[Federal Register Volume 77, Number 225 (Wednesday, November 21, 2012)]
[Rules and Regulations]
[Pages 69738-69739]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-27997]



12 CFR Part 1026

[Docket No. CFPB-2012-0044]

Truth in Lending (Regulation Z)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.


SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
publishing a final rule amending the official interpretations for 
Regulation Z (Truth in Lending). The Bureau is required to adjust 
annually the dollar amount that triggers requirements for certain home 
mortgage loans bearing fees above a certain amount. The Home Ownership 
and Equity Protection Act of 1994 (HOEPA) sets forth rules for home-
secured loans in which the total points and fees payable by the 
consumer at or before loan consummation exceed the greater of $400 or 8 
percent of the total loan amount. In keeping with the statute, the 
Bureau has adjusted the $400 amount based on the annual percentage 
change reflected in the Consumer Price Index as reported on June 1, 
2012. The adjusted dollar amount for 2013 is $625.

DATES: This final rule is effective January 1, 2013.

FOR FURTHER INFORMATION CONTACT: David Friend, Counsel, Office of 
Regulations, at (202) 435-7700.


I. Background

    The Truth in Lending Act (TILA; 15 U.S.C. 1601-1666j) requires 
creditors to disclose credit terms and the cost of consumer credit as 
an annual percentage rate. 15 U.S.C. 1638(a)(4). TILA requires 
additional disclosures for loans secured by a consumer's home, and 
permits consumers to cancel certain transactions that involve their 
principal dwelling. TILA is implemented by the Bureau's Regulation Z 
(12 CFR part 1026). Supplement I to Regulation Z contains the Bureau's 
official interpretations of the regulation, and provides guidance to 
creditors in applying the regulation to specific transactions.
    In 1995, the Board of Governors of the Federal Reserve System 
(Board) published amendments to Regulation Z implementing HOEPA, which 
amended TILA and was contained in the Riegle Community Development and 
Regulatory Improvement Act of 1994, Public Law 103-325, 108 Stat. 2160. 
These amendments, reflected in Sec. Sec.  1026.32 and 1026.34 of the 
regulation, impose substantive limitations and additional disclosure 
requirements on certain closed-end home mortgage loans bearing rates or 
fees above a certain percentage or amount. As enacted, the statute 
requires creditors to comply with the HOEPA requirements if the total 
points and fees payable by the consumer at or before loan closing 
exceed the greater of $400 or 8 percent of the total loan amount. TILA 
and Regulation Z provide that the $400 figure shall be adjusted 
annually on January 1 by the annual percentage change in the Consumer 
Price Index (CPI) that was reported on the preceding June 1. 15 U.S.C. 
1602(bb)(3); 12 CFR 1026.32(a)(1)(ii). The Board adjusted the $400 
amount to $611 for the year 2012 on June 13, 2011. The responsibility 
for promulgating rules under TILA was transferred from the Board to the 
Bureau effective July 21, 2011.\1\ The Bureau restated Regulation Z on 
December 22, 2011, and the Bureau's Regulation Z is located at 12 CFR 
part 1026. 76 FR 79768 (Dec. 22, 2011).

    \1\ See sections 1061 and 1100A of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act), Public Law 11-
203, 124 Stat. 1376 (2010). Section 1029 of the Dodd-Frank Act 
excludes from this transfer of authority, subject to certain 
exceptions, any rulemaking authority over a motor vehicle dealer 
that is predominantly engaged in the sale and servicing of motor 
vehicles, the leasing and servicing of motor vehicles, or both.

    The Bureau of Labor Statistics (BLS) publishes consumer-based 
indices monthly, but does not report a CPI change on June 1; 
adjustments are reported in the middle of each month. The Bureau uses 
the Consumer Price Index for All Urban Consumers (CPI-U) index, which 
is based on all urban consumers and represents approximately 88 percent 
of the U.S. population, as the index for adjusting the $400 figure. The 
adjustment to the CPI-U index reported by BLS on May 15, 2012, was the 
CPI-U index in effect on June 1, and reflects the percentage change 
from April 2011 to April 2012. The adjustment to the $400 figure below 
reflects a 2.3 percent increase in the CPI-U index for this period and 

[[Page 69739]]

rounded to whole dollars for ease of compliance.
    The fee trigger being adjusted in this Federal Register notice 
pursuant to TILA section 103(bb) is used in determining whether a loan 
is covered by Sec.  1026.32. Such loans have generally been known as 
``HOEPA loans.'' In July 2008, the Board revised Regulation Z to adopt 
additional protections for ``higher-priced mortgage loans,'' using its 
authority under TILA section 129(l)(2), since redesignated as section 
129(p)(2). Those revisions define a class of dwelling-secured 
transactions, described in Sec.  1026.35, using a threshold based on 
average market rates. The adjustment published today does not affect 
the triggers adopted in July 2008 by the Board for higher-priced 
mortgage loans.
    On July 9, 2012, the Bureau issued a proposed rule pursuant to, 
inter alia, section 1431 of the Dodd-Frank Act, which revises the 
statutory fee trigger for HOEPA loans. The Bureau is mindful of the 
need to coordinate implementation of this final rule with the effective 
date of the final rule adopting revisions to the HOEPA fee trigger 
pursuant to the July 9, 2012 proposal. Accordingly, the adjustment to 
the fee trigger that is being published today will become effective on 
January 1, 2013 and will apply for one year, or until final rules the 
Bureau proposed on July 9, 2012 to implement section 1431 of the Dodd-
Frank Act become effective, whichever is earlier.

II. Adjustment and Commentary Revision

    Effective January 1, 2013, for purposes of determining whether a 
home mortgage transaction is covered by Sec.  1026.32 (based on the 
total points and fees payable by the consumer at or before loan 
closing), a loan is covered if the points and fees exceed the greater 
of $625 or 8 percent of the total loan amount. Comment 32(a)(1)(ii)-2, 
which lists the adjustments for each year, is amended to reflect the 
new dollar threshold amount for 2013.
    Under the Administrative Procedure Act, notice and opportunity for 
public comment are not required if the Bureau finds that notice and 
public comment are impracticable, unnecessary, or contrary to the 
public interest. 5 U.S.C. 553(b)(B). Because the timing and method of 
the adjustment are set by statute and are technical and non-
discretionary, the Bureau finds that notice and public comment on the 
change are unnecessary. 5 U.S.C. 553(b)(B).
    Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not apply. 5 U.S.C. 601(2). In any 
event, the Bureau certifies that this amendment to Regulation Z will 
not have a significant economic impact on a substantial number of small 
entities. The only change is to increase the threshold for transactions 
requiring HOEPA disclosures and protections to reflect the annual 
percentage increase in the CPI-U. This change is required by statute. 
Furthermore, the Bureau believes that the number of small entities that 
will be required to comply with Regulation Z's HOEPA protections solely 
due to this adjustment because they offer ``HOEPA'' loans is not 
substantial. In addition, for entities that already offer ``HOEPA'' 
loans in which the total points and fees payable by the consumer at or 
before loan consummation exceed the greater of $400 or 8 percent of the 
loan amount, whichever is less, the Bureau believes the economic impact 
to comply with Regulation Z for additional ``HOEPA'' loans in which the 
total points and fees payable by the consumer at or before loan 
consummation exceed the greater of $625 or 8 percent of the loan 
amount, whichever is less, will not be significant.

List of Subjects in 12 CFR Part 1026

    Advertising, Consumer protection, Credit, Credit unions, Mortgages, 
National banks, Reporting and recordkeeping requirements, Savings 
association, 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:


1. The authority citation for part 1026 is revised to read as follows:

    Authority:  12 U.S.C. 2601; 2603-2605, 2607, 2609, 2617, 5511, 
5512, 5532, 5581; 15 U.S.C. 1601 et seq.

2. In Supplement I to part 1026, under Section 1026.32--Requirements 
for Certain Closed-End Home Mortgages, 32(a) Coverage, paragraph 
32(a)(1)(ii), paragraph 2 is amended by adding new paragraph 2.xviii to 
read as follows:


* * * * *
    Section 1026.32--Requirements for Certain Closed-End Home 
    32(a) Coverage.
* * * * *
    Paragraph 32(a)(1)(ii).
* * * * *
    2. Annual adjustment of $400 amount. * * *
    xviii. For 2013, $625, reflecting a 2.3 percent increase in the 
CPI-U from June 2011 to June 2012, rounded to the nearest whole 
* * * * *

    Dated: November 6, 2012.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2012-27997 Filed 11-20-12; 8:45 am]