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[Federal Register Volume 79, Number 209 (Wednesday, October 29, 2014)]
[Proposed Rules]
[Pages 64336-64346]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-24739]

[[Page 64336]]

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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Parts 1024 and 1026

[Docket No. CFPB-2014-0028]
RIN 3170-AA48

Amendments to the 2013 Integrated Mortgage Disclosures Rule Under 
the Real Estate Settlement Procedures Act (Regulation X) and Truth In 
Lending Act (Regulation Z) and the 2013 Loan Originator Rule Under the 
Truth in Lending Act (Regulation Z)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule with request for public comment.

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SUMMARY: The Bureau is proposing two modifications to the Truth in 
Lending Act and Real Estate Settlement Procedures Act Final Rule (TILA-
RESPA Final Rule): An adjustment to the timing requirement for revised 
disclosures when the consumer locks a rate or extends a rate lock after 
the initial disclosures are provided; and an amendment to permit 
language related to new construction loans to be included on the Loan 
Estimate form. The Bureau also is proposing to amend the 2013 Loan 
Originator Final Rule to provide for placement of the Nationwide 
Mortgage Licensing System and Registry ID (NMLSR ID) on the integrated 
disclosures. Additionally, the Bureau is proposing technical 
corrections, including citation and cross-reference updates, and 
wording changes for clarification purposes to various provisions of 
Regulations X and Z as amended or adopted by the TILA-RESPA Final Rule.

DATES: Comments must be received on or before November 10, 2014.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2014-
0028 or RIN 3170-AA48, by any of the following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: 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 generally will not 
be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Jaydee DiGiovanni, Policy and 
Procedure Analyst; Richard Arculin and David Friend, Counsels; Office 
of Regulations, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Summary of the Proposed Rule

    In November 2013, pursuant to sections 1098 and 1100A of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), 
the Bureau issued the Integrated Mortgage Disclosures under the Real 
Estate Settlement Procedures Act (Regulation X) and Truth in Lending 
Act (Regulation Z) (TILA-RESPA Final Rule),\1\ combining certain 
disclosures that consumers receive in connection with applying for and 
closing on a mortgage loan.
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    \1\ 78 FR 79730 (Dec. 31, 2013).
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    This rule proposes two amendments to Regulation Z provisions 
adopted by the 2013 TILA-RESPA Final Rule. First, the Bureau is 
proposing to amend Sec.  1026.19(e)(3)(iv)(D), which states that, in 
order to revise the estimated amounts used to determine good faith 
pursuant to Sec.  1026.19(e)(1), creditors must redisclose interest 
rate dependent charges and loan terms on the date that the rate is 
locked. The Bureau is proposing to relax the timing requirement to 
state that creditors must provide a revised disclosure no later than 
the next business day after the date the rate is locked, instead of the 
same date. Second, the Bureau is proposing to amend Sec.  1026.37(m) to 
provide for the placement of language relating to certain new 
construction loans on the Loan Estimate form that is required in order 
for creditors to redisclose estimated charges.
    The Bureau also is proposing several corrections, updates, and 
wording changes for clarification purposes that are non-substantive in 
nature, such as (1) technical corrections and corrected or updated 
citations and cross-references in the regulatory text and commentary 
adopted by the TILA-RESPA Final Rule; (2) minor wording changes 
throughout regulatory provisions and commentary adopted by the TILA-
RESPA Final Rule for additional clarity; and (3) an amendment to Sec.  
1026.36(g)(2)(ii), adopted by the 2013 Loan Originator Final Rule, to 
provide for placement of the NMLSR ID on the integrated disclosures.
    The Bureau is seeking comment on these amendments, with a 30-day 
comment period from the date of issuance of this proposed rule. The 
Bureau intends to finalize these proposed amendments quickly in order 
to provide industry adequate time to implement any changes that result 
from this proposal by the August 1, 2015 effective date.

II. Background

A. The Integrated Disclosures Rulemaking

    In July 2010, the Dodd-Frank Act was enacted by Congress, which 
transferred rulemaking authority under both TILA and RESPA to the 
Bureau and, under sections 1032(f), 1098, and 1100A, mandated that the 
Bureau establish a single disclosure scheme under TILA and RESPA and 
propose for public comment rules and model disclosures that integrate 
the TILA and RESPA disclosures by July 21, 2012. 12 U.S.C. 2603(a), 
5532(f); 15 U.S.C. 1604(b). In addition, the Dodd-Frank Act amended 
both statutes to mandate that the Bureau establish a single disclosure 
scheme for use by lenders or creditors in complying comprehensively 
with the disclosure requirements discussed above. Section 1098(2) of 
the Dodd-Frank Act amended RESPA section 4(a) to require that the 
Bureau publish a single, integrated disclosure for mortgage loan 
transactions ``which includes the disclosure requirements of this 
section and section 5, in conjunction with the disclosure requirements 
of [TILA] that, taken together, may apply to a transaction that is 
subject to both or either provisions of law.'' 12 U.S.C. 2603(a). 
Similarly, section 1100A(5) of the Dodd-Frank Act amended TILA section 
105(b) to require that the Bureau publish a single, integrated 
disclosure for mortgage loan transactions which ``includes the 
disclosure requirements of this title in conjunction with the

[[Page 64337]]

disclosure requirements of [RESPA] that, taken together, may apply to a 
transaction that is subject to both or either provisions of law.'' 15 
U.S.C. 1604(b).\2\
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    \2\ The amendments to RESPA and TILA mandating a ``single, 
integrated disclosure'' are among numerous conforming amendments to 
existing Federal laws found in subtitle H of the Consumer Financial 
Protection Act of 2010. Subtitle C of the Consumer Financial 
Protection Act, ``Specific Bureau Authorities,'' codified at 12 
U.S.C. chapter 53, subchapter V, part C, contains a similar 
provision. Specifically, section 1032(f) of the Dodd-Frank Act 
provides that, by July 21, 2012, the Bureau ``shall propose for 
public comment rules and model disclosures that combine the 
disclosures required under [TILA] and sections 4 and 5 of [RESPA] 
into a single, integrated disclosure for mortgage loan transactions 
covered by those laws, unless the Bureau determines that any 
proposal issued by the [Board] and [HUD] carries out the same 
purpose.'' 12 U.S.C. 5532(f). The Bureau issued the TILA-RESPA 
Proposal pursuant to that mandate and the parallel mandates 
established by the conforming amendments to RESPA and TILA, 
discussed above.
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    The Bureau issued proposed integrated disclosure forms and rules 
for public comment on July 9, 2012 (the TILA-RESPA Proposal or 
proposal).\3\ On December 31, 2013, more than 17 years after Congress 
first directed the Board and HUD to integrate the disclosures under 
TILA and RESPA, the Bureau published the TILA-RESPA Final Rule.
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    \3\ See the Bureau's press release Consumer Financial Protection 
Bureau proposes ``Know Before You Owe'' mortgage forms (July 9, 
2012), available at http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-proposes-know-before-you-owe-mortgage-forms/; the Bureau's blog post Know Before You Owe: 
Introducing our proposed mortgage disclosure forms (July 9, 2012), 
available at http://www.consumerfinance.gov/blog/know-before-you-owe-introducing-our-proposed-mortgage-disclosure-forms/.
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 B. Implementation Support

    In early 2014, the Bureau initiated efforts to support industry 
implementation of the TILA-RESPA Integrated Disclosure Final Rule. 
These efforts include: (1) The publication of a plain-language 
compliance guide and guide to forms to help industry understand the new 
rules, including updates to the guides, as needed; (2) an ongoing 
series of webinars to address common interpretive questions; (3) 
roundtables with industry, including creditors, settlement service 
providers, and vendors, to discuss implementation; (4) participation in 
conferences and forums; and (5) close collaboration with other 
regulators, including state regulators, on implementation of the Final 
Rule, including coordination on consistent examination procedures. More 
information regarding the Bureau's TILA-RESPA implementation initiative 
can be found on the Bureau's regulatory implementation Web site at 
www.consumerfinance.gov/regulatory-implementation.
    As part of the initiative to support ongoing implementation 
efforts, the Bureau has conducted extensive outreach to multiple 
stakeholders since publication of the Final Rule. Based on that 
extensive outreach, the Bureau believes these proposed amendments to be 
relatively straightforward and mostly technical in nature. Accordingly, 
the Bureau expects to be able to finalize this proposal in sufficient 
time for creditors and other stakeholders to be able to implement the 
final changes prior to the August 1, 2015 effective date.

III. Legal Authority

    The Bureau is issuing this proposed rule pursuant to its authority 
under TILA, RESPA, and the Dodd-Frank Act. Section 1061 of the Dodd-
Frank Act transferred to the Bureau the ``consumer financial protection 
functions'' previously vested in certain other Federal agencies, 
including the Board's consumer protection functions relating to TILA 
mortgage disclosures and the HUD Secretary's consumer protection 
functions relating to RESPA.\4\ The term ``consumer financial 
protection function'' is defined to include ``all authority to 
prescribe rules or issue orders or guidelines pursuant to any Federal 
consumer financial law, including performing appropriate functions to 
promulgate and review such rules, orders, and guidelines.'' \5\ Title X 
of the Dodd-Frank Act, including section 1061 of the Dodd-Frank Act, 
along with TILA, RESPA, and certain subtitles and provisions of title 
XIV of the Dodd-Frank Act, are Federal consumer financial laws.\6\ 
Accordingly, the Bureau has authority to issue regulations pursuant to 
TILA and RESPA, including the disclosure requirements added to those 
statutes by title XIV of the Dodd-Frank Act, as well as title X of the 
Dodd-Frank Act.
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    \4\ Public Law 111-203, 124 Stat. 1376, section 1061(b)(7); 12 
U.S.C. 5581(b)(7).
    \5\ 12 U.S.C. 5581(a)(1).
    \6\ Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14) 
(defining ``Federal consumer financial law'' to include the 
``enumerated consumer laws'' and the provisions of title X of the 
Dodd-Frank Act); Dodd-Frank Act section 1002(12), 12 U.S.C. 5481(12) 
(defining ``enumerated consumer laws'' to include TILA and RESPA); 
Dodd-Frank section 1400(b), 15 U.S.C. 1601 note (defining 
``enumerated consumer laws'' to include certain subtitles and 
provisions of Title XIV).
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A. The Integrated Disclosure Mandate

    Section 1032(f) of the Dodd-Frank Act requires that, ``[n]ot later 
than one year after the designated transfer date [of July 21, 2011], 
the Bureau shall propose for public comment rules and model disclosures 
that combine the disclosures required under [TILA] and sections 4 and 5 
of [RESPA], into a single, integrated disclosure for mortgage loan 
transactions covered by those laws, unless the Bureau determines that 
any proposal issued by the [Board] and [HUD] carries out the same 
purpose.'' 12 U.S.C. 5532(f). In addition, the Dodd-Frank Act amended 
section 105(b) of TILA and section 4(a) of RESPA to require the 
integration of the TILA disclosures and the disclosures required by 
sections 4 and 5 of RESPA.\7\ The purpose of the integrated disclosure 
is to facilitate compliance with the disclosure requirements of TILA 
and RESPA and to help the borrower understand the transaction by 
utilizing readily understandable language to simplify the technical 
nature of the disclosures. Dodd-Frank Act sections 1098, 1100A.
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    \7\ Section 1100A of the Dodd-Frank Act amended TILA section 
105(b) to provide that the ``Bureau shall publish a single, 
integrated disclosure for mortgage loan transactions (including real 
estate settlement cost statements) which includes the disclosure 
requirements of this title in conjunction with the disclosure 
requirements of the Real Estate Settlement Procedures Act of 1974 
that, taken together, may apply to a transaction that is subject to 
both or either provisions of law.'' 15 U.S.C. 1604(b). Section 1098 
of the Dodd-Frank amended RESPA section 4(a) to require the Bureau 
to publish a ``single, integrated disclosure for mortgage loan 
transactions (including real estate settlement cost statements) 
which includes the disclosure requirements of this section and 
section 5, in conjunction with the disclosure requirements of the 
Truth in Lending Act that, taken together, may apply to a 
transaction that is subject to both or either provisions of law.'' 
12 U.S.C. 2603(a).
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    Although Congress imposed this integrated disclosure requirement, 
it did not harmonize the underlying statutes. In particular, TILA and 
RESPA establish different timing requirements for disclosing mortgage 
credit terms and costs to consumers and require that those disclosures 
be provided by different parties. TILA generally requires that, within 
three business days of receiving the consumer's application and at 
least seven business days before consummation of certain mortgage 
transactions, creditors must provide consumers a good faith estimate of 
the costs of credit.\8\ TILA section 128(b)(2)(A); 15 U.S.C. 
1638(b)(2)(A). If the annual percentage rate that was initially 
disclosed becomes inaccurate, TILA requires creditors to redisclose the 
information at least three business days before consummation. TILA 
section 128(b)(2)(D); 15 U.S.C. 1638(b)(2)(D). These disclosures must 
be provided in final form at consummation. TILA

[[Page 64338]]

section 128(b)(2)(B)(ii); 15 U.S.C. 1638(b)(2)(B)(ii). RESPA also 
requires that the creditor or broker provide consumers with a good 
faith estimate of settlement charges no later than three business days 
after receiving the consumer's application. However, unlike TILA, RESPA 
requires that, at or before settlement, ``the person conducting the 
settlement'' (which may or may not be the creditor) provide the 
consumer with a statement that records all charges imposed upon the 
consumer in connection with the settlement. RESPA sections 4(b), 5(c); 
12 U.S.C. 2603(b), 2604(c).
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    \8\ This requirement applies to extensions of credit that are 
both secured by a dwelling and subject to RESPA. TILA section 
128(b)(2)(A); 15 U.S.C. 1638(b)(2)(A).
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    The Dodd-Frank Act did not reconcile these and other statutory 
differences. Therefore, to meet the Dodd-Frank Act's express 
requirement to integrate the disclosures required by TILA and RESPA, 
the Bureau was required to do so. Dodd-Frank Act section 1032(f), TILA 
section 105(b), and RESPA section 4(a) provide the Bureau with 
authority to issue regulations that reconcile certain provisions of 
TILA and RESPA to carry out Congress' mandate to integrate the 
statutory disclosure requirements.

B. Other Rulemaking and Exception Authorities

    This proposed rule also relies on the rulemaking and exception 
authorities specifically granted to the Bureau by TILA, RESPA, and the 
Dodd-Frank Act, including the authorities discussed below.
Truth in Lending Act
    TILA section 105(a). As amended by the Dodd-Frank Act, TILA section 
105(a), 15 U.S.C. 1604(a), directs the Bureau to prescribe regulations 
to carry out the purposes of TILA and provides that such regulations 
may contain additional requirements, classifications, differentiations, 
or other provisions and may further provide for such adjustments and 
exceptions for all or any class of transactions that the Bureau judges 
are necessary or proper to effectuate the purposes of TILA, to prevent 
circumvention or evasion thereof, or to facilitate compliance 
therewith. A purpose of TILA is ``to assure a meaningful disclosure of 
credit terms so that the consumer will be able to compare more readily 
the various credit terms available to him and avoid the uninformed use 
of credit.'' TILA section 102(a); 15 U.S.C. 1601(a). This stated 
purpose is informed by Congress' finding that ``economic stabilization 
would be enhanced and the competition among the various financial 
institutions and other firms engaged in the extension of consumer 
credit would be strengthened by the informed use of credit[.]'' TILA 
section 102(a). Thus, strengthened competition among financial 
institutions is a goal of TILA, achieved through the effectuation of 
TILA's purposes.
    Historically, TILA section 105(a) has served as a broad source of 
authority for rules that promote the informed use of credit through 
required disclosures and substantive regulation of certain practices. 
Dodd-Frank Act section 1100A clarified the Bureau's section 105(a) 
authority by amending that section to provide express authority to 
prescribe regulations that contain ``additional requirements'' that the 
Bureau finds are necessary or proper to effectuate the purposes of 
TILA, to prevent circumvention or evasion thereof, or to facilitate 
compliance. This amendment clarified the Bureau's authority to exercise 
TILA section 105(a) to prescribe requirements beyond those specifically 
listed in the statute that meet the standards outlined in section 
105(a). The Dodd-Frank Act also clarified the Bureau's rulemaking 
authority over certain high-cost mortgages pursuant to section 105(a). 
As amended by the Dodd-Frank Act, TILA section 105(a) authority to make 
adjustments and exceptions to the requirements of TILA applies to all 
transactions subject to TILA, except with respect to the provisions of 
TILA section 129 \9\ that apply to the high-cost mortgages referred to 
in TILA section 103(bb), 15 U.S.C. 1602(bb).
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    \9\ 15 U.S.C. 1639. TILA section 129 contains requirements for 
certain high-cost mortgages, established by the Home Ownership and 
Equity Protection Act (HOEPA), which are commonly called HOEPA 
loans.
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    TILA section 129B(e). Dodd-Frank Act section 1405(a) amended TILA 
to add new section 129B(e), 15 U.S.C. 1639B(e). That section authorizes 
the Bureau to ``prohibit or condition terms, acts, or practices 
relating to residential mortgage loans that the Bureau finds to be 
abusive, unfair, deceptive, predatory, necessary, or proper to ensure 
that responsible, affordable mortgage credit remains available to 
consumers in a manner consistent with the purposes of this section and 
section 129C [of TILA], necessary or proper to effectuate the purposes 
of this section and section 129C [of TILA], to prevent circumvention or 
evasion thereof, or to facilitate compliance with such sections, or are 
not in the interest of the borrower.'' In developing rules under TILA 
section 129B(e), the Bureau has considered whether the rules are in the 
interest of the borrower, as required by the statute.
Real Estate Settlement Procedures Act
    Section 19(a) of RESPA, 12 U.S.C. 2617(a), authorizes the Bureau to 
prescribe such rules and regulations and to make such interpretations 
and grant such reasonable exemptions for classes of transactions as may 
be necessary to achieve the purposes of RESPA. One purpose of RESPA is 
to effect certain changes in the settlement process for residential 
real estate that will result in more effective advance disclosure to 
home buyers and sellers of settlement costs. RESPA section 2(b); 12 
U.S.C. 2601(b). In addition, in enacting RESPA, Congress found that 
consumers are entitled to be ``provided with greater and more timely 
information on the nature and costs of the settlement process and [to 
be] protected from unnecessarily high settlement charges caused by 
certain abusive practices in some areas of the country.'' RESPA section 
2(a); 12 U.S.C. 2601(a). In the past, RESPA section 19(a) has served as 
a broad source of authority to prescribe disclosures and substantive 
requirements to carry out the purposes of RESPA.
    In developing rules under RESPA section 19(a), the Bureau has 
considered the purposes of RESPA, including to effect certain changes 
in the settlement process that will result in more effective advance 
disclosure of settlement costs.
Dodd-Frank Act
    Dodd-Frank Act section 1021. Section 1021(a) of the Dodd-Frank Act 
provides that the Bureau shall seek to implement and, where applicable, 
enforce Federal consumer financial law consistently for the purpose of 
ensuring that all consumers have access to markets for consumer 
financial services and that markets for consumer financial products and 
services are fair, transparent, and competitive. 12 U.S.C. 5511(a). In 
addition, section 1021(b) of the Dodd-Frank Act provides that the 
Bureau is authorized to exercise its authorities under Federal consumer 
financial law for the purposes of ensuring that, among other things, 
with respect to consumer financial products and services: (1) Consumers 
are provided with timely and understandable information to make 
responsible decisions about financial transactions; (2) consumers are 
protected from unfair, deceptive, or abusive acts and practices and 
from discrimination; (3) outdated, unnecessary, or unduly burdensome 
regulations are regularly identified and addressed in order to reduce 
unwarranted regulatory burdens; (4) Federal consumer financial law is 
enforced consistently, without regard to

[[Page 64339]]

the status of a person as a depository institution, in order to promote 
fair competition; and (5) markets for consumer financial products and 
services operate transparently and efficiently to facilitate access and 
innovation. 12 U.S.C. 5511(b). Accordingly, in developing this 
rulemaking, the Bureau has sought to ensure that it is consistent with 
the purposes of Dodd-Frank Act section 1021(a) and with the objectives 
of Dodd-Frank Act section 1021(b), specifically including Dodd-Frank 
Act section 1021(b)(1) and (3).
    Dodd-Frank Act section 1022(b). Section 1022(b)(1) of the Dodd-
Frank Act authorizes the Bureau to prescribe rules ``as may be 
necessary or appropriate to enable the Bureau to administer and carry 
out the purposes and objectives of the Federal consumer financial laws, 
and to prevent evasions thereof.'' 12 U.S.C. 5512(b)(1). Section 
1022(b)(2) of the Dodd-Frank Act prescribes certain standards for 
rulemaking that the Bureau must follow in exercising its authority 
under section 1022(b)(1). 12 U.S.C. 5512(b)(2). As discussed above, 
TILA and RESPA are Federal consumer financial laws. Accordingly, in 
proposing this rule, the Bureau is exercising its authority under Dodd-
Frank Act section 1022(b) to prescribe rules under TILA, RESPA, and 
Title X that carry out the purposes and objectives and prevent evasion 
of those laws. See part V for a discussion of the Bureau's standards 
for rulemaking under Dodd-Frank Act section 1022(b)(2).
    Dodd-Frank Act section 1032. Section 1032(a) of the Dodd-Frank Act 
provides that the Bureau ``may prescribe rules to ensure that the 
features of any consumer financial product or service, both initially 
and over the term of the product or service, are fully, accurately, and 
effectively disclosed to consumers in a manner that permits consumers 
to understand the costs, benefits, and risks associated with the 
product or service, in light of the facts and circumstances.'' 12 
U.S.C. 5532(a). The authority granted to the Bureau in section 1032(a) 
is broad and empowers the Bureau to prescribe rules regarding the 
disclosure of the ``features'' of consumer financial products and 
services generally. Accordingly, the Bureau may prescribe rules 
containing disclosure requirements even if other Federal consumer 
financial laws do not specifically require disclosure of such features.
    Dodd-Frank Act section 1032(c) provides that, in prescribing rules 
pursuant to section 1032, the Bureau ``shall consider available 
evidence about consumer awareness, understanding of, and responses to 
disclosures or communications about the risks, costs, and benefits of 
consumer financial products or services.'' 12 U.S.C. 5532(c). 
Accordingly, in developing the TILA-RESPA Final Rule under Dodd-Frank 
Act section 1032(a), the Bureau considered available studies, reports, 
and other evidence about consumer awareness, understanding of, and 
responses to disclosures or communications about the risks, costs, and 
benefits of consumer financial products or services. Moreover, the 
Bureau has considered the evidence developed through its consumer 
testing of the integrated disclosures as well as prior testing done by 
the Board and HUD regarding TILA and RESPA disclosures. See part III of 
the TILA-RESPA Final Rule for a discussion of the Bureau's consumer 
testing.
    Dodd-Frank Act section 1405(b). Section 1405(b) of the Dodd-Frank 
Act provides that, ``[n]otwithstanding any other provision of [title 14 
of the Dodd-Frank Act], in order to improve consumer awareness and 
understanding of transactions involving residential mortgage loans 
through the use of disclosures, the Bureau may, by rule, exempt from or 
modify disclosure requirements, in whole or in part, for any class of 
residential mortgage loans if the Bureau determines that such exemption 
or modification is in the interest of consumers and in the public 
interest.'' 15 U.S.C. 1601 note. Section 1401 of the Dodd-Frank Act, 
which amends TILA section 103(cc)(5), 15 U.S.C. 1602(cc)(5), generally 
defines a residential mortgage loan as any consumer credit transaction 
that is secured by a mortgage on a dwelling or on residential real 
property that includes a dwelling other than an open-end credit plan or 
an extension of credit secured by a consumer's interest in a timeshare 
plan. Notably, the authority granted by section 1405(b) applies to 
``disclosure requirements'' generally, and is not limited to a specific 
statute or statutes. Accordingly, Dodd-Frank Act section 1405(b) is a 
broad source of authority to exempt from or modify the disclosure 
requirements of TILA and RESPA.
    In developing rules for residential mortgage loans under Dodd-Frank 
Act section 1405(b), the Bureau has considered the purposes of 
improving consumer awareness and understanding of transactions 
involving residential mortgage loans through the use of disclosures, 
and the interests of consumers and the public.

IV. Section-by-Section Analysis

A. Regulation X

Section 1024.5--Coverage of RESPA
5(d) Partial Exemptions for Certain Mortgage Loans
    The Bureau is proposing to amend Sec.  1024.5(d) to remove the 
cross-references to Sec.  1024.21(b) and (c) and replace them with the 
appropriate cross-reference to Sec.  1024.33(a).

B. Regulation Z

General--Technical Corrections
    In addition to the amendments to Regulation Z discussed below, the 
Bureau is proposing non-substantive technical corrections, including 
citation and cross-reference updates as well as wording changes for 
clarification purposes, to various provisions of Regulation Z as 
amended or adopted by the TILA-RESPA Final Rule. The proposed technical 
corrections are to Sec. Sec.  1026.37(o) and 1026.38(e) and (k); to 
commentary to Sec. Sec.  1026.37(b), (c), and (h) and 1026.38(a) and 
(e); and to Appendix H. Where appropriate, some of these technical 
corrections and wording changes are discussed in the applicable 
sections below.
Section 1026.19--Certain Mortgage and Variable-Rate Transactions
19(e)(3)(iv)(D) Interest Rate Dependent Charges
    As the Bureau acknowledged in the TILA-RESPA Final Rule,\10\ if a 
loan's interest rate has not been locked at the time the initial 
disclosures are made, or a locked interest rate has expired, loan terms 
and costs related to the interest rate may change, including the charge 
or credit for the interest rate chosen, the adjusted origination 
charges, and per diem interest. Regulation X, Sec.  1024.7(f)(5), 
currently provides for redisclosure of these estimated charges in the 
event that a rate is locked after the initial Good Faith Estimate (GFE) 
has been provided: A revised GFE must be provided within three business 
days of the interest rate being locked or re-locked, showing the 
revised interest rate dependent charges and terms.
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    \10\ 78 FR 79730, 79833 (December 31, 2013).
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    In the TILA-RESPA Proposal, proposed Sec.  1026.19(e)(3)(iv)(D) 
retained the same basic approach, but the Bureau expressed concern that 
allowing creditors three business days to provide revised disclosures 
after a rate is locked could harm consumers through creditors engaging 
in rent-seeking behavior or attempting to circumvent RESPA and 
Regulation X. The Bureau

[[Page 64340]]

thus proposed Sec.  1026.19(e)(3)(iv)(D) to permit a revised disclosure 
in the event of a subsequent lock of the interest rate but required 
redisclosure on the same date that the rate is locked.
    The Bureau sought comment on the frequency and magnitude of 
revisions to the interest rate dependent charges, the frequency of 
cancellations of contractual agreements related to interest rate 
dependent charges, such as rate lock agreements, and the reasons for 
such revisions and cancellations. The Bureau received few comments 
specific to proposed Sec.  1026.19(e)(3)(iv)(D) and finalized Sec.  
1026.19(e)(3)(iv)(D) as proposed with some additional clarifications. 
The Bureau stated that, if the interest rate is set without a rate lock 
agreement, Sec.  1026.19(e)(3)(iv)(D) does not apply. The Bureau 
further explained that it intended Sec.  1026.19(e)(3)(iv)(D) only to 
apply in situations where a rate lock agreement has been entered into 
between the creditor and borrower or where such agreement has expired. 
The Bureau also stated that, in its view, creditors should not need any 
additional time beyond the date the rate is locked to provide revised 
disclosures because the creditor controls when it executes the rate 
lock agreement.\11\ The Bureau added comments 19(e)(3)(iv)(D)-1 and 
19(e)(4)(i)-2 to provide examples and additional explanations.
---------------------------------------------------------------------------

    \11\ 78 FR 79833 (December 31, 2013).
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    As adopted by the Final Rule, Sec.  1026.19(e)(3)(iv)(D) provides 
for revised disclosures when there are changes in interest rate 
dependent charges due to a rate lock, extension, or re-lock. Section 
1026.19(e)(3)(iv)(D) states that, in order to revise the estimated 
amounts used to determine good faith pursuant to Sec.  1026.19(e)(1), 
the creditor shall provide a revised version of the disclosures 
required under Sec.  1026.19(e)(1)(i) to the consumer with the revised 
interest rate, the points disclosed pursuant to Sec.  1026.37(f)(1), 
lender credits, and any other interest rate dependent charges and 
terms, on the date the rate is locked.
    As part of its regulatory implementation outreach, the Bureau has 
received significant feedback on this provision since the Final Rule 
was published. Numerous industry stakeholders have presented 
information that suggests that creditors may not control when a rate is 
locked to the same extent the Bureau believed when finalizing the rule, 
and have identified operational challenges due to the same-day 
redisclosure requirement in Sec.  1026.19(e)(3)(iv)(D).
    In light of this information and for reasons more fully discussed 
below, the Bureau believes the same-day redisclosure requirement could 
potentially create a consumer disadvantage. Accordingly, the Bureau 
believes that the same-day redisclosure requirement warrants 
reconsideration, and is proposing to amend Sec.  1026.19(e)(3)(iv)(D) 
and its commentary to adjust this timing requirement. First, the Bureau 
is reassessing the extent to which the creditor controls when a rate 
lock agreement arises in some circumstances. The Final Rule states that 
creditors generally should be able to control when a rate lock 
agreement is executed, even if a consumer requests a rate lock the 
business day before. However, the Bureau believes that creditors may 
not always control when the agreement is formed in all situations. 
Moreover, flexibilities that exist under existing practices may be 
advantageous to consumers. For example, some creditors permit the 
consumer, or loan originator working on behalf of the consumer, to lock 
the interest rate unilaterally at any point during a business day or 
even after business hours. Under these practices, the consumer has the 
flexibility to lock the rate and form that agreement late in a business 
day or after business hours.
    The Bureau believes this flexibility may be beneficial to 
consumers, because it allows them to lock interest rates on a date and 
time of their choosing without time restrictions being imposed by the 
creditor. The same-day redisclosure requirement could restrict this 
flexibility and reduce consumers' ability to determine when their rates 
may be locked. If creditors are required to provide revised disclosures 
to consumers the same date that the rate is locked, and a consumer asks 
to lock a rate late in the business day or after hours, creditors may 
be unable to provide a revised Loan Estimate that same date. Given the 
potential consequences of losing the ability to reset the applicable 
tolerances for interest rate-dependent charges pursuant to Sec.  
1026.19(e)(3), the Bureau believes creditors may respond to the Final 
Rule by limiting consumers' ability to lock rates at the time of their 
choice. Creditors may do this either by imposing cut-off times after 
which consumers are unable to lock their interest rates until the next 
day or by refusing to lock the rate contractually until the business 
day after the consumer requests a rate lock. The Bureau believes that 
both reactions to the Final Rule could be disadvantageous to consumers.
    If creditors impose cut-off times, consumers would be limited in 
the times of day that they or their representatives could lock interest 
rates. This could be problematic or inconvenient to consumers, 
particularly those who are in different time zones than their 
creditors, and could result in consumers missing the applicable windows 
to lock on a day of their choice and having to wait until the next 
business day to do so. Alternatively, the Bureau believes some 
creditors may be able to provide revised disclosures on the same date 
that a rate lock agreement is formed if those creditors only allow 
consumers to request the rate at a time of their choosing, and then 
later execute or form a binding agreement with the consumer. However, 
the Bureau believes this result could present other challenges to 
consumers. For example, consumers may be confused if they believe they 
are locking an interest rate at a certain time, but in fact are merely 
requesting rates that are not contractually binding until the creditor 
accepts the request, which may not be until the next business day. 
Accordingly, the Bureau believes that the same-day redisclosure 
requirement could create implementation challenges to industry that may 
result in unintended reduced consumer flexibility in locking or 
resetting floating interest rates.
    For these reasons, the Bureau believes the same-day redisclosure 
requirement warrants reconsideration. The Bureau maintains that there 
is a benefit to consumers in receiving the revised Loan Estimate as 
early as possible to enable the consumer to evaluate the information. 
The Bureau also believes that a creditor should be able to provide a 
revised Loan Estimate based on interest rate dependent charges more 
quickly in comparison to other types of disclosures, because the 
creditor may not need to obtain information from other parties, such as 
third party vendors. However, the Bureau believes that providing for 
redisclosure on the next business day after the rate is locked would 
still further these purposes but without the operational challenges 
presented by a same-day redisclosure requirement. Accordingly, the 
Bureau is proposing to revise Sec.  1026.19(e)(3)(iv)(D) to provide 
that creditors shall redisclose the interest rate and interest rate 
dependent charges no later than the next business day after the date 
the interest rate is locked. The proposal also would make conforming 
changes to comments 19(e)(3)(iv)(D)-1 and 19(e)(4)(i)-2, which provide 
illustrations of the provision's application.
    The Bureau seeks comment on whether there is potential for consumer

[[Page 64341]]

harm if creditors are allowed a business day to provide revised Loan 
Estimates or benefit to consumers in retaining the same-day 
redisclosure requirement. The Bureau also seeks comment as to whether a 
single business day is sufficient for creditors to deliver or place in 
the mail a revised Loan Estimate modifying interest rate dependent 
charges and terms without the unintended consequences described in this 
proposal and, conversely, whether there is consumer harm that would 
result from allowing redisclosure more than one business day after the 
interest rate is locked.
Section 1026.36--Prohibited Acts or Practices and Certain Requirements 
for Credit Secured by a Dwelling
36(g) Name and NMLSR ID on Loan Documents
36(g)(2)(ii)
    The Bureau is proposing to amend Sec.  1026.36(g)(2)(ii) to conform 
to the requirements adopted by the 2013 Loan Originator Compensation 
Final Rule. Section 1026.36(g)(2) lists the specific loan documents 
that must contain the loan originator's name and NMLSR ID. The Bureau 
explained in the 2013 Loan Originator Compensation Final Rule that it 
was reserving Sec.  1026.36(g)(2)(ii) for references to the integrated 
disclosures the Bureau was expecting to adopt in the final rule 
implementing the 2012 TILA-RESPA Integration Proposal. The disclosures 
referenced are those required by Sec.  1026.19(e) and (f) in the TILA-
RESPA Final Rule. Accordingly, the Bureau is proposing to amend Sec.  
1026.36(g)(2)(ii) to include in the list of loan documents the 
disclosures described Sec.  1026.19(e) and (f), as adopted by the TILA-
RESPA Final Rule.
Section 1026.37 Content of Disclosure for Certain Mortgage Transactions 
(Loan Estimate)
37(b) Loan Terms
37(b)(6) Adjustments After Consummation
    Section 1026.37(b)(6) requires creditors to disclose that 
adjustments to principal, interest, and periodic payment may occur 
after consummation, including the date when the adjustment may first 
occur. As stated in comment 37(b)(8)-1, for adjustments that occur less 
than 24 months after consummation, the Bureau intended that date to be 
disclosed as a month, whereas for adjustments that occur after 24 
months, as a whole year. Thus, an adjustment that first occurs 20 
months after consummation would be disclosed as occurring in ``month 
20,'' whereas an adjustment that occurs 37 months after consummation 
would disclosed as occurring in ``year 3,'' not in ``year 3.1.'' 
Comment 37(b)(6)-1, which provides for this timing mechanism, implies 
that comment 37(a)(10)-3 should be used to determine all adjustments 
that occur in periods not in whole years. While the Bureau intended 
that comment 37(a)(10)-3.ii be used to guide creditors regarding how to 
disclose terms of less than 24 months, comment 37(a)(10)-3.i provides 
that decimals should be used for periods greater than 24 months. The 
Bureau did not intend this guidance to be applicable to Sec.  
1026.37(b)(6); rather, any such period should be disclosed in whole 
years as stated in comment 37(b)(8)-1. Accordingly, the Bureau is 
proposing to revise comment 37(b)(6)-1 to align it with the commentary 
37(b)(8) and ensure consistency in the reporting of time periods. 
Specifically, the Bureau proposes that guidance provided in 37(a)(10)-3 
only should be referenced when reporting increases that occur less than 
24 months after consummation but does not equate to a number of whole 
years or a number of days less than a week. For all other increases, 
whole years should be used in accordance with comment 37(b)(8)-1.
37(c) Projected Payments
37(c)(2) Itemization
37(c)(2)(ii) and 37(c)(2)(iii)
    The Bureau is proposing to move the reference to the disclosure of 
mortgage insurance premiums as ``0'' where no escrow account is 
established to pay charges, such as property taxes or homeowners 
association fees, from comment 37(c)(ii)-2 and move it to comment 
37(c)(2)(iii)-1. The Bureau believes that this reference is better 
suited in comment 37(c)(2)(iii), which provides for escrow disclosure. 
The Bureau also is proposing to amend comment 37(c)(2)(iii)-1 to state 
that the escrow payment should be disclosed as ``--'' if an escrow 
account is established for the payment of amounts identified in Sec.  
1026.37(c)(4)(ii), but no escrow payment is required with a particular 
periodic payment or range of payments, consistent with the disclosure 
of mortgage insurance premiums in comment 37(c)(2)(ii)-1.
37(c)(4) Taxes, Insurance, and Assessments
37(c)(4)(iv)
    The Bureau is proposing to revise comment 37(c)(4)(iv)-2 to remove 
the reference to property taxes and homeowner's insurance to clarify 
that the amounts disclosed pursuant to Sec.  1026.37(c)(4)(ii) may be 
paid by the creditor using some funds from the escrow account.
37(h) Calculating Cash To Close
37(h)(1) For all Transactions
37(h)(1)(ii) Closing Costs Financed
    The Bureau is proposing to revise comment 37(h)(1)(ii)-1 to reflect 
the intended meaning of the regulatory text in Sec.  1026.37(h)(1)(ii), 
which requires disclosure, in the Loan Estimate, of the amount, 
expressed as a negative number, of any closing costs that are to be 
paid from the loan proceeds. The Bureau explained in the preamble to 
the Final Rule that the amount disclosed under Sec.  1026.37(h)(1)(ii) 
is determined by subtracting the estimated total amount of payments to 
third parties not otherwise disclosed pursuant to Sec.  1026.37(f) and 
(g) from the total loan amount so long as the amount is a positive 
number and does not exceed the total closing costs disclosed under 
Sec.  1026.37(g)(6), but comment 37(h)(1)(ii)-1 referenced ``lender 
credits'' instead of ``closing costs.'' Accordingly, the Bureau is 
proposing to remove the words ``lender credits'' and replace them with 
the words ``closing costs'' to harmonize with the preamble, which 
correctly reflected the Bureau's intent.
37(m) Other Considerations
    Section 1026.19(e)(3)(iv)(F) governs redisclosures on new 
construction loans when the creditor reasonably expects settlement to 
occur more than 60 days after providing the initial Loan Estimate. 
Section 1026.19(e)(3)(iv)(F) provides that a creditor may issue a 
revised disclosure if the original disclosure clearly and conspicuously 
states the creditor may issue revised disclosures at any time prior to 
60 days before consummation. If no such statement is provided, the 
creditor may not issue revised disclosures, except as otherwise 
provided in Sec.  1026.19(f).
    The Bureau intended to permit creditors that make new construction 
loans and reasonably expect settlement to occur more than 60 calendar 
days after the initial Loan Estimate is provided to state on the Loan 
Estimate that the creditor may issue revised disclosures. However, 
Sec.  1026.37, which prescribes the content for the disclosures 
provided on the Loan Estimate pursuant to Sec.  1026.19(e)(1)(i), does 
not permit the creditor to state that it may issue revised disclosures. 
The proposal would add a new provision allowing the creditor to make 
the statement on the Loan Estimate form. Creditors would thus be able 
to preserve

[[Page 64342]]

the ability to provide the borrower with a revised loan estimate if 
settlement is not expected to occur for more than 60 days after the 
disclosures required by Sec.  1026.19(e) are provided.
    The Bureau is proposing to add new Sec.  1026.37(m)(8), under the 
master heading ``Additional Information About This Loan'' and under the 
heading ``Other Considerations,'' and believes the Sec.  
1026.19(e)(3)(iv)(F) language is appropriately placed in this section 
of Sec.  1026.37. The Bureau also is proposing to add new comment 
37(m)(8)-1 to state that placement of the language here satisfies the 
``clear and conspicuous'' standard set forth in Sec.  
1026.19(e)(3)(iv)(F). The Bureau invites comments on whether this is 
the most appropriate placement or if there are other areas on the Loan 
Estimate form that are more appropriate.
Section 1026.38--Content of Disclosures for Certain Mortgage 
Transactions (Closing Disclosure)
38(a) General Information
38(a)(3) Closing Information
38(a)(3)(vi)
    The Bureau is proposing to add new commentary to Sec.  
1026.38(a)(3)(vi) to clarify that, in the case of multiple properties 
securing the transaction, the property address for all properties must 
be disclosed on the Closing Disclosure. Comment 37(a)(6)-3 provides 
that, where more than one property secures the credit transaction, all 
property addresses securing the transaction must be disclosed on the 
Loan Estimate pursuant to Sec.  1026.37(a)(6). The Bureau believes that 
the requirement to disclose all real property securing the transaction 
must also be applied to the Closing Disclosure to ensure consistency 
between the two forms.
    Accordingly, the Bureau is proposing to add new comment 
38(a)(3)(vi)-2 to clarify that the addresses of all properties securing 
the transaction must be disclosed on the Closing Disclosure. 
Furthermore, proposed comment 38(a)(3)(vi)-2 would clarify that 
additional pages may be appended to the end of the form with the real 
property information if there is not enough space on the Closing 
Disclosure.
38(e) Alternative Calculating Cash To Close Table for Transactions 
Without a Seller
38(e)(1) Loan Amount
38(e)(1)(iii)(A)
    The Bureau is proposing to amend comment 38(e)(1)(iii)(A)-1 to 
clarify the statement identifying a difference between the loan amount 
in the Loan Estimate and Closing Disclosure, pursuant to Sec.  
1026.38(e)(1)(iii)(A). The Bureau is proposing to amend comment 
38(e)(1)(iii)(A)-1 to replace ``You increased this amount'' with ``This 
amount increased.''
38(e)(2) Total Closing Costs
38(e)(2)(iii)(A)
    The Bureau is proposing to add commentary to Sec.  1026.38(e)(2) to 
harmonize the disclosure of increases or decreases in closing costs 
between the ``Alternative Calculating Cash to Close'' table, which may 
be used for transactions without a seller, and the general 
``Calculating Cash to Close'' table. Section 1026.38(i) and comment 
38(i)-4, which prescribe content for the general ``Calculating Cash to 
Close'' table, require statements regarding any excess amount and any 
credit to the consumer be disclosed on the table. However, a parallel 
comment was not adopoted or incorporated by reference in Sec.  
1026.38(e) for the alternative table. The Bureau intended that the same 
requirement apply to the alternative table and is proposing to add 
comment to section 38(e)(2)(iii)(A) to reflect the intended meaning of 
Sec.  1026.38(e)(2)(iii)(A) and harmonize the commentary with section 
38(i)(1)-3, which interprets Sec.  1026.38(i)(1).
38(e)(3) Closing Costs Paid Before Closing
38(e)(3)(iii)(A)
    The Bureau is proposing to amend Sec.  1026.38(e)(3)(iii)(A), which 
applies to the ``Alternative Calculating Cash to Close'' table, to 
harmonize it with the parallel provision in Sec.  
1026.38(i)(2)(iii)(A), which applies to the general ``Calculating Cash 
to Close'' table. The Bureau intended that that these two provisions 
require, among other things, a statement that the consumer ``paid such 
amounts prior to consummation of the transaction,'' as reflected in 
Sec.  1026.38(i)(2)(iii)(A). However, Sec.  1026.38(e)(3)(iii)(A), as 
adopted by the TILA-RESPA Final Rule contains different language. 
Accordingly, the Bureau is proposing to amend Sec.  
1026.38(e)(3)(iii)(A) to harmonize these two provisions.

V. Dodd-Frank Act Section 1022(b)(2)

A. Overview

    In developing the proposed rule, the Bureau has considered 
potential benefits, costs, and impacts.\12\ The Bureau requests comment 
on the preliminary analysis presented below as well as submissions of 
additional data that could inform the Bureau's analysis of the 
benefits, costs, and impacts. 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, the U.S. 
Department of Veterans Affairs, the U.S. Department of Agriculture, 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) of the Dodd-Frank Act 
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 Dodd-Frank Act; and the impact on consumers 
in rural areas.
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    This rule proposes two main amendments to provisions adopted by the 
TILA-RESPA Final Rule. First, the Bureau is proposing to amend Sec.  
1026.19(e)(3)(iv)(D) and related commentary to relax a timing 
requirement that currently requires creditors to redisclose the 
interest rate and interest rate dependent charges to the consumer on 
the date that the rate is locked. The proposed amendment would require 
creditors to redisclose the interest rate and interest rate dependent 
charges no later than the next business day after the rate is locked.
    The Bureau believes that, absent the proposed change, this 
requirement is likely to result in at least some creditors limiting 
consumers' ability to lock their interest rates only to times early in 
a business day due to the implementation costs of getting the 
disclosure to the consumer the same date if the consumer requested a 
rate lock sufficiently late during the business day or after hours. The 
Bureau believes that consumers are unlikely to choose creditors based 
on the creditors' policies regarding interest rate locks. Moreover, 
consumers would be unlikely to know whether their creditors will in 
fact allow interest rate locks at all times until the consumer actually 
attempts to lock the interest rate. Consequently, consumers could 
experience inconvenience because creditors limit when they may lock 
their interest rates. Furthermore, because consumers are unlikely to 
know of this practice until they attempt to lock a floating interest 
rate, it is unlikely that this practice would be corrected or 
influenced by market competition.
    The second proposed amendment would permit creditors to state on 
the Loan Estimate that the creditor may

[[Page 64343]]

issue revised disclosures if settlement is reasonably expected to occur 
more than 60 calendar days after the initial Loan Estimate is provided. 
The proposal would add a new provision allowing the creditor to make 
the statement on the Loan Estimate form, and thus enable creditors to 
preserve their ability to provide borrowers with revised loan estimates 
in these circumstances. Without the proposed amendment, creditors may 
have lower incentives to originate construction loans, especially if 
they believe that the estimates provided in the Loan Estimate might 
need to be revised. As a result, consumers either would be unable to 
get construction loans until most of the uncertainty about estimated 
costs is resolved or consumers will be offered construction loans with 
a priced-in premium that reflects the possibility that the creditor is 
not able to redisclose estimates after the initial 60 days.
    The Bureau believes that both proposed amendments would provide 
options that a creditor is free to undertake or not to undertake, and 
thus present no cost to creditors. The Bureau believes that both 
proposed amendments would present some benefits to creditors. The 
Bureau believes that the first proposed amendment could present both 
benefits and costs to consumers, while the second proposed amendment 
presents benefits to consumers.

B. Potential Benefits and Costs to Consumers and Covered Persons 
Relaxing the Same-Day Redisclosure Requirement for Interest Rate Locks

    The proposed amendment would provide an option to creditors: 
Creditors may avail themselves of an extra business day to redisclose 
interest rate and interest rate dependent charges, but do not have to. 
They also may continue to provide revised disclosures on the same date 
that the rate is locked if they choose. Therefore, some creditors will 
benefit if the proposed amendment is adopted by not having to 
redisclose on the same date the rate is locked, while other creditors 
could continue to redisclose on the date the rate is locked if they 
choose and are as well off as they would have been without this 
proposed amendment. Overall, if the proposed amendment is adopted, some 
creditors will benefit, others may not, all creditors will enjoy 
increased flexibility, but no creditors will face increased costs.
    Under the current rule, the Bureau believes that some creditors 
could continue offering flexible time periods for interest rate locks, 
but others, for example, might choose to limit when consumers may lock 
interest rates in order to ease the compliance cost. Other creditors 
might continue to allow consumers to request a lock at any time but 
only lock the rate contractually the business day after the consumer 
requests a rate lock, instead of on the date the consumer requests the 
rate lock. Consumers of these creditors could benefit from the proposed 
amendment through the increased convenience of being able to lock in 
the interest rate at any time during the day.
    Consumers of creditors that continue to allow flexibility in 
locking interest rates might experience a cost: Their revised 
disclosures might not be available until the next business day if the 
proposed amendment is adopted. However, some of these creditors might 
still provide revised disclosures on the same date that the interest 
rate is locked. If they do not provide the revised disclosure until the 
next business day, then the potential consumer harm is the time 
difference between when the consumers would receive revised 
disclosures.
    The Bureau does not possess any data, and is not aware of a source 
to obtain data, that would enable it to report the quantitative effects 
of this provision, for example, the number of creditors that would not 
let their consumers lock the interest rate in the afternoon or in the 
evening if the provision is not adopted. The Bureau seeks comment on 
this issue.
Specific Language on Loan Estimates for New Construction Loans
    The Bureau believes that, without the proposed amendment, creditors 
that ordinarily originate construction loans could be forced either to 
originate only those construction loans for which the creditor is 
certain that no redisclosure prior to settlement will be necessary or 
to price in the risk of having to cure any amounts charged over the 
estimates initially provided more than 60 days before settlement. 
Creditors that price in the risk, including the estimated cost of cure 
in their pricing, risk miscalibrating the pricing and losing consumers 
to less risk-averse competitors or facing unanticipated costs related 
to cure for the failure to redisclose more accurate costs. In all 
events, creditors risk losing consumers to other options. In all 
events, the proposed amendment presents benefits to the creditors that 
decide to originate construction loans and presents no costs.
    As noted above, under the current rule, a consumer who needs a new 
construction loan may only be able to obtain a construction loan where 
the creditor has priced in the risk of having to cure any amounts 
charged over the estimates initially provided over 60 days before 
settlement, and that is a cost to consumers. On the other hand, if the 
proposed amendment is not adopted, yet the consumer manages to receive 
a construction loan, then the Loan Estimate provides consumers more 
certainty, given that creditors would be limited in their ability to 
redisclose estimated costs and reset the applicable tolerances. In 
situations where creditors misgauged estimates provided in the initial 
Loan Estimate, consumers might be entitled to receive a cure of any 
differences between the initial disclosure and the final costs at 
closing, to the extent such differences exceed applicable tolerances. 
However, the Bureau believes that these benefits to consumers are 
marginal, given that costs associated with construction loans are 
inherently volatile beyond the creditor's control. As a result, the 
Bureau believes that creditors unable to redisclose estimates given 
more than 60 days prior to consummation would be less likely to 
originate such loans.
    The Bureau does not possess any data, and is not aware of a source 
to obtain data, that would enable it to report the number of 
transactions affected or to quantify the extent of creditor and 
consumer benefits. The Bureau seeks comment on this issue.

C. Impact on Covered Persons With No More Than $10 Billion in Assets

    The Bureau believes that covered persons with no more than $10 
billion in assets will not be differentially affected by the proposed 
amendment regarding construction loans.
    The proposed amendment regarding interest rate locks might have two 
particular effects on covered persons with no more than $10 billion in 
assets. First, covered persons with no more than $10 billion in assets 
are more likely to benefit from this proposed provision to the extent 
that redisclosure on the same business day of an interest rate lock 
that occurred close to the end of the business day might require 
software and business processes upgrade costs. Larger covered persons 
are more likely to originate a sufficient number of transactions to 
make it worth implementing these changes, as opposed to choosing to 
offer interest rate locks only at set times during business hours.
    Secondly, creditors located in more than one time zone might have 
to offer a shorter preset adjustment time to some customers (for 
example, if the location of the rate lock operation is in the Eastern 
Time zone), but covered persons with no more than $10 billion in assets

[[Page 64344]]

are more likely to be located in a single time zone. From this 
perspective, covered persons with no more than $10 billion in assets 
are less likely to benefit from this proposed amendment. The Bureau 
does not possess data to quantify either of the two possible 
aforementioned effects of the proposed amendment on covered persons 
with no more than $10 billion in assets.

D. Impact on Access to Credit

    The Bureau does not believe that there will be an adverse impact on 
access to credit resulting from any of the two provisions. Moreover, it 
is possible that there will be an expansion of access to credit, if the 
proposed amendment regarding construction loans facilitates the making 
of new construction loans, as the Bureau anticipates.

E. Impact on Rural Areas

    The Bureau believes that rural areas might benefit from these two 
proposed provisions more than urban areas. Competition might drive 
creditors to originate construction loans despite the possible 
redisclosure issues and to provide interest rate locks throughout the 
day despite the same business day redisclosure requirement. To the 
extent that there are fewer creditors operating in rural areas than in 
urban areas with correspondingly reduced competition, and to the extent 
that competition would actually matter for these two issues, rural 
areas are most likely to suffer the potential harms the proposed 
amendments seek to address. Therefore, rural areas may conversely see 
the largest benefit from the proposed amendments.

VI. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (the RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small nonprofit organizations. The RFA defines a ``small business'' as 
a business that meets the size standard developed by the Small Business 
Administration pursuant to the Small Business Act.
    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, unless the agency certifies that the rule will 
not have a significant economic impact on a substantial number of small 
entities. 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.
    An IRFA is not required for this proposal because the proposal, if 
adopted, would not have a significant economic impact on any small 
entities. The Bureau does not expect the proposal to impose costs on 
covered persons. All methods of compliance under current law will 
remain available to small entities if the proposal is adopted. Thus, a 
small entity that is in compliance with current law need not take any 
additional action if the proposal is adopted.
    Accordingly, the undersigned certifies that this proposal, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities.

VII. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), Federal agencies are generally required to seek the Office of 
Management and Budget (OMB) approval for information collection 
requirements prior to implementation. The collections of information 
related to Regulations Z and X have been previously reviewed and 
approved by OMB in accordance with the PRA and assigned OMB Control 
Number 3170-0015 (Regulation Z) and 3170-0016 (Regulation X). Under the 
PRA, the Bureau may not conduct or sponsor and, notwithstanding any 
other provision of law, a person is not required to respond to an 
information collection unless the information collection displays a 
valid control number assigned by OMB.
    The Bureau has determined that this Proposed Rule would not impose 
any new or revised information collection requirements (recordkeeping, 
reporting, or disclosure requirements) on covered entities or members 
of the public that would constitute collections of information 
requiring OMB approval under the PRA. The Bureau welcomes comments on 
this determination or any other aspect of this proposal for purposes of 
the PRA. Comments should be submitted as outlined in the ADDRESSES 
section above. All comments will become a matter of public record.

List of Subjects

12 CFR Part 1024

    Condominiums, Consumer protection, Housing, Mortgage servicing, 
Mortgages, Reporting and recordkeeping requirements.

12 CFR Part 1026

    Advertising, Consumer protection, Credit, Credit unions, Mortgages, 
National banks, Recordkeeping and recordkeeping requirements, 
Reporting, Savings associations, Truth in lending.

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau proposes to 
amend Regulation X, 12 CFR part 1024, and Regulation Z, 12 CFR part 
1026, as set forth below:

PART 1024--REAL ESTATE SETTLEMENT PROCEDURES ACT (REGULATION X)

0
1. The authority citation for part 1024 continues to read as follows:

    Authority:  12 U.S.C. 2603-2605, 2607, 2609, 2617, 5512, 5532, 
5581.

Subpart A--General Provisions

0
2. Section 1024.5 is amended by revising paragraph (d) introductory 
text to read as follows:

Sec.  1024.5  Coverage of RESPA.

* * * * *
    (d) Partial exemptions for certain mortgage loans. Sections 1024.6, 
1024.7, 1024.8, 1024.10, and 1024.33(a) do not apply to a federally 
related mortgage loan:
* * * * *

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
3. The authority citation for part 1026 continues 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.
* * * * *

Subpart C--Closed-End Credit

0
4. Section 1026.19 is amended by revising paragraph (e)(3)(iv)(D) to 
read as follows:

Sec.  1026.19  Certain mortgage and variable-rate transactions.

* * * * *
    (e) * * *
    (3) * * *
    (iv) * * *
    (D) Interest rate dependent charges. The points or lender credits 
change because the interest rate was not locked when the disclosures 
required under paragraph (e)(1)(i) of this section were provided. No 
later than the next business day after the date the interest rate is 
locked, the creditor shall provide a revised version of the disclosures 
required under paragraph (e)(1)(i) of this section to the consumer with 
the revised interest rate, the points disclosed pursuant to Sec.  
1026.37(f)(1), lender

[[Page 64345]]

credits, and any other interest rate dependent charges and terms.
* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

0
5. Section 1026.36 is amended by adding paragraph (g)(2)(ii) to read as 
follows:

Sec.  1026.36  Prohibited acts or practices and certain requirements 
for credit secured by a dwelling.

* * * * *
    (g) * * *
    (2) * * *
    (ii) The disclosures required by Sec.  1026.19 (e) and (f);
* * * * *
0
6. Section 1026.37 is amended by adding paragraph (m)(8) and revising 
paragraph (o)(4)(i)(A) to read as follows:

Sec.  1026.37  Content of disclosures for certain mortgage transactions 
(Loan Estimate).

* * * * *
    (m) * * *
    (8) New construction loans. In transactions involving new 
construction, where the creditor reasonably expects that settlement 
will occur more than 60 days after the provision of the loan estimate, 
at the creditor's option, a clear and conspicuous statement that the 
creditor may issue a revised disclosure any time prior to 60 days 
before consummation, pursuant to Sec.  1026.19(e)(3)(iv)(F).
* * * * *
    (o) * * *
    (4) * * *
    (i) * * *
    (A) The dollar amounts required to be disclosed by paragraphs 
(b)(6) and (7), (c)(1)(iii), (c)(2)(ii) and (iii), (c)(4)(ii), (f), 
(g), (h), (i), and (l) of this section shall be rounded to the nearest 
whole dollar, except that the per diem amount required to be disclosed 
by paragraph (g)(2)(iii) of this section and the monthly amounts 
required to be disclosed by paragraphs (g)(3)(i) through (iii) and 
(g)(3)(v) of this section shall not be rounded.
* * * * *
0
7. Section 1026.38 is amended by revising paragraphs (e)(3)(iii)(A), 
(e)(4)(ii), and (k)(2)(v) and (vi) to read as follows:

Sec.  1026.38  Content of disclosures for certain mortgage transactions 
(Closing Disclosure).

* * * * *
    (e) * * *
    (3) * * *
    (iii) * * *
    (A) If the amount disclosed under paragraph (e)(3)(ii) of this 
section is different than the amount disclosed under paragraph 
(e)(3)(i) of this section (unless the difference is due to rounding), a 
statement of that fact, along with a statement that the consumer paid 
such amounts prior to consummation of the transaction; or
* * * * *
    (4) * * *
    (ii) Under the subheading ``Final,'' the total amount of payoffs 
and payments made to third parties disclosed pursuant to paragraph 
(t)(5)(vii)(B) of this section, to the extent known, disclosed as a 
negative number;
* * * * *
    (k) * * *
    (2) * * *
    (v) The amount of any loan secured by a first lien on the property 
that will be paid off as part of the real estate closing, labeled 
``Payoff of First Mortgage Loan'';
    (vi) The amount of any loan secured by a second lien on the 
property that will be paid off as part of the real estate closing, 
labeled ``Payoff of Second Mortgage Loan'';
* * * * *
0
8. Appendix H to part 1026 is amended by revising the Description in H-
24(G) to read as follows:

Appendix H to Part 1026--Closed-End Forms and Clauses

* * * * *

 H-24(G) Mortgage Loan Transaction Loan Estimate--Modification to Loan 
Estimate for Transaction Not Involving Seller--Model Form

    Description: This is a blank model Loan Estimate that 
illustrates the application of the content requirements in Sec.  
1026.37, with the optional alternative tables permitted by Sec.  
1026.37(d)(2) and (h)(2) for transactions without a seller. This 
form provides one variation of page one, four variations of page 
two, and four variations of page three, reflecting the variable 
content requirements in Sec.  1026.37.
* * * * *
0
9. In Supplement I to part 1026:
0
a. Under Section 1026.19--Certain Mortgage and Variable-Rate 
Transactions:
0
i. Under paragraph 19(e)(3)(iv)(D), paragraph 1 is revised.
0
ii. Under paragraph 19(e)(4)(i), paragraph 2 is revised.
0
b. Under Section 1026.37--Content of Disclosures for Certain Mortgage 
Transactions (Loan Estimate):
0
i. Under paragraph 37(b)(6), paragraph 1 is revised.
0
ii. Under paragraph 37(c)(2)(ii), paragraph 2 is revised.
0
ii. Under paragraph 37(c)(2)(iii), paragraph 1 is revised.
0
iii. Under paragraph 37(c)(4)(iv), paragraph 2 is revised.
0
iv. Under paragraph 37(h)(1)(ii), paragraph 1 is revised.
0
v. Under paragraph 37(m), the subheading 37(m)(8) New construction 
loans and paragraph 1 are added.
0
vi. Under paragraph 37(n), paragraph 2 is revised.
0
c. Under Section 1026.38--Content of Disclosures for Certain Mortgage 
Transactions (Closing Disclosure):
0
i. Under paragraph 38(a)(3)(vi), paragraph 2 is added.
0
ii. Under paragraph 38(e)(1)(iii)(A), paragraph 1 is revised.
0
iii. Under paragraph 38(e)(2)(iii)(A), paragraph 3 is added.
    The revisions and additions read as follows:

    Supplement I to Part 1026--Official Interpretations 

* * * * *

Subpart C--Closed-End Credit

* * * * *

Section 1026.19--Certain Mortgage and Variable-Rate Transactions

* * * * *
    19(e) Mortgage loans secured by real property--Early 
disclosures.
* * * * *
    19(e)(3) Good faith determination for estimates of closing 
costs.
* * * * *
    Paragraph 19(e)(3)(iv)(D) Interest rate dependent charges.
    1. Requirements. If the interest rate is not locked when the 
disclosures required by Sec.  1026.19(e)(1)(i) are provided, a valid 
reason for revision exists when the interest rate is subsequently 
locked. No later than the next business day after the date the 
interest rate is locked, Sec.  1026.19(e)(3)(iv)(D) requires the 
creditor to provide a revised version of the disclosures required 
under Sec.  1026.19(e)(1)(i) reflecting the revised interest rate, 
the points disclosed pursuant to Sec.  1026.37(f)(1), lender 
credits, and any other interest rate dependent charges and terms. 
The following examples illustrate this requirement:
    i. Assume a creditor sets the interest rate by executing a rate 
lock agreement with the consumer. If such an agreement exists when 
the original disclosures required under Sec.  1026.19(e)(1)(i) are 
provided, then the actual points and lender credits are compared to 
the estimated points disclosed pursuant to Sec.  1026.37(f)(1) and 
lender credits included in the original disclosures provided under 
Sec.  1026.19(e)(1)(i) for the purpose of determining good faith 
pursuant to Sec.  1026.19(e)(3)(i). If the consumer enters into a 
rate lock agreement with the creditor after the disclosures required 
under Sec.  1026.19(e)(1)(i) were provided, then Sec.  
1026.19(e)(3)(iv)(D) requires the creditor to provide, no later than 
the next business day after the date that the consumer and the 
creditor enter into a rate lock agreement, a revised version of the 
disclosures required under Sec.  1026.19(e)(1)(i) reflecting the 
revised interest rate, the points disclosed pursuant to Sec.  
1026.37(f)(1), lender credits, and any other

[[Page 64346]]

interest rate dependent charges and terms. Provided that the revised 
version of the disclosures required under Sec.  1026.19(e)(1)(i) 
reflect any revised points disclosed pursuant to Sec.  1026.37(f)(1) 
and lender credits, the actual points and lender credits are 
compared to the revised points and lender credits for the purpose of 
determining good faith pursuant to Sec.  1026.19(e)(3)(i).
* * * * *
    19(e)(4) Provision and receipt of revised disclosures.
    Paragraph 19(e)(4)(i) General rule.
* * * * *
    2. Relationship to Sec.  1026.19(e)(3)(iv)(D). If the reason for 
the revision is provided under Sec.  1026.19(e)(3)(iv)(D), 
notwithstanding the three-business-day rule set forth in Sec.  
1026.19(e)(4)(i), Sec.  1026.19(e)(3)(iv)(D) requires the creditor 
to provide a revised version of the disclosures required under Sec.  
1026.19(e)(1)(i) no later than the next business day after the date 
the interest rate is locked. See comment 19(e)(3)(iv)(D)-1.
* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 1026.37--Content of Disclosures for Certain Mortgage 
Transactions (Loan Estimate)

* * * * *
    37(b) Loan terms.
* * * * *
    37(b)(6) Adjustments after consummation.
    1. Periods not in whole years. For guidance on how to disclose 
increases after consummation that occur after a number of months 
less than 24 but that do not equate to a number of whole years or 
within a number of days less than a week, see the guidance provided 
in comment 37(a)(10)-3. For all other increases that occur after 
more than 24 months, see the guidance provided in comment 37(b)(8)-
1.
* * * * *
    37(c) Projected payments.
* * * * *
    37(c)(2) Itemization.
* * * * *
    Paragraph 37(c)(2)(ii).
* * * * *
    2. Relationship to principal and interest disclosure. The 
creditor discloses mortgage insurance premiums pursuant to Sec.  
1026.37(c)(2)(ii) on the same periodic basis that payments for 
principal and interest are disclosed pursuant to Sec.  
1026.37(c)(2)(i), even if mortgage insurance premiums are actually 
paid on some other periodic basis.
    Paragraph 37(c)(2)(iii).
    1. Escrow disclosure. The disclosure described in Sec.  
1026.37(c)(2)(iii) is required only if the creditor will establish 
an escrow account for the payment of some or all of the charges 
described in Sec.  1026.37(c)(4)(ii). If no escrow account for the 
payment of some or all such charges will be established, the 
creditor discloses the escrow amount as ``0.'' If an escrow account 
is established for the payment of amounts described in Sec.  
1026.37(c)(4)(ii), but no escrow payment is required with a 
particular periodic payment (such as with a final balloon payment) 
or range of payments, the escrow payment should be disclosed as ``--
''.
* * * * *
    37(c)(4) Taxes, insurance, and assessments.
* * * * *
    Paragraph 37(c)(4)(iv).
* * * * *
    2. Amounts paid by the creditor using escrow account funds. 
Section 1026.37(c)(4)(iv) requires the creditor to disclose an 
indication of whether the amounts disclosed pursuant to Sec.  
1026.37(c)(4)(ii) will be paid by the creditor using escrow account 
funds. If the amount disclosed pursuant to Sec.  1026.37(c)(4)(ii) 
requires the creditor to disclose a description of more than one 
amount and only some of those amounts will be paid by the creditor 
using escrow account funds, the creditor may indicate that only some 
of those amounts will be paid using escrow account funds, such as by 
using the word ``some.''
* * * * *
    37(h) Calculating cash to close.
* * * * *
    37(h)(1)(ii) Closing costs financed.
    1. Calculating amount. The amount of closing costs financed 
disclosed under Sec.  1026.37(h)(1)(ii) is determined by subtracting 
the estimated total amount of payments to third parties not 
otherwise disclosed pursuant to Sec.  1026.37(f) and Sec.  
1026.37(g) from the total loan amount disclosed pursuant to Sec.  
1026.37(b)(1). If the result of the calculation is a positive 
number, that amount is disclosed as a negative number under Sec.  
1026.37(h)(1)(ii), but only to the extent that it does not exceed 
the total amount of closing costs disclosed under Sec.  
1026.37(g)(6). If the result of the calculation is zero or negative, 
the amount of $0 is disclosed under Sec.  1026.37(h)(1)(ii).
* * * * *
    37(m) Other considerations.
* * * * *
    37(m)(8) New construction loans.
    1. Clear and conspicuous statement regarding redisclosure for 
new construction loans. For new construction loans where the 
creditor reasonably expects the settlement date to be 60 days or 
more after the provision of the disclosures required under Sec.  
1026.19(e)(1)(i), providing the statement, ``You may receive a 
revised Loan Estimate at least 60 days prior to consummation'' under 
the master heading ``Additional Information About This Loan'' and 
under the heading ``Other Considerations'' pursuant to Sec.  
1026.37(m) satisfies the requirements set forth in Sec.  
1026.19(e)(3)(iv)(F) that the statement be made clearly and 
conspicuously on the disclosure.
    37(n) Signature statement.
* * * * *
    2. Multiple consumers. If there is more than one consumer who 
will be obligated in the transaction, the first consumer signs as 
the applicant and each additional consumer signs as a co-applicant. 
If there is not enough space under the heading ``Confirm Receipt'' 
to provide signature lines for every consumer in the transaction, 
the creditor may add additional signature pages, as needed, at the 
end of the form for the remaining consumers' signatures. However, 
the creditor is required to disclose the heading and statement 
required by Sec.  1026.37(n)(1) on such additional pages.
* * * * *

Section 1026.38--Content of Disclosures for Certain Mortgage 
Transactions (Closing Disclosure)

* * * * *
    38(a) General information.
    38(a)(3) Closing information.
* * * * *
    38(a)(3)(vi) Property.
* * * * *
    2. Multiple properties. Where more than one property secures the 
credit transaction, Sec.  1026.38(a)(3)(vi) requires disclosure of 
all property addresses. If the addresses of all properties securing 
the transaction do not fit in the space allocated on the Closing 
Disclosure, an additional page with the addresses of all real 
properties may be appended to the end of the form.
* * * * *
    38(e) Alternative calculating cash to close table for 
transactions without a seller.
* * * * *
    38(e)(1) Loan amount.
    Paragraph 38(e)(1)(iii)(A).
    1. Statements of increases or decreases. Section 
1026.38(e)(1)(iii)(A) requires a statement of whether the amount 
increased or decreased from the estimated amount. For Sec.  
1026.38(e)(1)(iii)(A), the statement, ``This amount increased,'' in 
which the word ``increased'' is in boldface font and is replaced 
with the word ``decreased'' as applicable, complies with this 
provision.
    38(e)(2) Total closing costs.
* * * * *
    Paragraph 38(e)(2)(iii)(A).
* * * * *
    3. Statements regarding excess amount and any credit to the 
consumer. Section 1026.38(e)(2)(iii)(A) requires statements that an 
increase in closing costs exceeds legal limits by the dollar amount 
of the excess and a statement directing the consumer to the 
disclosure of lender credits under Sec.  1026.38(h)(3) if a credit 
is provided under Sec.  1026.19(f)(2)(v). See form H-25(F) of 
appendix H to this part for examples of such statements.
* * * * *

    Dated: October 9, 2014.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2014-24739 Filed 10-28-14; 8:45 am]
BILLING CODE 4810-AM-P
```