[Federal Register Volume 86, Number 105 (Thursday, June 3, 2021)]
[Rules and Regulations]
[Pages 29685-29687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11571]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

[Docket No. CFPB-2020-0023]
RIN 3170-AA83


Higher-Priced Mortgage Loan Escrow Exemption (Regulation Z); 
Correcting Amendments

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretations; correcting amendments.

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SUMMARY: This document corrects the Official Interpretations 
(Commentary) to Regulation Z. Specifically, the Bureau of Consumer 
Financial Protection (Bureau) is adding a comment to its Commentary 
that it included in a recent higher-priced mortgage loan escrow 
exemption final rule but that was not incorporated into the Code of 
Federal Regulations (CFR) due to an omission in an amendatory 
instruction. The Bureau is also revising a comment that it included in 
the same recent final rule, but that inadvertently did not appear in a 
subsequently effective final rule.

DATES: The corrections are effective on June 3, 2021.

FOR FURTHER INFORMATION CONTACT: Joseph Devlin, Senior Counsel, Office 
of Regulations, at 202-435-7700 or https://reginquiries.consumerfinance.gov/. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    The Bureau is issuing this document to correct two comments in the 
Bureau's Commentary to Regulation Z, which implements the Truth in 
Lending Act.\1\ In the final rule titled ``Higher-Priced Mortgage Loan 
Escrow Exemption (Regulation Z)'' (Escrow Exemption Final Rule), 
published in the Federal Register on February 17, 2021 (86 FR 9840), 
the Bureau included Paragraph 35(b)(2)(vi)(B) in its commentary text 
for the rule, but omitted the related amendatory instruction to add 
that specific paragraph to the Commentary. This omission was a 
scrivener's error. The Bureau is therefore issuing this correction to 
ensure that Paragraph 35(b)(2)(vi)(B) is incorporated into the 
Commentary published in the CFR.
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    \1\ 15 U.S.C. 1601 et seq.
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    Additionally, the Bureau is amending the CFR to revise a comment 
that the Bureau amended in the Escrow Exemption Rule but that 
inadvertently

[[Page 29686]]

did not appear in a subsequently effective final rule. In the Escrow 
Exemption Rule, the Bureau amended preexisting Paragraph 43(f)(1)(vi). 
This amended comment was incorporated into the CFR on the February 17, 
2021 effective date of the Escrow Exemption Rule; however, an unamended 
version of the preexisting comment was included in the Bureau's final 
rule titled ``Qualified Mortgage Definition Under the Truth in Lending 
Act (General QM Loan Definition)'' (General QM Rule) (85 FR 86308). The 
General QM Rule was published in the Federal Register on December 29, 
2020, but it did not take effect until March 1, 2021.\2\ The unamended 
version of the preexisting comment therefore inadvertently replaced the 
amended version when the General QM Rule was incorporated into the CFR. 
The Bureau is therefore issuing this correction to ensure that the CFR 
contains the intended version of this comment that the Bureau amended 
in the Escrow Exemption Final Rule.
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    \2\ When amending commentary, the Office of the Federal Register 
requires reprinting of certain subsections being amended in their 
entirety rather than providing more targeted amendatory instructions 
and related text.
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    Regulatory Requirements: The Bureau finds that public comment on 
this correction is unnecessary because the Bureau is correcting 
inadvertent, technical errors, about which there is minimal, if any, 
basis for substantive disagreement. Because no notice of proposed 
rulemaking is required, the Regulatory Flexibility Act does not require 
an initial or final regulatory flexibility analysis.\3\ The Bureau has 
determined that these corrections do not impose any new or revise any 
existing recordkeeping, reporting, or disclosure requirements on 
covered entities or members of the public that would be collections of 
information requiring OMB approval under the Paperwork Reduction 
Act.\4\
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    \3\ 5 U.S.C. 603(a) and 604(a).
    \4\ 44 U.S.C. 3501 et seq.
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List of Subjects in 12 CFR Part 1026

    Advertising, Banks, banking, 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. Amend supplement I to part 1026--Official Interpretations by:
0
a. Adding Paragraph 35(b)(2)(vi)(B); and
0
b. Revising Paragraph 43(f)(1)(vi).
    The addition and revision read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Section 1026.35--Requirements for Higher-Priced Mortgage Loans

* * * * *
35(b) Escrow Accounts
* * * * *
35(b)(2) Exemptions
* * * * *
    Paragraph 35(b)(2)(vi)(B).
    1. The transaction threshold in Sec.  1026.35(b)(2)(vi)(B) differs 
from the transaction threshold in Sec.  1026.35(b)(2)(iii)(B) in two 
ways. First, the threshold in Sec.  1026.35(b)(2)(vi)(B) is 1,000 loans 
secured by first liens on a principal dwelling, while the threshold in 
Sec.  1026.35(b)(2)(iii)(B) is 2,000 loans secured by first liens on a 
dwelling. Second, all loans made by the creditor and its affiliates 
secured by a first lien on a principal dwelling count toward the 1,000-
loan threshold in Sec.  1026.35(b)(2)(vi)(B), whether or not such loans 
are held in portfolio. By contrast, under Sec.  1026.35(b)(2)(iii)(B), 
only loans secured by first liens on a dwelling that were sold, 
assigned, or otherwise transferred to another person, or that were 
subject at the time of consummation to a commitment to be acquired by 
another person, are counted toward the 2,000-loan threshold.
* * * * *

Section 1026.43--Minimum Standards for Transactions Secured by a 
Dwelling

* * * * *
43(f) Balloon-Payment Qualified Mortgages Made by Certain Creditors
43(f)(1) Exemption
* * * * *
    Paragraph 43(f)(1)(vi).
    1. Creditor qualifications. Under Sec.  1026.43(f)(1)(vi), to make 
a qualified mortgage that provides for a balloon payment, the creditor 
must satisfy three criteria that are also required under Sec.  
1026.35(b)(2)(iii)(A), (B) and (C), which require:
    i. During the preceding calendar year or during either of the two 
preceding calendar years if the application for the transaction was 
received before April 1 of the current calendar year, the creditor 
extended a first-lien covered transaction, as defined in Sec.  
1026.43(b)(1), on a property that is located in an area that is 
designated either ``rural'' or ``underserved,'' as defined in Sec.  
1026.35(b)(2)(iv), to satisfy the requirement of Sec.  
1026.35(b)(2)(iii)(A) (the rural-or-underserved test). Pursuant to 
Sec.  1026.35(b)(2)(iv), an area is considered to be rural if it is: A 
county that is neither in a metropolitan statistical area, nor a 
micropolitan statistical area adjacent to a metropolitan statistical 
area, as those terms are defined by the U.S. Office of Management and 
Budget; or a census block that is not in an urban area, as defined by 
the U.S. Census Bureau using the latest decennial census of the United 
States. An area is considered to be underserved during a calendar year 
if, according to HMDA data for the preceding calendar year, it is a 
county in which no more than two creditors extended covered 
transactions secured by first liens on properties in the county five or 
more times.
    A. The Bureau determines annually which counties in the United 
States are rural or underserved as defined by Sec.  
1026.35(b)(2)(iv)(A)(1) or Sec.  1026.35(b)(2)(iv)(B) and publishes on 
its public website lists of those counties to assist creditors in 
determining whether they meet the criterion at Sec.  
1026.35(b)(2)(iii)(A). Creditors may also use an automated tool 
provided on the Bureau's public website to determine whether specific 
properties are located in areas that qualify as ``rural'' or 
``underserved'' according to the definitions in Sec.  1026.35(b)(2)(iv) 
for a particular calendar year. In addition, the U.S. Census Bureau may 
also provide on its public website an automated address search tool 
that specifically indicates if a property address is located in an 
urban area for purposes of the Census Bureau's most recent delineation 
of urban areas. For any calendar year that begins after the date on 
which the Census Bureau announced its most recent delineation of urban 
areas, a property is located in an area that qualifies as ``rural'' 
according to the definitions in Sec.  1026.35(b)(2)(iv) if the search 
results provided for the property by any such automated address search 
tool available on the Census Bureau's public website

[[Page 29687]]

do not identify the property as being in an urban area.
    B. For example, if a creditor extended during 2017 a first-lien 
covered transaction that is secured by a property that is located in an 
area that meets the definition of rural or underserved under Sec.  
1026.35(b)(2)(iv), the creditor meets this element of the exception for 
any transaction consummated during 2018.
    C. Alternatively, if the creditor did not extend in 2017 a 
transaction that meets the definition of rural or underserved test 
under Sec.  1026.35(b)(2)(iv), the creditor satisfies this criterion 
for any transaction consummated during 2018 for which it received the 
application before April 1, 2018, if it extended during 2016 a first-
lien covered transaction that is secured by a property that is located 
in an area that meets the definition of rural or underserved under 
Sec.  1026.35(b)(2)(iv).
    ii. During the preceding calendar year, or, if the application for 
the transaction was received before April 1 of the current calendar 
year, during either of the two preceding calendar years, the creditor 
together with its affiliates extended no more than 2,000 covered 
transactions, as defined by Sec.  1026.43(b)(1), secured by first 
liens, that were sold, assigned, or otherwise transferred to another 
person, or that were subject at the time of consummation to a 
commitment to be acquired by another person, to satisfy the requirement 
of Sec.  1026.35(b)(2)(iii)(B).
    iii. As of the preceding December 31st, or, if the application for 
the transaction was received before April 1 of the current calendar 
year, as of either of the two preceding December 31sts, the creditor 
and its affiliates that regularly extended covered transactions secured 
by first liens, together, had total assets that do not exceed the 
applicable asset threshold established by the Bureau, to satisfy the 
requirement of Sec.  1026.35(b)(2)(iii)(C). The Bureau publishes notice 
of the asset threshold each year by amending comment 35(b)(2)(iii)-
1.iii.
* * * * *

    Dated: May 26, 2021.
David Uejio,
Acting Director, Bureau of Consumer Financial Protection.
[FR Doc. 2021-11571 Filed 6-2-21; 8:45 am]
BILLING CODE 4810-AM-P