[Federal Register Volume 80, Number 246 (Wednesday, December 23, 2015)]
[Rules and Regulations]
[Pages 79674-79675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32293]
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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 decrease to
$2.052 billion from $2.060 billion. The adjustment is based on the 0.4
percent decrease in the average of the CPI-W for the 12-month period
ending in November 2015. Therefore, creditors with assets of less than
$2.052 billion (including assets of certain affiliates) as of December
31, 2015, are exempt, if other requirements of Regulation Z also are
met, from establishing escrow accounts for higher-priced mortgage loans
in 2016. This asset limit will also apply during a grace period, in
certain circumstances, with respect to transactions with applications
received before April 1 of 2017. The adjustment to the escrows
exemption asset-size threshold will also decrease 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 have (together with
certain affiliates) total assets below the threshold, are also excepted
from the prohibition on balloon payments for high-cost mortgages.
DATES: This final rule is effective January 1, 2016.
FOR FURTHER INFORMATION CONTACT: James Wylie or Jaclyn Maier, Counsels,
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. TILA section 129(D) also
generally permits an exemption from the higher-priced mortgage loan
escrow requirement for a creditor that meets certain requirements,
including any asset-size threshold 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 2015, the threshold was
$2.060 billion. The Bureau recently revised the criteria for small
creditors, and rural and underserved areas, for purposes of certain
special provisions and exemptions from various requirements provided to
certain small creditors under the Bureau's mortgage rules. As part of
this revision the Bureau made certain changes that affect how the
asset-size threshold applies. The Bureau revised the rule to include in
the calculation of the asset-size threshold the assets of the
creditor's affiliates that regularly extended covered transactions
secured by first liens during the applicable period. The Bureau also
added a grace period from calendar year to calendar year to allow an
otherwise eligible creditor that exceeded the asset limit in the
preceding calendar year (but not in the calendar year before the
preceding year) to continue to operate as a small creditor with respect
to transactions with applications received before April 1 of the
current calendar year.\3\
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\1\ 78 FR 4726 (Jan. 22, 2013).
\2\ See 12 CFR 1026.35(b)(2)(iii)(C).
\3\ See 80 FR 59943, 59951 (Oct. 2, 2015).
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During the 12-month period ending in November 2015, the average of
the CPI-W decreased by 0.4 percent. As a result, the exemption
threshold is decreased to $2.052 billion for 2016. Thus, if the
creditor's assets together with the assets of its affiliates that
regularly extended first-lien covered transactions during calendar year
2015 are less than $2.052 billion on December 31, 2015, and it meets
the other requirements of Sec. 1026.35(b)(2)(iii) it will be exempt in
2016 from the escrow-accounts requirement for higher-priced mortgage
loans and will also be exempt from the escrow-accounts requirement for
higher-priced mortgage loans for purposes of any loan consummated in
2017 for which the application was received before April 1, 2017. The
[[Page 79675]]
adjustment to the escrows exemption asset-size threshold will also
decrease the threshold for small-creditor portfolio and balloon-payment
qualified mortgages under Regulation Z. The requirements for small-
creditor portfolio qualified mortgages at Sec. 1026.43(e)(5)(i)(D)
reference the asset threshold in Sec. 1026.35(b)(2)(iii)(C). Likewise,
the requirements for balloon-payment qualified mortgages at Sec.
1026.43(f)(1)(vi) reference the asset threshold in Sec.
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) for
covered transactions for which the application is received before April
1, 2016,\4\ including being made by creditors that have (together with
certain affiliates) total assets below the threshold in Sec.
1026.35(b)(2)(iii)(C), are also excepted from the prohibition on
balloon payments for high-cost mortgages in Sec. 1026.32(d)(1)(ii)(C).
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\4\ The Bureau extended the temporary provision in Sec.
1026.43(e)(6) from covered transactions consummated on or before
January 10, 2016 to covered transactions for which the application
was received on or before April 1, 2016. See 80 FR 59943, 59959
(Oct. 2, 2015).
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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 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, 2016. The amendment in this rule is technical, and 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, 3353,
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.E
introductory text, as amended at 80 FR 59968 (Oct. 2, 2015), 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. * * *
iii. * * *
E. Under Sec. 1026.35(b)(2)(iii)(C), the $2,000,000,000 asset
threshold adjusts 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 calendar year
2016, the asset threshold is $2,052,000,000. A creditor that
together with the assets of its affiliates that regularly extended
first-lien covered transactions during calendar year 2015 has total
assets of less than $2,052,000,000 on December 31, 2015, satisfies
this criterion for purposes of any loan consummated in 2016 and for
purposes of any loan consummated in 2017 for which the application
was received before April 1, 2017. For historical purposes:
* * * * *
Dated: December 16, 2015.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2015-32293 Filed 12-22-15; 8:45 am]
BILLING CODE 4810-AM-P