than $10 billion in assets 
are less likely to benefit from this amendment. The Bureau does not 
possess data to quantify either of the two possible aforementioned 
effects of the provision on covered persons with no more than $10 
billion in assets.
    The Bureau believes that covered persons with no more than $10 
billion in assets will not be differentially affected by the new 
provision regarding construction loans.

D. Impact on Access to Credit

    The Bureau does not believe that there will be an adverse impact on 
access to credit resulting from either of the changes adopted by this 
final rule. There may be an expansion of access to credit, if the 
second provision facilitates the making of construction loans as the 
Bureau anticipates.

E. Impact on Rural Areas

    The Bureau believes that rural areas might benefit more than urban 
areas from the provision for construction loans and the amendment to 
the existing provision for rate lock redisclosure. Competition may 
drive creditors to originate construction loans despite the possible 
redisclosure issues and to provide interest rate locks throughout the 
day despite the same-day redisclosure requirement. Thus, rural areas 
are more likely to benefit from these two provisions, to the extent 
that there are fewer creditors operating in rural areas than in urban 
areas and to the extent that competition would affect these issues.

VII. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (the RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small nonprofit organizations. The RFA defines a ``small business'' as 
a business that meets the size standard developed by the Small Business 
Administration pursuant to the Small Business Act. The RFA generally 
requires an agency to conduct an initial regulatory flexibility 
analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of 
any rule subject to notice-and-comment rulemaking requirements, unless 
the agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. The Bureau also is 
subject to certain additional procedures under the RFA involving the 
convening of a panel to consult with small business representatives 
prior to proposing a rule for which an IRFA is required.
    An IRFA is not required for this rule because it will not have a 
significant economic impact on any small entities. The Bureau does not 
expect the rule to impose costs on covered persons. All methods of 
compliance under current law will remain available to small entities 
when these provisions become effective. Thus, a small entity that is in 
compliance with current law need not take any additional action.
    Accordingly, the undersigned certifies that this final rule will 
not have a significant economic impact on a substantial number of small 
entities.

VIII. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), Federal agencies are generally required to seek the Office of 
Management and Budget (OMB) approval for information collection 
requirements prior to implementation. The collections of information 
related to Regulations Z and X have been previously reviewed and 
approved by OMB in accordance with the PRA and assigned OMB Control 
Numbers 3170-0015 (Regulation Z) and 3170-0016 (Regulation X). Under 
the PRA, the Bureau may not conduct or sponsor and, notwithstanding any 
other provision of law, a person is not required to respond to an 
information collection unless the information collection displays a 
valid control number assigned by OMB.
    The Bureau has determined that this final rule would not impose any 
new or revised information collection (recordkeeping, reporting, or 
disclosure) requirements on covered entities or members of the public 
that would constitute collections of information requiring OMB approval 
under the PRA.

List of Subjects

12 CFR Part 1024

    Condominiums, Consumer protection, Housing, Mortgage servicing, 
Mortgages, Reporting and recordkeeping requirements.

12 CFR Part 1026

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

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau amends 
Regulation X, 12 CFR part 1024, and Regulation Z, 12 CFR part 1026, as 
set forth below:

PART 1024--REAL ESTATE SETTLEMENT PROCEDURES ACT (REGULATION X)

0
1. The authority citation for part 1024 continues to read as follows:

    Authority:  12 U.S.C. 2603-2605, 2607, 2609, 2617, 5512, 5532, 
5581.

Subpart A--General Provisions

0
2. Section 1024.5 is amended by revising paragraph (d) introductory 
text to read as follows:


Sec.  1024.5  Coverage of RESPA.

* * * * *

[[Page 8776]]

    (d) Partial exemptions for certain mortgage loans. Sections 1024.6, 
1024.7, 1024.8, 1024.10, and 1024.33(a) do not apply to a federally 
related mortgage loan:
* * * * *

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
3. 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.

Subpart C--Closed-End Credit

0
4. Section 1026.19 is amended by revising paragraph (e)(3)(iv)(D) to 
read as follows:


Sec.  1026.19  Certain mortgage and variable-rate transactions.

* * * * *
    (e) * * *
    (3) * * *
    (iv) * * *
    (D) Interest rate dependent charges. The points or lender credits 
change because the interest rate was not locked when the disclosures 
required under paragraph (e)(1)(i) of this section were provided. No 
later than three business days after the date the interest rate is 
locked, the creditor shall provide a revised version of the disclosures 
required under paragraph (e)(1)(i) of this section to the consumer with 
the revised interest rate, the points disclosed pursuant to Sec.  
1026.37(f)(1), lender credits, and any other interest rate dependent 
charges and terms.
* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

0
5. Section 1026.36 is amended by adding paragraph (g)(2)(ii) to read as 
follows:


Sec.  1026.36  Prohibited acts or practices and certain requirements 
for credit secured by a dwelling.

* * * * *
    (g) * * *
    (2) * * *
    (ii) The disclosures required by Sec.  1026.19 (e) and (f);
* * * * *

0
6. Section 1026.37 is amended by adding paragraph (m)(8) and revising 
paragraph (o)(4)(i)(A) to read as follows:


Sec.  1026.37  Content of disclosures for certain mortgage transactions 
(Loan Estimate).

* * * * *
    (m) * * *
    (8) Construction loans. In transactions involving new construction, 
where the creditor reasonably expects that settlement will occur more 
than 60 days after the provision of the loan estimate, at the 
creditor's option, a clear and conspicuous statement that the creditor 
may issue a revised disclosure any time prior to 60 days before 
consummation, pursuant to Sec.  1026.19(e)(3)(iv)(F).
* * * * *
    (o) * * *
    (4) * * *
    (i) * * *
    (A) The dollar amounts required to be disclosed by paragraphs 
(b)(6) and (7), (c)(1)(iii), (c)(2)(ii) and (iii), (c)(4)(ii), (f), 
(g), (h), (i), and (l) of this section shall be rounded to the nearest 
whole dollar, except that the per diem amount required to be disclosed 
by paragraph (g)(2)(iii) of this section and the monthly amounts 
required to be disclosed by paragraphs (g)(3)(i) through (iii) and 
(g)(3)(v) of this section shall not be rounded.
* * * * *

0
7. Section 1026.38 is amended by revising paragraphs (e)(3)(iii)(A), 
(e)(4)(ii), (j)(2)(iv), (k)(2)(v), (k)(2)(vi), and (t)(4)(ii) to read 
as follows:


Sec.  1026.38  Content of disclosures for certain mortgage transactions 
(Closing Disclosure).

* * * * *
    (e) * * *
    (3) * * *
    (iii) * * *
    (A) If the amount disclosed under paragraph (e)(3)(ii) of this 
section is different than the amount disclosed under paragraph 
(e)(3)(i) of this section (unless the difference is due to rounding), a 
statement of that fact, along with a statement that the consumer paid 
such amounts prior to consummation of the transaction; or
* * * * *
    (4) * * *
    (ii) Under the subheading ``Final,'' the total amount of payoffs 
and payments made to third parties disclosed pursuant to paragraph 
(t)(5)(vii)(B) of this section, to the extent known, disclosed as a 
negative number;
* * * * *
    (j) * * *
    (2) * * *
    (iv) The amount of any existing loans that the consumer is 
assuming, or any loans subject to which the consumer is taking title to 
the property, labeled ``Existing Loan(s) Assumed or Taken Subject to'';
* * * * *
    (k) * * *
    (2) * * *
    (v) The amount of any loan secured by a first lien on the property 
that will be paid off as part of the real estate closing, labeled 
``Payoff of First Mortgage Loan'';
    (vi) The amount of any loan secured by a second lien on the 
property that will be paid off as part of the real estate closing, 
labeled ``Payoff of Second Mortgage Loan'';
* * * * *
    (t) * * *
    (4) * * *
    (ii) Percentages. The percentage amounts required to be disclosed 
under paragraphs (b), (f)(1), (n), and (o)(5) of this section shall not 
be rounded and shall be disclosed up to two or three decimal places. 
The percentage amount required to be disclosed under paragraph (o)(4) 
of this section shall not be rounded and shall be disclosed up to three 
decimal places. If the amount is a whole number then the amount 
disclosed shall be truncated at the decimal point.
* * * * *

0
8. Appendix H to part 1026 is amended by revising the Description in H-
24(G) to read as follows.

Appendix H to Part 1026--Closed-End Forms and Clauses

* * * * *
    H-24(G) Mortgage Loan Transaction Loan Estimate--Modification to 
Loan Estimate for Transaction Not Involving Seller--Model Form
    Description: This is a blank model Loan Estimate that 
illustrates the application of the content requirements in Sec.  
1026.37, with the optional alternative tables permitted by Sec.  
1026.37(d)(2) and (h)(2) for transactions without a seller. This 
form provides one variation of page one, four variations of page 
two, and four variations of page three, reflecting the variable 
content requirements in Sec.  1026.37.

* * * * *

0
9. In Supplement I to part 1026:
0
a. Under Section 1026.19--Certain Mortgage and Variable-Rate 
Transactions:
0
i. Under paragraph 19(e)(3)(iv)(D), paragraph 1 is revised.
0
ii. Under paragraph 19(e)(4)(i), paragraph 2 is revised.
0
b. Under Section 1026.37--Content of Disclosures for Certain Mortgage 
Transactions (Loan Estimate):
0
i. Under paragraph 37(b)(6), paragraph 1 is revised.
0
ii. Under paragraph 37(c)(2)(ii), paragraph 2 is revised.
0
ii. Under paragraph 37(c)(2)(iii), paragraph 1 is revised.
0
iii. Under paragraph 37(c)(4)(iv), paragraph 2 is revised.
0
iv. Under paragraph 37(h)(1)(ii), paragraph 1 is revised.

[[Page 8777]]

0
v. Under paragraph 37(m), the subheading 37(m)(8) Construction loans 
and paragraph 1 are added.
0
vi. Under paragraph 37(n), paragraph 2 is revised.
0
c. Under Section 1026.38--Content of Disclosures for Certain Mortgage 
Transactions (Closing Disclosure):
0
i. Under paragraph 38(a)(3)(vi), paragraph 2 is added.
0
ii. Under paragraph 38(e)(1)(iii)(A), paragraph 1 is revised.
0
iii. Under paragraph 38(e)(2)(iii)(A), paragraph 3 is added.
0
iv. Under paragraph 38(g)(2), paragraph 4 is revised.
    The revisions and additions read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Subpart C--Closed-End Credit

* * * * *
Section 1026.19--Certain Mortgage and Variable-Rate Transactions
* * * * *
19(e)(3)(iv)(D) Interest Rate Dependent Charges
    1. Requirements. If the interest rate is not locked when the 
disclosures required by Sec.  1026.19(e)(1)(i) are provided, a valid 
reason for revision exists when the interest rate is subsequently 
locked. No later than three business days after the date the interest 
rate is locked, Sec.  1026.19(e)(3)(iv)(D) requires the creditor to 
provide a revised version of the disclosures required under Sec.  
1026.19(e)(1)(i) reflecting the revised interest rate, the points 
disclosed pursuant to Sec.  1026.37(f)(1), lender credits, and any 
other interest rate dependent charges and terms. The following examples 
illustrate this requirement:
    i. Assume a creditor sets the interest rate by executing a rate 
lock agreement with the consumer. If such an agreement exists when the 
original disclosures required under Sec.  1026.19(e)(1)(i) are 
provided, then the actual points and lender credits are compared to the 
estimated points disclosed pursuant to Sec.  1026.37(f)(1) and lender 
credits included in the original disclosures provided under Sec.  
1026.19(e)(1)(i) for the purpose of determining good faith pursuant to 
Sec.  1026.19(e)(3)(i). If the consumer enters into a rate lock 
agreement with the creditor after the disclosures required under Sec.  
1026.19(e)(1)(i) were provided, then Sec.  1026.19(e)(3)(iv)(D) 
requires the creditor to provide, no later than three business days 
after the date that the consumer and the creditor enter into a rate 
lock agreement, a revised version of the disclosures required under 
Sec.  1026.19(e)(1)(i) reflecting the revised interest rate, the points 
disclosed pursuant to Sec.  1026.37(f)(1), lender credits, and any 
other interest rate dependent charges and terms. Provided that the 
revised version of the disclosures required under Sec.  
1026.19(e)(1)(i) reflect any revised points disclosed pursuant to Sec.  
1026.37(f)(1) and lender credits, the actual points and lender credits 
are compared to the revised points and lender credits for the purpose 
of determining good faith pursuant to Sec.  1026.19(e)(3)(i).
* * * * *
19(e)(4)(i) General Rule
* * * * *
    2. Relationship to Sec.  1026.19(e)(3)(iv)(D). If the reason for 
the revision is provided under Sec.  1026.19(e)(3)(iv)(D), 
notwithstanding the three-business-day rule set forth in Sec.  
1026.19(e)(4)(i), Sec.  1026.19(e)(3)(iv)(D) requires the creditor to 
provide a revised version of the disclosures required under Sec.  
1026.19(e)(1)(i) no later than three business days after the date the 
interest rate is locked. See comment 19(e)(3)(iv)(D)-1.
* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 1026.37--Content of Disclosures for Certain Mortgage 
Transactions (Loan Estimate)

* * * * *
37(b)(6) Adjustments After Consummation
    1. Periods not in whole years. For guidance on how to disclose 
increases after consummation that occur after a number of months less 
than 24 but that do not equate to a number of whole years or within a 
number of days less than a week, see the guidance provided in comment 
37(a)(10)-3. For increases that occur after more than 24 months, see 
the guidance provided in comment 37(b)(8)-1.
* * * * *
Paragraph 37(c)(2)(ii)
* * * * *
    2. Relationship to principal and interest disclosure. The creditor 
discloses mortgage insurance premiums pursuant to Sec.  
1026.37(c)(2)(ii) on the same periodic basis that payments for 
principal and interest are disclosed pursuant to Sec.  
1026.37(c)(2)(i), even if mortgage insurance premiums are actually paid 
on some other periodic basis.
Paragraph 37(c)(2)(iii)
    1. Escrow disclosure. The disclosure described in Sec.  
1026.37(c)(2)(iii) is required only if the creditor will establish an 
escrow account for the payment of some or all of the charges described 
in Sec.  1026.37(c)(4)(ii). If no escrow account for the payment of 
some or all such charges will be established, the creditor discloses 
the escrow amount as ``0.'' If an escrow account is established for the 
payment of amounts described in Sec.  1026.37(c)(4)(ii), but no escrow 
payment is required with a particular periodic payment (such as with a 
final balloon payment) or range of payments, the escrow payment should 
be disclosed as ``--.''
* * * * *
Paragraph 37(c)(4)(iv)
* * * * *
    2. Amounts paid by the creditor using escrow account funds. Section 
1026.37(c)(4)(iv) requires the creditor to disclose an indication of 
whether the amounts disclosed pursuant to Sec.  1026.37(c)(4)(ii) will 
be paid by the creditor using escrow account funds. If the amount 
disclosed pursuant to Sec.  1026.37(c)(4)(ii) requires the creditor to 
disclose a description of more than one amount and only some of those 
amounts will be paid by the creditor using escrow account funds, the 
creditor may indicate that only some of those amounts will be paid 
using escrow account funds, such as by using the word ``some.''
* * * * *
37(h)(1)(ii) Closing Costs Financed
    1. Calculating amount. The amount of closing costs financed 
disclosed under Sec.  1026.37(h)(1)(ii) is determined by subtracting 
the estimated total amount of payments to third parties not otherwise 
disclosed pursuant to Sec.  1026.37(f) and (g) from the total loan 
amount disclosed pursuant to Sec.  1026.37(b)(1). If the result of the 
calculation is a positive number, that amount is disclosed as a 
negative number under Sec.  1026.37(h)(1)(ii), but only to the extent 
that it does not exceed the total amount of closing costs disclosed 
under Sec.  1026.37(g)(6). If the result of the calculation is zero or 
negative, the amount of $0 is disclosed under Sec.  1026.37(h)(1)(ii).
* * * * *

[[Page 8778]]

37(m)(8) Construction Loans
    1. Clear and conspicuous statement regarding redisclosure for 
construction loans. For construction loans in transactions involving 
new construction, where the creditor reasonably expects the settlement 
date to be 60 days or more after the provision of the disclosures 
required under Sec.  1026.19(e)(1)(i), providing the statement, ``You 
may receive a revised Loan Estimate at any time prior to 60 days before 
consummation'' under the master heading ``Additional Information About 
This Loan'' and the heading ``Other Considerations'' pursuant to Sec.  
1026.37(m)(8) satisfies the requirements set forth in Sec.  
1026.19(e)(3)(iv)(F) that the statement be made clearly and 
conspicuously on the disclosure.
37(n) Signature Statement
* * * * *
    2. Multiple consumers. If there is more than one consumer who will 
be obligated in the transaction, the first consumer signs as the 
applicant and each additional consumer signs as a co-applicant. If 
there is not enough space under the heading ``Confirm Receipt'' to 
provide signature lines for every consumer in the transaction, the 
creditor may add additional signature pages, as needed, at the end of 
the form for the remaining consumers' signatures. However, the creditor 
is required to disclose the heading and statement required by Sec.  
1026.37(n)(1) on such additional pages.
* * * * *
Section 1026.38--Content of Disclosures for Certain Mortgage 
Transactions (Closing Disclosure)
* * * * *
38(a)(3)(vi) Property
* * * * *
    2. Multiple properties. Where more than one property secures the 
credit transaction, Sec.  1026.38(a)(3)(vi) requires disclosure of all 
property addresses. If the addresses of all properties securing the 
transaction do not fit in the space allocated on the Closing 
Disclosure, an additional page with the addresses of all such 
properties may be appended to the end of the form.
* * * * *
Paragraph 38(e)(1)(iii)(A)
    1. Statements of increases or decreases. Section 
1026.38(e)(1)(iii)(A) requires a statement of whether the amount 
increased or decreased from the estimated amount. The statement, ``This 
amount increased,'' in which the word ``increased'' is in boldface font 
and is replaced with the word ``decreased'' as applicable, complies 
with this requirement.
* * * * *
Paragraph 38(e)(2)(iii)(A)
* * * * *
    3. Statements regarding excess amount and any credit to the 
consumer. Section 1026.38(e)(2)(iii)(A) requires a statement that an 
increase in closing costs exceeds legal limits by the dollar amount of 
the excess and a statement directing the consumer to the disclosure of 
lender credits under Sec.  1026.38(h)(3) if a credit is provided under 
Sec.  1026.19(f)(2)(v). See form H-25(F) in appendix H to this part for 
examples of such statements.
* * * * *
38(g)(2) Prepaids
* * * * *
    4. Interest rate for prepaid interest. The dollar amounts disclosed 
pursuant to Sec.  1026.38(g)(2) must be based on the interest rate 
disclosed under Sec.  1026.38(b), as required by Sec.  1026.37(b)(2).
* * * * *

    Dated: January 18, 2015.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2015-01321 Filed 2-18-15; 8:45 am]
BILLING CODE 4810-AM-P