[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