[Federal Register Volume 81, Number 230 (Wednesday, November 30, 2016)]
[Rules and Regulations]
[Pages 86250-86256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28699]


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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-AA68


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: Final rules, official interpretations and commentary.

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SUMMARY: The OCC, the Board, and the Bureau are finalizing amendments 
to 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 final rule will 
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. Based on the CPI-W in 
effect as of June 1, 2016, the exemption threshold will remain at 
$25,500 through 2017.

DATES: This final rule is effective January 1, 2017.

FOR FURTHER INFORMATION CONTACT: OCC: MaryAnn Nash, Counsel, 
Legislative and Regulatory Activities 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: 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

[[Page 86251]]

$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

    On August 4, 2016, the OCC, the Board and the Bureau published a 
proposed rule in the Federal Register to memorialize the calculation 
method used by the agencies each year to adjust the exemption 
threshold. See 81 FR 51394 (Aug. 4, 2016). The proposed commentary 
stated that 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. The proposed commentary 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. As the OCC, the Board and 
the Bureau discussed in the proposal, the proposed calculation method 
would ensure that the values for the exemption threshold keep pace with 
the CPI-W as contemplated in the December 2013 Supplemental Final Rule.
    The comment period closed on September 6, 2016. In response to the 
proposal, the OCC, the Board and the Bureau received one comment from 
an individual, one from a State bankers association, and one from a 
community bank. The individual supported the proposal. The State 
bankers association requested that the smaller dollar loan exemption be 
raised to $50,000, and the community bank commenter requested an 
exemption from the HPML rules for small institutions. Both of these 
comments are beyond the scope of this rulemaking.
    The OCC, the Board, and the Bureau are adopting the commentary 
revisions as proposed, with some minor clarifying amendments. These 
changes will be effective on January 1, 2017. 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, this ``Commentary Revision'' discussion refers only to 
the section numbers of the commentary that will be 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 
revising 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. Consistent with the proposal, the 
discussion of how the agencies round the threshold calculation will 
remain in comment 35(c)(2)(ii)-1 of the final rule. Additionally, 
current comments 35(c)(2)(ii)-2 and 35(c)(2)(ii)-3 are re-numbered as 
comments 35(c)(2)(ii)-4 and 35(c)(2)(ii)-5, respectively.
    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).\9\ 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 this issue of the Federal Register.
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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 memorializing this concept in comment 
35(c)(2)(ii)-2, which provides 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.
    In the final rule, comment 35(c)(2)(ii)-2 further sets 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, comment 
35(c)(2)(ii)-2 provides that, 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, after rounding, if 
the decreases and any subsequent increases in the CPI-W had been taken 
into account. Comment 35(c)(2)(ii)-2.i further states that, if the 
resulting amount, after rounding, is greater than the current 
threshold, then

[[Page 86252]]

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, after 
rounding. 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, after rounding, 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, after rounding. 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, after rounding, 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, after rounding, to the 
CPI-W in effect on June 1, 2020.

III. 2017 Threshold

    Based on the calculation method detailed above, the exemption 
threshold amount for 2017 remains at $25,500. This is based on the CPI-
W in effect on June 1, 2016, which was reported on May 17, 2016. The 
Bureau of Labor Statistics publishes consumer-based indices monthly, 
but does not report a CPI change on June 1; adjustments are reported in 
the middle of the month. The CPI-W is a subset of the CPI-U index 
(based on all urban consumers) and represents approximately 28 percent 
of the U.S. population. The CPI-W reported on May 17, 2016, reflects a 
0.8 percent increase in the CPI-W from April 2015 to April 2016. 
Because the CPI-W decreased by 0.8 percent from April 2014 to April 
2015, the OCC, the Board and the Bureau are calculating the threshold 
based on the amount that would have resulted had this decrease been 
taken into account, which is $25,300. A 0.8 percent increase in the 
CPI-W applied to $25,300 results in $25,500, which is the same 
threshold amount for 2016. Thus, the exemption threshold amount that 
will be in effect for 2017 remains at $25,500. The OCC, the Board and 
the Bureau are revising the commentaries to their respective 
regulations to add new comments as follows:
     Comment 203(b)(2)-3.iv to 12 CFR part 34, appendix C to 
subpart G (OCC);
     Comment 43(b)(2)-3.iv to supplement I of 12 CFR part 226 
(Board); and
     Comment 35(c)(2)(ii)-3.iv in supplement I of 12 CFR part 
1026 (Bureau).
    These new comments state that, from January 1, 2017, through 
December 31, 2017, the threshold amount is $25,500. These revisions are 
effective January 1, 2017.

IV. Regulatory Analysis

Administrative Procedure Act

    Under the Administrative Procedure Act, notice and opportunity for 
public comment are not required if the OCC, the Board and the Bureau 
find that notice and public comment are impracticable, unnecessary, or 
contrary to the public interest.\10\ The 2017 threshold amount for 
exempt transactions announced in this rule, $25,500, is technical and 
applies the calculation method set forth elsewhere in this final rule, 
for which notice and public comment were provided.\11\ For these 
reasons, the OCC, the Board and the Bureau have determined that 
publishing a notice of proposed rulemaking and providing opportunity 
for public comment for purposes of the 2017 threshold adjustment are 
unnecessary. Therefore, the amendments regarding the 2017 threshold 
amount for exempt transactions are adopted in final form.
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    \10\ 5 U.S.C. 553(b)(B).
    \11\ See 81 FR 51394 (Aug. 4, 2016).
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Bureau's Dodd-Frank Act Section 1022(b)(2) Analysis

    In developing the final rule, the Bureau has considered potential 
benefits, costs, and impacts.\12\ 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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    \12\ 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 final rule 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 final rule 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.\13\ The final rule 
memorializes this in official commentary. The final rule also clarifies 
how the threshold is 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, taking into account both decreases and 
increases in the CPI-W, exceeds the actual threshold. The Bureau 
requested, but did not receive, comment on this point. Thus, the Bureau 
concludes that the final rule will not change the regulatory regime 
relative to the baseline and will create no significant benefits, 
costs, or impacts.
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    \13\ 78 FR 48547, 48565 (Aug. 8, 2013) and 80 FR 73943, 73944 
(Nov. 27, 2015).
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    The final 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.

[[Page 86253]]

Regulatory Flexibility Act

    OCC: Pursuant to the Regulatory Flexibility Act (RFA), an agency 
must prepare a regulatory flexibility analysis for all proposed and 
final rules that describes the impact of the rule on small 
entities.\14\ Under section 605(b) of the RFA, this analysis is not 
required if the head of the agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities and publishes its certification and a short explanatory 
statement in the Federal Register along with its rule. The OCC has 
concluded that the final rule does not have a significant economic 
impact on a substantial number of small entities supervised by the OCC.
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    \14\ See 5 U.S.C. 601 et seq.
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    As explained in the Commentary Revision section of the preamble, 
this final 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 final 
rule on small national banks and Federal savings associations 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 small OCC-supervised entities. Therefore, 
pursuant to section 605(b) of the RFA, the OCC hereby certifies that 
this final rule will not have a significant economic impact on a 
substantial number of small entities. Accordingly, a regulatory 
flexibility analysis is not required.
    Board: An initial regulatory flexibility analysis (IRFA) was 
included in the proposal in accordance with section 3(a) of the 
Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq. (RFA). In the 
IRFA, the Board requested comments on any approaches, other than the 
proposed alternatives, that would reduce the burden on small entities. 
The RFA requires an agency to prepare a final regulatory flexibility 
analysis (FRFA) unless the agency certifies that the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities.\15\ In accordance with section 3(a) of the RFA, the 
Board has reviewed the final regulation. 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.
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    \15\ See 5 U.S.C. 601 et seq.
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    1. Statement of the need for, and objectives of, the final rule. 
The final rule memorializes 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). The final rule also adopts the 
exemption threshold that will apply from January 1, 2017, through 
December 31, 2017, based on the calculation method memorialized in the 
final rule.
    2. Summary of issues raised by comments in response to the IFRA. 
The Board did not receive any comments on the IFRA.
    3. Small entities affected by the final rule. 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.\16\ The Board does not believe that the final rule will 
have a significant economic impact on the entities that it affects.
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    \16\ 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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    4. Recordkeeping, reporting, and compliance requirements. The final 
rule would not impose any recordkeeping, reporting, or compliance 
requirements.
    5. Other Federal rules. The Board has not identified any likely 
duplication, overlap and/or potential conflict between the final rule 
and any Federal 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.\17\ These analyses must describe the impact of 
the proposed and final rules on small entities.\18\ 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.\19\ 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.\20\
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    \17\ 5 U.S.C. 601 et seq.
    \18\ Id. at 603(a) and 604(a). For purposes of assessing the 
impacts of the 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).
    \19\ Id. at 605(b).
    \20\ Id. at 609.
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    A FRFA is not required for this final rule because it will 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 final rule does not introduce costs or benefits to covered 
persons because it seeks only to clarify the method of threshold 
adjustment which has already been established in previous Agency rules. 
Therefore this final rule will not have a significant impact on small 
entities.
Certification
    Accordingly, the Bureau Director, by signing below, certifies that 
this final rule will 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,\21\ the 
agencies reviewed this final rule. No collections of information 
pursuant to the Paperwork Reduction Act are contained in the final 
rule.
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    \21\ 44 U.S.C. 3506; 5 CFR part 1320.
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Unfunded Mandates Reform Act

    The OCC has analyzed the final rule 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 final 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 final 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 final rule is designed to 
clarify existing rules, and does not introduce any new requirements, 
the OCC has determined

[[Page 86254]]

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 final 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 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 amends 12 CFR 
part 34 as set forth below:

PART 34--REAL ESTATE LENDING AND APPRAISALS

0
1. The authority citation for part 34 continues 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, the entry for Paragraph 34.203(b)(2) is 
revised to read as follows:

Appendix C to Subpart G of Part 34--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, after rounding, if decreases and 
any subsequent increases in the CPI-W had been taken into account.
    i. Net increases. If the resulting amount calculated, after 
rounding, 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, after 
rounding, 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.
    iv. From January 1, 2017, through December 31, 2017, 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 amends 
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, the entry for Paragraph 43(b)(2) is revised 
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 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

[[Page 86255]]

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, after rounding, if decreases and any subsequent 
increases in the CPI-W had been taken into account.
    i. Net increases. If the resulting amount calculated, after 
rounding, 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, after 
rounding, 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.
    iv. From January 1, 2017, through December 31, 2017, 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 amends 
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, the entry for Paragraph 35(c)(2)(ii) 
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(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, after rounding, if decreases and any subsequent 
increases in the CPI-W had been taken into account.
    i. Net increases. If the resulting amount calculated, after 
rounding, 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, after 
rounding, 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.
    iv. From January 1, 2017, through December 31, 2017, 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

[[Page 86256]]

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.  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).
* * * * *

    Dated: November 22, 2016.
Thomas J. Curry,
Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System, November 21, 2016.
Robert deV. Frierson,
Secretary of the Board.

    Dated: November 7, 2016.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2016-28699 Filed 11-29-16; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 4810-AM-P