[Federal Register Volume 81, Number 150 (Thursday, August 4, 2016)]
[Proposed Rules]
[Pages 51394-51400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18058]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 34

[Docket No. OCC-2015-0021]
RIN 1557-AD99

FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Docket No. R-1443]
RIN 7100-AD 90

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

[Docket No. CFPB-2016-0035]
RIN 3170-AA11


Appraisals for Higher-Priced Mortgage Loans Exemption Threshold

AGENCY: Board of Governors of the Federal Reserve System (Board); 
Bureau of Consumer Financial Protection (Bureau); and Office of the 
Comptroller of the Currency, Treasury (OCC).

ACTION: Proposed rule; request for public comment.

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SUMMARY: The OCC, the Board and the Bureau are publishing proposed 
rules amending the official interpretations for their regulations that 
implement section 129H of the Truth in Lending Act (TILA). Section 129H 
of TILA establishes special appraisal requirements for ``higher-risk 
mortgages,'' termed ``higher-priced mortgage loans'' or ``HPMLs'' in 
the agencies' regulations. The OCC, the Board, the Bureau, the Federal 
Deposit Insurance Corporation (FDIC), the National Credit Union 
Administration (NCUA) and the Federal Housing Finance Agency (FHFA) 
(collectively, the Agencies) issued joint final rules implementing 
these requirements, effective January 18, 2014. The Agencies' rules 
exempted, among other loan types, transactions of $25,000 or less, and 
required that this loan amount be adjusted annually based on any annual 
percentage increase in the Consumer Price Index for Urban Wage Earners 
and Clerical Workers (CPI-W). If there is no annual percentage increase 
in the CPI-W, the OCC, the Board and the Bureau will not adjust this 
exemption threshold from the prior year. The proposal would memorialize 
this as well as the agencies' calculation method for determining the 
adjustment in years following a year in which there is no annual 
percentage increase in the CPI-W.

DATES: Comments must be received on or before September 6, 2016.

ADDRESSES: Interested parties are encouraged to submit written comments 
jointly to the OCC, the Board, and the Bureau. Commenters are 
encouraged to use the title ``Appraisals for Higher-Priced Mortgage 
Loans'' to facilitate the organization and distribution of comments 
among the agencies. Interested parties are invited to submit written 
comments to:
    OCC: Because paper mail in the Washington, DC area and at the OCC 
is subject to delay, commenters are encouraged to submit comments by 
the Federal eRulemaking Portal or email, if possible. Please use the 
title ``Appraisals for Higher-Priced Mortgage Loans'' to facilitate the 
organization and distribution of the comments. You may submit comments 
by any of the following methods:
     Federal eRulemaking Portal--``regulations.gov'': Go to 
http://www.regulations.gov. Enter ``Docket ID OCC-2015-0021'' in the 
Search box and click ``Search.'' Results can be filtered using the 
filtering tools on the left side of the screen. Click on ``Comment 
Now'' to submit public comments.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting public comments.
     Email: [email protected].
     Mail: Legislative and Regulatory Activities Division, 400 
7th Street SW., suite 3E-218, mail stop 9W-11, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW., suite 3E-218, 
mail stop 9W-11, Washington, DC 20219.
     Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2015-0021'' in your comment. In general, OCC will enter 
all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not enclose any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this notice of proposed rulemaking by any of the following methods:
     Viewing Comments Electronically: Go to http://www.regulations.gov. Enter ``Docket ID OCC-2015-0021'' in the Search 
box and click ``Search.'' Comments can be filtered by Agency using the 
filtering tools on the left side of the screen.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
viewing public comments, viewing other supporting and related 
materials, and viewing the docket after the close of the comment 
period.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 400 7th Street SW., Washington, DC. 
For security reasons, the OCC requires that visitors make an 
appointment to inspect comments. You may do so by calling (202) 649-
6700 or, for persons who are deaf or hard of hearing, TTY, (202) 649-
5597. Upon arrival, visitors will be required to present valid 
government-issued photo identification and submit to security screening 
in order to inspect and photocopy comments.
    Docket: You may also view or request available background documents 
and project summaries using the methods described above.
    Board: You may submit comments, identified by Docket No. R-1443 or 
RIN 7100 AD-90, by any of the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Robert deV. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.


[[Page 51395]]


All public comments will be made available on the Board's Web site at 
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as 
submitted, unless modified for technical reasons. Accordingly, comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper in Room 
MP-500 of the Board's Martin Building (20th and C Streets NW.) between 
9:00 a.m. and 5:00 p.m. on weekdays.
    Bureau: You may submit comments, identified by Docket No. CFPB-
2016-0035 or RIN 3170-AA11, by any of the following methods:
     Email: [email protected]. Include Docket 
No. CFPB-2016-0035 or RIN 3170-AA11 in the subject line of the email.
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 
20552.
     Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1275 First 
Street NE., Washington, DC 20002.
    Instructions: All submissions should include the agency name and 
docket number or Regulatory Information Number (RIN) for this 
rulemaking. Because paper mail in the Washington, DC area and at the 
Bureau is subject to delay, commenters are encouraged to submit 
comments electronically. In general, all comments received will be 
posted without change to http://www.regulations.gov. In addition, 
comments will be available for public inspection and copying at 1275 
First Street NE., Washington, DC 20002, on official business days 
between the hours of 10 a.m. and 5 p.m. eastern time. You can make an 
appointment to inspect the documents by telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or Social 
Security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: OCC: MaryAnn Nash, Counsel, 
Legislative and Regulatory Affairs Division, (202) 649-6287; for 
persons who are deaf and hard of hearing TTY, (202) 649-5597. Board: 
Lorna M. Neill, Senior Counsel, Division of Consumer and Community 
Affairs, Board of Governors of the Federal Reserve System, at (202) 
452-3667; for users of Telecommunications Device for the Deaf (TDD) 
only, contact (202) 263-4869.
    Bureau: Shaakira Gold-Ramirez, Paralegal Specialist, Jaclyn Maier, 
Counsel, Office of Regulations, Consumer Financial Protection Bureau, 
at (202) 435-7700.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Dodd-Frank Wall Street Reform and Consumer Protection Act of 
2010 (Dodd-Frank Act) amended the Truth in Lending Act (TILA) to add 
special appraisal requirements for ``higher-risk mortgages.'' \1\ In 
January 2013, the Agencies issued a joint final rule implementing these 
requirements and adopted the term ``higher-priced mortgage loan'' 
(HPML) instead of ``higher-risk mortgage'' (the January 2013 Final 
Rule).\2\ In July 2013, the Agencies proposed additional exemptions 
from the January 2013 Final Rule (the 2013 Supplemental Proposed 
Rule).\3\ In December 2013, the Agencies issued a supplemental final 
rule with additional exemptions from the January 2013 Final Rule (the 
December 2013 Supplemental Final Rule).\4\ Among other exemptions, the 
Agencies adopted an exemption from the new HPML appraisal rules for 
transactions of $25,000 or less, to be adjusted annually for inflation.
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    \1\ Public Law 111-203 section 1471, 124 Stat. 1376 (2010), 
codified at TILA section 129H, 15 U.S.C. 1639h.
    \2\ 78 FR 10368 (Feb. 13, 2013).
    \3\ 78 FR 48548 (Aug. 8, 2013).
    \4\ 78 FR 78520 (Dec. 26, 2013).
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    The Bureau's, the OCC's, and the Board's versions of the January 
2013 Final Rule and December 2013 Supplemental Final Rule and 
corresponding official interpretations are substantively identical. The 
FDIC, NCUA, and FHFA adopted the Bureau's version of the regulations 
under the January 2013 Final Rule and December 2013 Supplemental Final 
Rule.\5\
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    \5\ See NCUA: 12 CFR 722.3; FHFA: 12 CFR part 1222. Although the 
FDIC adopted the Bureau's version of the regulation, the FDIC did 
not issue its own regulation containing a cross-reference to the 
Bureau's version. See 78 FR 10368, 10370 (Feb. 13, 2013).
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    Section 34.203(b)(2) of subpart G of part 34 of the OCC's 
regulations, Sec.  226.43(b)(2) of the Board's Regulation Z, and Sec.  
1026.35(c)(2)(ii) of the Bureau's Regulation Z, and their accompanying 
interpretations,\6\ provide that the exemption threshold for smaller 
loans will be adjusted effective January 1 of each year based on any 
annual percentage increase in the Consumer Price Index for Urban Wage 
Earners and Clerical Workers (CPI-W) that was in effect on the 
preceding June 1. Any increase in the threshold amount will be rounded 
to the nearest $100 increment. For example, if the annual percentage 
increase in the CPI-W would result in a $950 increase in the threshold 
amount, the threshold amount will be increased by $1,000. However, if 
the annual percentage increase in the CPI-W would result in a $949 
increase in the threshold amount, the threshold amount will be 
increased by $900. If there is no annual percentage increase in the 
CPI-W, the OCC, the Board, and the Bureau will not adjust the threshold 
amounts from the prior year.\7\
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    \6\ See 12 CFR part 34, Appendix C to Subpart G, comment 
203(b)(2)-1 (OCC); 12 CFR part 226, Supplement I, comment 43(b)(2)-1 
(Board); and 12 CFR part 1026, Supplement I, comment 35(c)(2)(ii)-1 
(Bureau).
    \7\ See 78 FR 48548, 48565 (Aug. 8, 2013) (``Thus, under the 
proposal, if the CPI-W decreases in an annual period, the percentage 
increase would be zero, and the dollar amount threshold for the 
exemption would not change.'').
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II. Commentary Revision

    The OCC, the Board and the Bureau are proposing new commentary to 
memorialize the calculation method used by the agencies each year to 
adjust the exemption threshold. The new commentary is substantively 
identical for Sec.  34.203(b)(2) of subpart G of part 34 of the OCC's 
regulations, Sec.  226.43(b)(2) of the Board's Regulation Z, and Sec.  
1026.35(c)(2)(ii) of the Bureau's Regulation Z. For ease of reference, 
the ``Commentary Revision'' refers only to the section numbers of the 
commentary that will published in the Bureau's Regulation Z at 12 CFR 
part 1026, Supplement I.
    Comment 35(c)(2)(ii)-1 to the Bureau's Regulation Z currently 
provides the threshold amount in effect during a particular period and 
details the rules the agencies use for rounding the threshold 
calculation to the nearest $100 or $1,000 increment, as discussed above 
in part I, ``Background.'' The OCC, the Board and the Bureau are 
proposing to revise comment 35(c)(2)(ii)-1 by moving the text regarding 
the threshold amount that is in effect during a particular period to a 
new proposed comment 35(c)(2)(ii)-3. The discussion of how the agencies 
round the threshold calculation would remain in comment 35(c)(2)(ii)-1. 
Current comments 35(c)(2)(ii)-2 and 35(c)(2)(ii)-3 would be renumbered 
as proposed comments 35(c)(2)(ii)-5 and 35(c)(2)(ii)-6, respectively.

[[Page 51396]]

    As the Agencies have stated previously,\8\ if there is no annual 
percentage increase in the CPI-W, the OCC, the Board, and the Bureau 
will not adjust the exemption threshold from the prior year. This 
position is consistent with the Board's and the Bureau's approach in 
adjusting the coverage thresholds for the Consumer Leasing Act (CLA) 
and TILA, based on Section 1100E(b) of the Dodd-Frank Act, which states 
that the threshold must be adjusted by the ``annual percentage 
increase'' in the CPI-W (emphasis added). The Board and the Bureau are 
publishing similar amendments to the commentaries to each of their 
respective regulations implementing the CLA (Regulation M) and TILA 
(Regulation Z) elsewhere in the Federal Register.\9\
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    \8\ See 78 FR 48548, 48565 (Aug. 8, 2013) and 80 FR 73943, 73944 
(Nov. 27, 2015).
    \9\ 76 FR 18354, 18355 n.1 (Apr. 4, 2011) (``[A]n annual period 
of deflation or no inflation would not require a change in the 
threshold amount.'').
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    For the HPML appraisal rule exemption for smaller loans, the OCC, 
the Board, and the Bureau are proposing to memorialize this concept in 
proposed comment 35(c)(2)(ii)-2, which would provide that if the CPI-W 
in effect on June 1 does not increase from the CPI-W in effect on June 
1 of the previous year, the threshold amount effective the following 
January 1 through December 31 will not change from the previous year. 
For example, if the threshold in effect from January 1, 2019, through 
December 31, 2019, is $27,500 and the CPI-W in effect on June 1 of 
2019, indicates a 1.1 percent decrease from the CPI-W in effect on June 
1, 2018, the threshold in effect for January 1, 2020, through December 
31, 2020, will remain $27,500.
    Proposed comment 35(c)(2)(ii)-2 would further set forth the 
calculation method the agencies would use in years following a year in 
which the exemption threshold was not adjusted because there was no 
increase in the CPI-W from the previous year. Specifically, as set 
forth under proposed comment 35(c)(2)(ii)-2, for the years after a year 
in which the threshold did not change because the CPI-W in effect on 
June 1 decreased from the CPI-W in effect on June 1 of the previous 
year, the threshold is calculated by applying the annual percentage 
change in the CPI-W to the dollar amount that would have resulted if 
the decreases and any subsequent increases in the CPI-W had been taken 
into account. Proposed comment 35(c)(2)(ii)-2.i further states that, if 
the resulting amount is greater than the current threshold, then the 
threshold effective January 1 the following year will increase 
accordingly.
    For example, assume that the threshold in effect from January 1, 
2019, through December 31, 2019, is $27,500 and that, due to a 1.1 
percent decrease from the CPI-W in effect on June 1, 2018, to the CPI-W 
in effect on June 1, 2019, the threshold in effect from January 1, 
2020, through December 31, 2020, remains at $27,500. If, however, the 
threshold had been adjusted downward to reflect the decrease in the 
CPI-W over that time period, the threshold in effect from January 1, 
2020, through December 31, 2020, would have been $27,200. Further 
assume that the CPI-W in effect on June 1, 2020, increased by 1.6 
percent from the CPI-W in effect on June 1, 2019. The calculation for 
the threshold that will be in effect from January 1, 2021, through 
December 31, 2021, is based on the impact of a 1.6 percent increase in 
the CPI-W on $27,200, rather than $27,500, resulting in a 2021 
threshold of $27,600.
    Furthermore, comment 35(c)(2)(ii)-2.ii states that, if the 
resulting amount calculated is equal to or less than the current 
threshold, then the threshold effective January 1 the following year 
will not change, but future increases will be calculated based on the 
amount that would have resulted. To illustrate, assume in the example 
above that the CPI-W in effect on June 1, 2020, increased by only 0.6 
percent from the CPI-W in effect on June 1, 2019. The calculation for 
the threshold that will be in effect from January 1, 2021, through 
December 31, 2021, is based on the impact of a 0.6 percent increase in 
the CPI-W on $27,200. The resulting amount is $27,400, which is lower 
than $27,500, the threshold in effect from January 1, 2020, through 
December 31, 2020. Therefore, the threshold in effect from January 1, 
2021, through December 31, 2021, will remain $27,500. However, the 
calculation for the threshold that will be in effect from January 1, 
2022, through December 31, 2022, will apply the percentage change in 
the CPI-W to $27,400, the amount that would have resulted based on the 
0.6 percent change from the CPI-W in effect on June 1, 2019, to the 
CPI-W in effect on June 1, 2020.
    The agencies request comment on all aspects of the proposed rule.

III. Regulatory Analysis

Bureau's Dodd-Frank Act Section 1022(b)(2) Analysis

    In developing this proposal, the Bureau has considered potential 
benefits, costs, and impacts.\10\ In addition, the Bureau has 
consulted, or offered to consult with, the prudential regulators, the 
Securities and Exchange Commission, the Department of Housing and Urban 
Development, the Federal Housing Finance Agency, the Federal Trade 
Commission, and the Department of the Treasury, including regarding 
consistency with any prudential, market, or systemic objectives 
administered by such agencies.
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    \10\ Specifically, section 1022(b)(2)(A) 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 Act; and 
the impact on consumers in rural areas.
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    The Bureau has chosen to evaluate the benefits, costs and impacts 
of the proposed commentary against the current state of the world, 
which takes into account the current regulatory regime. The Bureau is 
not aware of any significant benefits or costs to consumers or covered 
persons associated with the proposal relative to the baseline. The OCC, 
the Board, and the Bureau previously stated that if there is no annual 
percentage increase in the CPI-W, then the agencies will not adjust the 
exemption threshold from the prior year.\11\ The proposal memorializes 
this in official commentary. The proposal also clarifies how the 
threshold would be calculated for years after a year in which the 
threshold did not change. The Bureau believes that this clarification 
memorializes the method that the Bureau would be expected to use: This 
method holds the threshold fixed until a notional threshold calculated 
using the Bureau's methodology, but taking into account both decreases 
and increases in the CPI-W, exceeds the actual threshold. The Bureau 
requests comment on this point. Thus, the Bureau believes that the 
proposed rule does not change the regulatory regime relative to the 
baseline and creates no significant benefits, costs, or impacts.
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    \11\ 78 FR 48547, 48565 (Aug. 8, 2013) and 80 FR 73943, 73944 
(Nov. 27, 2015).
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    The proposed rule will have no unique impact on depository 
institutions or credit unions with $10 billion or less in assets as 
described in section 1026(a) of the Dodd-Frank Act or on rural 
consumers. The Bureau does not expect this final rule to affect 
consumers' access to credit.

Regulatory Flexibility Act

    OCC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA) 
requires an agency, in connection with a proposed

[[Page 51397]]

rule, to prepare an Initial Regulatory Flexibility Analysis describing 
the impact of the proposed rule on small entities (defined by the Small 
Business Administration for purposes of the RFA to include banking 
entities with total assets of $550 million or less) or to certify that 
the proposed rule would not have a significant economic impact on a 
substantial number of small entities.
    As explained in the Commentary Revision section of the preamble, 
this proposed rule memorializes the calculation method used by the OCC, 
the Board, and the Bureau each year to adjust the threshold for 
exemption from the special appraisal requirements for HPMLs and 
clarifies the agencies' calculation method for determining the 
adjustment in the years following a year in which there is no annual 
percentage increase in the CPI-W. The economic impact of this proposed 
rule on national banks and Federal savings associations, regardless of 
size, is not expected to be significant. Accordingly, the OCC certifies 
that the proposed rule would not have a significant economic impact on 
a substantial number of OCC-supervised small entities.
    Board: The Regulatory Flexibility Act (RFA) requires an agency to 
publish an initial regulatory flexibility analysis with a proposed rule 
or certify that the proposed rule will not have a significant economic 
impact on a substantial number of small entities.\12\ Based on its 
analysis, and for the reasons stated below, the Board believes that the 
rule will not have a significant economic impact on a substantial 
number of small entities. Nevertheless, the Board is publishing an 
initial regulatory flexibility analysis and requests public comment on 
all aspects of its analysis. The Board will, if necessary, conduct a 
final regulatory flexibility analysis after considering the comments 
received during the public comment period.
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    \12\ See 5 U.S.C. 601 et seq.
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    1. Statement of the need for, and objectives of, the proposed rule. 
The proposed rule would memorialize the calculation method used by the 
Board each year to adjust the exemption threshold in accordance with 
Regulation Z, 12 CFR 226.43(b)(2).
    2. Small entities affected by the proposed rule. The Board invites 
comment on the effect of the proposed rule on small entities. For 
purposes of the RFA, the Small Business Administration defines small 
entities to include banking entities with total assets of $550 million 
or less. Of Board supervised institutions with an asset size of $550 
million or less as of March 2016, 223 reported making 5,135 higher-
priced mortgage loans in 2015.\13\
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    \13\ Board supervised institutions include State Member Banks, 
uninsured state branches and agencies of foreign banks. The number 
of institutions making higher-priced mortgage loans and the number 
of higher-priced mortgage loans is based on data reported pursuant 
to the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. 2801 et seq.
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    3. Recordkeeping, reporting, and compliance requirements. The 
proposed rule would not impose any recordkeeping, reporting, or 
compliance requirements.
    4. Other Federal rules. The Board has not identified any likely 
duplication, overlap and/or potential conflict between the proposed 
rule and any Federal rule.
    5. Significant alternatives to the proposed revisions. The Board 
solicits comment on any significant alternatives that would reduce the 
regulatory burden on small entities associated with this proposed rule.
    Bureau: 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.\14\ These analyses must ``describe the impact 
of the proposed rule on small entities''.\15\ An IRFA or FRFA is not 
required if the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small 
entities.\16\ 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.\17\
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    \14\ 5 U.S.C. 601 et seq.
    \15\ Id. at 603(a). For purposes of assessing the impacts of the 
proposed rule on small entities, ``small entities'' is defined in 
the RFA to include small businesses, small not-for-profit 
organizations, and small government jurisdictions. Id. at 601(6). A 
``small business'' is determined by application of Small Business 
Administration regulations and reference to the North American 
Industry Classification System (NAICS) classifications and size 
standards. Id. at 601(3). A ``small organization'' is any ``not-for-
profit enterprise which is independently owned and operated and is 
not dominant in its field.'' Id. at 601(4). A ``small governmental 
jurisdiction'' is the government of a city, county, town, township, 
village, school district, or special district with a population of 
less than 50,000. Id. at 601(5).
    \16\ Id. at 605(b).
    \17\ Id. at 609.
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    An IRFA is not required for this proposal because if adopted it 
would not have a significant economic impact on a substantial number of 
small entities. As discussed in the Bureau's Section 1022(b)(2) 
Analysis above, this proposal does not introduce costs or benefits to 
covered persons because the proposal seeks only to clarify the method 
of threshold adjustment which has already been established in previous 
Agency rules. Therefore this proposed rule would not have a significant 
impact on small entities.

Certification

    Accordingly, the Bureau Director, by signing below, certifies that 
this proposal, if adopted, would not have a significant economic impact 
on a substantial number of small entities.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\18\ the 
agencies reviewed this proposed rule. No collections of information 
pursuant to the Paperwork Reduction Act are contained in the proposed 
rule.
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    \18\ 44 U.S.C. 3506; 5 CFR 1320.
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Unfunded Mandates Reform Act

    The OCC has analyzed the notice of proposed rulemaking under the 
factors set forth in the Unfunded Mandates Reform Act of 1995 (UMRA) (2 
U.S.C. 1532). Under this analysis, the OCC considered whether the 
proposed rule includes a Federal mandate that may result in the 
expenditure by State, local, and Tribal governments, in the aggregate, 
or by the private sector, of $100 million or more in any one year 
(adjusted annually for inflation).
    The proposed rule memorializes the calculation method used by the 
OCC, the Board, and the Bureau each year to adjust the threshold for 
exemption from the special appraisal requirements for HPMLs and 
clarifies the agencies' calculation method for determining the 
adjustment in the years following a year in which there is no annual 
percentage increase in the CPI-W. Because the proposed rule is designed 
to clarify existing rules, and does not introduce any new requirements, 
the OCC has determined that it would not result in expenditures by 
State, local, and Tribal governments or by the private sector, of $100 
million or more. Accordingly, the OCC has not prepared a written 
statement to accompany its proposed rule.

List of Subjects

12 CFR Part 34

    Appraisal, Appraiser, Banks, Banking, Consumer protection, Credit, 
Mortgages, National banks, Reporting and recordkeeping requirements, 
Savings associations, Truth in lending.

12 CFR Part 226

    Advertising, Appraisal, Appraiser, Consumer protection, Credit, 
Federal

[[Page 51398]]

Reserve System, Mortgages, Reporting and recordkeeping requirements, 
Truth in lending.

12 CFR Part 1026

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

Department of the Treasury

Office of the Comptroller of the Currency

Authority and Issuance

    For the reasons set forth in the preamble, the OCC proposes to 
amend 12 CFR part 34 as set forth below:

PART 34--REAL ESTATE LENDING AND APPRAISALS

0
1. The authority citation for part 34 is revised to read as follows:

    Authority: 12 U.S.C. 1 et seq., 25b, 29, 93a, 371, 1463, 1464, 
1465, 1701j-3, 1828(o), 3331 et seq., 5101 et seq., 5412(b)(2)(B) 
and 15 U.S.C. 1639h.

Subpart G--Appraisals for Higher-Priced Mortgage Loans

0
2. In Appendix C to Subpart G, under Section 34.203--Appraisals for 
Higher-Priced Mortgage Loans, under paragraph (b)(2):
0
i. Paragraph 1 is revised;
0
ii. Paragraphs 2 and 3 are re-designated as paragraphs 4 and 5, 
respectively; and
0
iii. Paragraphs 2 and 3 are added.
    The additions and revisions read as follows:

Appendix C to Subpart G--OCC Interpretations

* * * * *

Section 34.203--Appraisals for Higher-Priced Mortgage Loans

* * * * *

34.203(b) Exemptions

* * * * *

Paragraph 34.203(b)(2)

    1. Threshold amount. For purposes of Sec.  34.203(b)(2), the 
threshold amount in effect during a particular period is the amount 
stated in comment 203(b)(2)-3 for that period. The threshold amount is 
adjusted effective January 1 of each year by any annual percentage 
increase in the Consumer Price Index for Urban Wage Earners and 
Clerical Workers (CPI-W) that was in effect on the preceding June 1. 
Comment 203(b)(2)-3 will be amended to provide the threshold amount for 
the upcoming year after the annual percentage change in the CPI-W that 
was in effect on June 1 becomes available. Any increase in the 
threshold amount will be rounded to the nearest $100 increment. For 
example, if the annual percentage increase in the CPI-W would result in 
a $950 increase in the threshold amount, the threshold amount will be 
increased by $1,000. However, if the annual percentage increase in the 
CPI-W would result in a $949 increase in the threshold amount, the 
threshold amount will be increased by $900.
    2. No increase in the CPI-W. If the CPI-W in effect on June 1 does 
not increase from the CPI-W in effect on June 1 of the previous year, 
the threshold amount effective the following January 1 through December 
31 will not change from the previous year. When this occurs, for the 
years that follow, the threshold is calculated based on the annual 
percentage change in the CPI-W applied to the dollar amount that would 
have resulted if decreases and any subsequent increases in the CPI-W 
had been taken into account.
    i. Net increases. If the resulting amount is greater than the 
current threshold, then the threshold effective January 1 the following 
year will increase accordingly.
    ii. Net decreases. If the resulting amount calculated is equal to 
or less than the current threshold, then the threshold effective 
January 1 the following year will not change, but future increases will 
be calculated based on the amount that would have resulted.
    3. Threshold. For purposes of Sec.  34.203(b)(2), the threshold 
amount in effect during a particular period is the amount stated below 
for that period.
    i. From January 18, 2014, through December 31, 2014, the threshold 
amount is $25,000.
    ii. From January 1, 2015, through December 31, 2015, the threshold 
amount is $25,500.
    iii. From January 1, 2016 through December 31, 2016, the threshold 
amount is $25,500.
    4. Qualifying for exemption--in general. A transaction is exempt 
under Sec.  34.203(b)(2) if the creditor makes an extension of credit 
at consummation that is equal to or below the threshold amount in 
effect at the time of consummation.
    5. Qualifying for exemption--subsequent changes. A transaction does 
not meet the condition for an exemption under Sec.  34.203(b)(2) merely 
because it is used to satisfy and replace an existing exempt loan, 
unless the amount of the new extension of credit is equal to or less 
than the applicable threshold amount. For example, assume a closed-end 
loan that qualified for a Sec.  34.203(b)(2) exemption at consummation 
in year one is refinanced in year ten and that the new loan amount is 
greater than the threshold amount in effect in year ten. In these 
circumstances, the creditor must comply with all of the applicable 
requirements of Sec.  34.203 with respect to the year ten transaction 
if the original loan is satisfied and replaced by the new loan, unless 
another exemption from the requirements of Sec.  34.203 applies. See 
Sec.  34.203(b) and (d)(7).
* * * * *

Board of Governors of the Federal Reserve System

Authority and Issuance

    For the reasons set forth in the preamble, the Board proposes to 
amend Regulation Z, 12 CFR part 226, as set forth below:

PART 226--TRUTH IN LENDING (REGULATION Z)

0
3. The authority citation for part 226 continues to read as follows:

    Authority: 12 U.S.C. 3806; 15 U.S.C. 1604, 1637(c)(5), 1639(l), 
and 1639h; Pub. L. 111-24, section 2, 123 Stat. 1734; Pub. L. 111-
203, 124 Stat. 1376.

0
4. In Supplement I to part 226, under Section 226.43--Appraisals for 
Higher-Risk Mortgage Loans, under paragraph 43(b)(2), paragraph 1 is 
revised, paragraphs 2 and 3 are re-numbered paragraphs 4 and 5, 
respectively, and new paragraphs 2 and 3 are added, to read as follows:

Supplement I to Part 226--Official Staff Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 226.43--Appraisals for Higher-Risk Mortgage Loans

* * * * *

43(b) Exemptions

* * * * *

Paragraph 43(b)(2)

    1. Threshold amount. For purposes of Sec.  226.43(b)(2), the 
threshold amount in effect during a particular period is the amount 
stated in comment 43(b)(2)-3 for that period. The threshold amount is 
adjusted effective January 1 of each year by any annual percentage 
increase in the Consumer Price Index for Urban

[[Page 51399]]

Wage Earners and Clerical Workers (CPI-W) that was in effect on the 
preceding June 1. Comment 43(b)(2)-3 will be amended to provide the 
threshold amount for the upcoming year after the annual percentage 
change in the CPI-W that was in effect on June 1 becomes available. Any 
increase in the threshold amount will be rounded to the nearest $100 
increment. For example, if the annual percentage increase in the CPI-W 
would result in a $950 increase in the threshold amount, the threshold 
amount will be increased by $1,000. However, if the annual percentage 
increase in the CPI-W would result in a $949 increase in the threshold 
amount, the threshold amount will be increased by $900.
    2. No increase in the CPI-W. If the CPI-W in effect on June 1 does 
not increase from the CPI-W in effect on June 1 of the previous year, 
the threshold amount effective the following January 1 through December 
31 will not change from the previous year. When this occurs, for the 
years that follow, the threshold is calculated based on the annual 
percentage change in the CPI-W applied to the dollar amount that would 
have resulted if decreases and any subsequent increases in the CPI-W 
had been taken into account.
    i. Net increases. If the resulting amount is greater than the 
current threshold, then the threshold effective January 1 the following 
year will increase accordingly.
    ii. Net decreases. If the resulting amount calculated is equal to 
or less than the current threshold, then the threshold effective 
January 1 the following year will not change, but future increases will 
be calculated based on the amount that would have resulted.
    3. Threshold. For purposes of Sec.  226.43(b)(2), the threshold 
amount in effect during a particular period is the amount stated below 
for that period.
    i. From January 18, 2014, through December 31, 2014, the threshold 
amount is $25,000.
    ii. From January 1, 2015, through December 31, 2015, the threshold 
amount is $25,500.
    iii. From January 1, 2016 through December 31, 2016, the threshold 
amount is $25,500.
    4. Qualifying for exemption--in general. A transaction is exempt 
under Sec.  226.43(b)(2) if the creditor makes an extension of credit 
at consummation that is equal to or below the threshold amount in 
effect at the time of consummation.
    5. Qualifying for exemption--subsequent changes. A transaction does 
not meet the condition for an exemption under Sec.  226.43(b)(2) merely 
because it is used to satisfy and replace an existing exempt loan, 
unless the amount of the new extension of credit is equal to or less 
than the applicable threshold amount. For example, assume a closed-end 
loan that qualified for a Sec.  226.43(b)(2) exemption at consummation 
in year one is refinanced in year ten and that the new loan amount is 
greater than the threshold amount in effect in year ten. In these 
circumstances, the creditor must comply with all of the applicable 
requirements of Sec.  226.43 with respect to the year ten transaction 
if the original loan is satisfied and replaced by the new loan, unless 
another exemption from the requirements of Sec.  226.43 applies. See 
Sec.  226.43(b) and (d)(7).
* * * * *

Bureau of Consumer Financial Protection

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau proposes to 
amend Regulation Z, 12 CFR part 1026, as set forth below:

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
5. 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
6. In Supplement I to part 1026, under Section 1026.35--Requirements 
for Higher-Priced Mortgage Loans, under paragraph 35(c)(2)(ii), 
paragraphs 1 through 3 are revised, and paragraphs 4 and 5 are added, 
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(c) Appraisals
* * * * *
    35(c)(2) Exemptions
* * * * *

Paragraph 35(c)(2)(ii)

    1. Threshold amount. For purposes of Sec.  1026.35(c)(2)(ii), the 
threshold amount in effect during a particular period is the amount 
stated in comment 35(c)(2)(ii)-3 for that period. The threshold amount 
is adjusted effective January 1 of each year by any annual percentage 
increase in the Consumer Price Index for Urban Wage Earners and 
Clerical Workers (CPI-W) that was in effect on the preceding June 1. 
Comment 35(c)(2)(ii)-3 will be amended to provide the threshold amount 
for the upcoming year after the annual percentage change in the CPI-W 
that was in effect on June 1 becomes available. Any increase in the 
threshold amount will be rounded to the nearest $100 increment. For 
example, if the annual percentage increase in the CPI-W would result in 
a $950 increase in the threshold amount, the threshold amount will be 
increased by $1,000. However, if the annual percentage increase in the 
CPI-W would result in a $949 increase in the threshold amount, the 
threshold amount will be increased by $900.
    2. No increase in the CPI-W. If the CPI-W in effect on June 1 does 
not increase from the CPI-W in effect on June 1 of the previous year, 
the threshold amount effective the following January 1 through December 
31 will not change from the previous year. When this occurs, for the 
years that follow, the threshold is calculated based on the annual 
percentage change in the CPI-W applied to the dollar amount that would 
have resulted if decreases and any subsequent increases in the CPI-W 
had been taken into account.
    i. Net increases. If the resulting amount is greater than the 
current threshold, then the threshold effective January 1 the following 
year will increase accordingly.
    ii. Net decreases. If the resulting amount calculated is equal to 
or less than the current threshold, then the threshold effective 
January 1 the following year will not change, but future increases will 
be calculated based on the amount that would have resulted.
    3. Threshold. For purposes of Sec.  1026.35(c)(2)(ii), the 
threshold amount in effect during a particular period is the amount 
stated below for that period.
    i. From January 18, 2014, through December 31, 2014, the threshold 
amount is $25,000.
    ii. From January 1, 2015, through December 31, 2015, the threshold 
amount is $25,500.
    iii. From January 1, 2016 through December 31, 2016, the threshold 
amount is $25,500.
    4. Qualifying for exemption--in general. A transaction is exempt 
under Sec.  1026.35(c)(2)(ii) if the creditor makes an extension of 
credit at consummation that is equal to or below the threshold amount 
in effect at the time of consummation.

[[Page 51400]]

    5. Qualifying for exemption--subsequent changes. A transaction does 
not meet the condition for an exemption under Sec.  1026.35(c)(2)(ii) 
merely because it is used to satisfy and replace an existing exempt 
loan, unless the amount of the new extension of credit is equal to or 
less than the applicable threshold amount. For example, assume a 
closed-end loan that qualified for a Sec.  1026.35(c)(2)(ii) exemption 
at consummation in year one is refinanced in year ten and that the new 
loan amount is greater than the threshold amount in effect in year ten. 
In these circumstances, the creditor must comply with all of the 
applicable requirements of Sec.  1026.35(c) with respect to the year 
ten transaction if the original loan is satisfied and replaced by the 
new loan, unless another exemption from the requirements of Sec.  
1026.35(c) applies. See Sec.  1026.35(c)(2) and (c)(4)(vii).
* * * * *

Thomas J. Curry,
Comptroller of the Currency.
    By order of the Board of Governors of the Federal Reserve 
System, July 19, 2016.
Robert deV. Frierson,
Secretary of the Board.
    Dated: July 13, 2016.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2016-18058 Filed 8-3-16; 8:45 am]
 BILLING CODE 4810-33-P; 6210-01-P; 4810-AM-P