This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

23289 

Vol. 74, No. 95 

Tuesday, May 19, 2009 

FEDERAL RESERVE SYSTEM 

12 CFR Part 226 

[Regulation Z; Docket No. R–1340] 

Truth in Lending 

AGENCY: Board of Governors of the 

Federal Reserve System. 

ACTION: Final rule; official staff 

commentary. 

SUMMARY: On July 30, 2008, the Board 

published a final rule amending 

Regulation Z, which implements the 

Truth in Lending Act (TILA) and the 

Home Ownership and Equity Protection 

Act (HOEPA). The July 2008 final rule 

requires creditors to give consumers 

transaction-specific cost disclosures 

shortly after application for closed-end 

loans secured by a consumer’s principal 

dwelling. The disclosures must be 

provided before the consumer pays any 

fee, other than a fee for obtaining the 

consumer’s credit history. Also on July 

30, 2008, the Congress enacted the 

Housing and Economic Recovery Act of 

2008, which included amendments to 

TILA, known as the Mortgage Disclosure 

Improvement Act of 2008 (MDIA). On 

October 3, 2008, the Congress amended 

the MDIA in connection with its 

enactment of the Emergency Economic 

Stabilization Act of 2008 (Stabilization 

Act). The Board is now revising 

Regulation Z to implement the 

provisions of the MDIA, as amended. 

The MDIA broadens and adds to the 

requirements of the Board’s July 2008 

final rule. Among other things, the 

MDIA requires early, transactionspecific disclosures for mortgage loans 

secured by dwellings other than the 

consumer’s principal dwelling and 

requires waiting periods between the 

time when disclosures are given and 

consummation of the mortgage 

transaction. Moreover, these 

requirements of the MDIA will become 

effective on July 30, 2009, about two 

months earlier than the Board’s 

regulatory amendments adopted in the 

July 2008 final rule. 

Consistent with the MDIA, the final 

rule amending Regulation Z requires 

creditors to make good faith estimates of 

the required mortgage disclosures, and 

deliver or place them in the mail, no 

later than three business days after 

receiving a consumer’s application for a 

dwelling-secured closed-end loan. 

Consummation may occur on or after 

the seventh business day after the 

delivery or mailing of these disclosures. 

If the annual percentage rate provided 

in the good faith estimates changes 

beyond a specified tolerance for 

accuracy, creditors must provide 

corrected disclosures, which the 

consumer must receive on or before the 

third business day before consummation 

of the transaction. The final rule allows 

consumers to expedite consummation to 

meet a bona fide personal financial 

emergency. The MDIA, as amended by 

the Stabilization Act, specifies different 

requirements for providing early 

disclosures for mortgage transactions 

that are secured by a consumer’s interest 

in a timeshare plan. 

DATES: The amendments to 

§§ 226.2(a)(6), 226.17(b) and (f), and 

226.19(a)(1); and amendments 13, 14, 

16, and 17 to Supplement I to part 226, 

published on July 30, 2008 (73 FR 

44522), previously to become effective 

on October 1, 2009, are now effective on 

July 30, 2009. 

Additionally, this final rule is also 

effective on July 30, 2009 and includes 

further amendments to Regulation Z. 

FOR FURTHER INFORMATION CONTACT: Paul 

Mondor, Senior Attorney, or Jamie Z. 

Goodson, Attorney; Division of 

Consumer and Community Affairs, 

Board of Governors of the Federal 

Reserve System, Washington, DC 20551, 

at (202) 452–2412 or (202) 452–3667. 

For users of Telecommunications 

Device for the Deaf (TDD) only, contact 

(202) 263–4869. 

SUPPLEMENTARY INFORMATION: 

I. Background 

One of the purposes of the Truth in 

Lending Act (TILA), 15 U.S.C. 1601 et 

seq., is to promote the informed use of 

consumer credit by requiring 

disclosures about its terms and cost. The 

act requires creditors to disclose the cost 

of credit as a dollar amount (the finance 

charge) and as an annual percentage rate 

(APR). Uniformity in creditors’ 

disclosures is intended to assist 

consumers in comparison shopping. 

TILA requires additional disclosures for 

loans secured by consumers’ homes and 

permits consumers to rescind certain 

transactions that involve their principal 

dwelling. 

TILA mandates that the Board 

prescribe regulations to carry out the 

purposes of the act. 15 U.S.C. 1604(a). 

TILA is implemented by the Board’s 

Regulation Z, 12 CFR part 226. An 

Official Staff Commentary interprets the 

requirements of the regulation and 

provides guidance to creditors in 

applying the rules to specific 

transactions. See 12 CFR part 226 

(Supp. I). 

TILA Section 128, 15 U.S.C. 1638, 

requires creditors to make specified 

disclosures in connection with closedend consumer credit transactions before 

the credit is extended. Before 

amendment by the MDIA, for certain 

mortgage loans TILA required creditors 

to make good faith estimates of the 

disclosures (‘‘early disclosures’’) within 

three business days after the consumer 

has submitted an application or before 

the credit is extended, whichever is 

earlier. In implementing TILA Section 

128, Regulation Z requires creditors to 

give these early disclosures only for 

loans that finance the purchase or initial 

construction of a consumer’s principal 

dwelling. 

On July 30, 2008, the Board published 

a final rule amending Regulation Z (the 

July 2008 final rule) (73 FR 44522). The 

July 2008 final rule requires, among 

other things, that a creditor provide the 

early disclosures even when the loan is 

not for the purpose of financing the 

purchase or initial construction of the 

consumer’s principal dwelling. Under 

the July 2008 final rule, the early 

disclosures also must be provided for 

non-purchase closed-end loans secured 

by the consumer’s principal dwelling 

(such as a refinance loan). The July 2008 

final rule also required these disclosures 

to be given before the consumer pays 

any fee, other than a bona fide and 

reasonable fee for obtaining the 

consumer’s credit history. As published, 

these provisions of the July 2008 final 

rule were scheduled to become effective 

on October 1, 2009 (73 FR at 55494). 

Consistent with the MDIA, however, 

this final rule sets an earlier effective 

date of July 30, 2009 for these fee 


erowe on PROD1PC63 with RULES
23290 Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 

1The MDIA is contained in Sections 2501 

through 2503 of the Housing and Economic 

Recovery Act of 2008 (HERA), Public Law 110–289, 

enacted on July 30, 2008. The MDIA was amended 

by the Emergency Economic Stabilization Act of 

2008, Public Law 110–343, enacted on October 3, 

2008. 

collection restrictions, as discussed 

below. 

On the same day that the July 2008 

final rule was published, Congress 

amended TILA by enacting the Mortgage 

Disclosure Improvement Act of 2008 

(MDIA).1 The MDIA amends TILA and 

codifies some of the early disclosure 

requirements of the July 2008 final rule, 

but also expands upon the regulatory 

provisions. 

Like the July 2008 final rule, the 

MDIA requires creditors to make the 

early disclosures even when the loan is 

not for the purpose of financing the 

purchase or initial construction of the 

consumer’s principal dwelling and 

prohibits the collection of fees before 

the consumer receives the disclosures, 

other than a fee for obtaining a 

consumer’s credit report. However, the 

MDIA applies these provisions to loans 

secured by a dwelling even when it is 

not the consumer’s principal dwelling. 

Moreover, the MDIA imposes additional 

requirements not contained in the July 

2008 final rule. Under the MDIA, for 

loans secured by a consumer’s dwelling, 

creditors must deliver or mail the early 

disclosures at least seven business days 

before consummation. If the APR 

contained in the early disclosures 

becomes inaccurate (for example, due to 

a change in the loan terms), creditors 

must ‘‘redisclose’’ and provide corrected 

disclosures that the consumer must 

receive at least three business days 

before consummation. The disclosures 

also must inform consumers that they 

are not obligated to complete the 

transaction simply because disclosures 

were provided or because a consumer 

has applied for a loan. The MDIA 

imposes different requirements for early 

disclosure in closed-end mortgage 

transactions that are secured by a 

consumer’s interest in a timeshare plan. 

These provisions of the MDIA, 

including the fee collection restriction, 

will become effective on July 30, 2009, 

which is about two months earlier than 

the effective date of the July 2008 final 

rule. 

At this time, the Board is only 

conforming Regulation Z, as amended 

on July 30, 2008, to the MDIA 

provisions that become effective on July 

30, 2009. The MDIA also contains 

additional disclosure requirements for 

variable-rate transactions that are not 

addressed in this rulemaking. Those 

provisions of the MDIA will not become 

effective until January 30, 2011, or any 

earlier compliance date ultimately 

established by the Board. This final rule 

does not address those disclosures. The 

Board anticipates issuing proposed 

amendments to Regulation Z to 

implement those provisions of the 

MDIA later during 2009, in connection 

with the Board’s comprehensive review 

of closed-end mortgage disclosures that 

is currently underway. 

As discussed above, the MDIA 

contains several provisions that mirror 

the July 2008 final rule. These 

provisions are not discussed below 

because they are explained in detail in 

the supplementary information portion 

of the July 2008 final rule. (See 73 FR 

at 44590–44594; July 30, 2008). To 

conform to the MDIA, certain regulatory 

changes that the Board adopted in July 

2008 will become effective on July 30, 

2009 (and not on October 1, 2009 as 

originally provided in the July 2008 

final rule). These regulatory changes are: 

the requirement that early disclosures 

be given for all dwelling-secured 

mortgage loans rather than only for 

‘‘residential mortgage transactions’’ to 

finance the purchase or initial 

construction of the dwelling (in 

§§ 226.17(f) and 226.19(a)(1)(i) and 

associated commentary) and that early 

disclosures be given before consumers 

pay any fee except a fee for obtaining 

the consumer’s credit history (in 

§ 226.19(a)(1)(ii) and (iii) and associated 

commentary). The final rule the Board 

is publishing today further revises 

Regulation Z, also effective July 30, 

2009. These revisions will apply only if 

a consumer’s application for a covered 

transaction is received on or after July 

30, 2009. 

Minor conforming and technical 

amendments to Regulation Z also are 

made in this final rule. 

II. Overview of Comments Received 

On December 10, 2008, the Board 

published a proposed rule that would 

amend Regulation Z’s rules for the 

timing and content of disclosures for 

dwelling-secured mortgage loans. 73 FR 

74989. The Board received fifty-one 

public comment letters. Several 

financial institutions and financial 

services trade associations stated that 

they support efforts to improve the 

disclosure of credit terms to consumers 

and recognize that the Board’s proposal 

is intended to conform Regulation Z to 

TILA, as amended by the MDIA. These 

commenters generally stated that the 

Board should make timing requirements 

as flexible as is possible. Several other 

financial institutions stated that the 

costs of the new waiting periods 

required by the MDIA outweigh any 

benefits and that consumers would 

object to delays in consummating a 

mortgage transaction. By contrast, 

consumer advocacy organizations 

generally supported the MDIA’s goal of 

providing accurate disclosure of credit 

to consumers terms in a timely manner. 

Consumer advocates further stated that 

the MDIA provisions allowing 

consumers to waive the waiting period 

between disclosure and consummation 

should be narrowly circumscribed. 

Comments are discussed in detail below 

in part III of the SUPPLEMENTARY

INFORMATION. 

III. The Board’s Final Rule 

A. Coverage of § 226.19(a) 

Proposed Rule 

TILA Section 128(a), 15 U.S.C. 

1638(a), requires creditors to disclose 

certain information for closed-end 

consumer credit transactions, including, 

for example, the amount financed and 

the APR. TILA Section 128(b)(2), 15 

U.S.C. 1638(b)(2), requires creditors to 

make good faith estimates of these 

disclosures within three business days 

of receiving the consumer’s application, 

or before consummation if that occurs 

earlier. Until the recent enactment of the 

MDIA, TILA Section 128(b)(2) applied 

only to a ‘‘residential mortgage 

transaction’’ subject to the Real Estate 

Settlement Procedures Act (RESPA). See 

15 U.S.C. 1602(w). A residential 

mortgage transaction is defined in TILA 

as a loan to finance the purchase or 

initial construction of a consumer’s 

dwelling. Regulation Z limits the 

definition to transactions secured by the 

consumer’s principal dwelling. See 

§ 226.2(a)(24). 

The MDIA extends the early 

disclosure requirement in TILA Section 

128(b)(2), 15 U.S.C. 1638(b)(2), to 

additional types of loans. Under the 

MDIA, early disclosures are required for 

‘‘any extension of credit secured by the 

dwelling of a consumer.’’ Thus, as 

amended, the statute requires early 

disclosures for home refinance loans 

and home equity loans. This is 

consistent with revisions made by the 

Board’s July 2008 final rule. To 

implement the MDIA, the Board 

proposed to also apply the early 

disclosure requirements to loans 

secured by dwellings other than the 

consumer’s principal dwelling. 

Accordingly, the Board proposed, under 

§ 226.19(a)(1)(i), to require creditors to 

give consumers early disclosures in 

connection with a dwelling-secured 

mortgage loan (if also subject to RESPA), 

whether or not the loan is for the 

purpose of financing the purchase or 

initial construction of the consumer’s 


erowe on PROD1PC63 with RULES
Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 23291 

principal dwelling. The Board’s 

proposal did not apply to home equity 

lines of credit (HELOCs), which are 

subject to the rules for open-end credit 

in § 226.5b. The July 2008 final rule also 

did not apply to HELOCs. 

TILA Section 128(b)(2), 15 U.S.C. 

1638(b)(2), as amended by the MDIA, 

applies to dwelling-secured mortgage 

loans if they also are subject to RESPA. 

The U.S. Department of Housing and 

Urban Development’s (HUD) Regulation 

X implements RESPA. See 12 U.S.C. 

2601 et seq.; 24 CFR 3500.1 et seq. In 

March 2008, HUD published a proposal 

to revise Regulation X. (See 73 FR 

14030; Mar. 14, 2008). In November 

2008, HUD published final rules 

amending Regulation X. (See 73 FR 

68204; Nov. 17, 2008). The Board 

believes that Regulation Z’s timing 

requirements for early disclosures, as 

amended by this final rule, remain 

consistent with timing requirements for 

the initial good faith estimates of 

settlement costs required under 

Regulation X, as recently amended by 

HUD. Consistency between Regulation Z 

and Regulation X are discussed in detail 

below. 

Public Comment 

The Board received few comments 

that addressed the coverage of proposed 

§ 226.19(a). A few financial institutions 

and financial services trade associations 

stated that the early disclosure 

requirements should only apply to loans 

secured by a consumer’s principal 

dwelling. A financial institution stated 

that consumers who own more than one 

dwelling usually are more sophisticated 

financially and will not benefit from the 

early disclosures. One financial services 

trade association supported the 

extension of coverage to mortgage 

transactions that are secured by 

dwellings that are not a consumer’s 

principal dwelling. A few commenters 

stated that the Board should clarify 

whether the MDIA’s timing 

requirements apply when the person 

obligated on the loan does not occupy 

the dwelling that secures the loan. 

Final Rule 

As proposed, the final rule applies the 

early disclosure requirements to loans 

secured by dwellings other than the 

consumer’s principal dwelling. Under 

§ 226.19(a)(1)(i), creditors must give 

consumers early disclosures in 

connection with a dwelling-secured 

mortgage loan that is subject to RESPA, 

whether or not the loan is for the 

purpose of financing the purchase or 

initial construction of the consumer’s 

principal dwelling. The final rule does 

not revise the disclosure requirements 

for home equity lines of credit 

(HELOCs). The Board is currently 

reviewing the disclosure rules for real 

estate-secured loans, including HELOCs, 

and will consider the need for earlier 

disclosures in connection with that 

proposed rulemaking. 

A few commenters requested 

guidance on whether the early 

disclosure rules apply to a loan secured 

by a dwelling that is not occupied by 

the person who is obligated on the loan. 

If the transaction is a dwelling-secured 

extension of consumer credit, early 

disclosures would be required 

regardless of who occupies the 

dwelling. However, TILA and 

Regulation Z do not apply to credit 

extensions that are primarily for 

business purposes. 15 U.S.C. 1603(l); 12 

CFR 226.3(a)(1). Existing guidance in 

comment 3(a)–2 provides that creditors 

should determine whether a credit 

extension is business or consumer credit 

based on the factors stated in the 

comment. Further, comment 3(a)–3 

states that credit extended to acquire, 

improve, or maintain rental property 

that is not owner-occupied (that is, in 

which the owner does not expect to live 

for more than fourteen days during the 

coming year) is deemed to be for 

business purposes. The Board believes 

this guidance is sufficient to determine 

whether a transaction is subject to TILA. 

B. Timing of Delivery of Early 

Disclosures—§ 226.19(a)(1)(i) 

Proposed Rule 

Currently under Regulation Z, 

creditors must provide the early 

disclosures within three business days 

after receiving the consumer’s written 

application or before consummation, 

whichever is earlier. The MDIA amends 

TILA to require creditors to deliver or 

mail the early disclosures at least seven 

business days before consummation. 

The Board proposed to further amend 

§ 226.19(a)(1)(i), as published in the July 

2008 final rule, to reflect this change. 

The Board proposed to add comment 

19(a)(1)(i)–6 to clarify that 

consummation may occur any time on 

the seventh business day following 

delivery or mailing; the proposed 

comment provided examples to 

facilitate compliance. The proposal 

would have required creditors to 

calculate the seven-business-day 

waiting period using the general 

definition of ‘‘business day’’ (a calendar 

day on which the creditor’s offices are 

open to the public for carrying on 

substantially all of its business 

functions). 

Public Comment 

Many of the comments the Board 

received on the requirements for early 

disclosures discussed the definition of 

‘‘business day’’ that should apply for 

purposes of those requirements. Those 

comments are discussed in detail below, 

in part III.D of this SUPPLEMENTARY

INFORMATION. 

Final Rule 

Consistent with the MDIA, the final 

rule adopts the requirement that a 

creditor deliver or mail the early 

disclosures for all dwelling-secured 

mortgage loans no later than three 

business days after the creditor receives 

a consumer’s application. Also as 

proposed, the general definition of 

‘‘business day’’ (days on which a 

creditor’s offices are open to the public 

for carrying on substantially all of its 

business functions) applies for this 

purpose. 

Under the July 2008 final rule, the 

early disclosures also must be provided 

for non-purchase closed-end loans 

secured by the consumer’s principal 

dwelling (such as a refinance loan). The 

July 2008 final rule also required these 

disclosures to be given before the 

consumer pays any fee, other than a 

bona fide and reasonable fee for 

obtaining the consumer’s credit history. 

This final rule expands these 

requirements to apply to mortgage 

transactions secured by a dwelling other 

than the consumer’s principal dwelling 

(such as a second home) and makes 

them effective for covered loans for 

which the creditor receives an 

application on or after July 30, 2009, 

consistent with the MDIA. 

The requirement for a creditor to 

deliver or place in the mail the early 

disclosures no later than the seventh 

business day before consummation has 

been moved to § 226.19(a)(2) and 

modified, as discussed below in part 

III.C of the SUPPLEMENTARY INFORMATION. 

In addition, under the final rule, the 

more precise definition of ‘‘business 

day’’ will apply for purposes of 

calculating the seven-business-day 

waiting period, as discussed in detail in 

part III.D of the SUPPLEMENTARY

INFORMATION. The Board is revising 

comment 19(a)(1)(i)–4 to clarify that if a 

consumer withdraws a loan application 

within three business days after a 

creditor receives it, the creditor need 

not make the early disclosures. This is 

consistent with comment 5b(b)–5, 

regarding denial or withdrawal of an 

application for an open-end home 

equity plan. 


erowe on PROD1PC63 with RULES
23292 Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 

C. Waiting Periods After Early 

Disclosures and Corrected Disclosures— 

§ 226.19(a)(2) 

Proposed Rule 

Currently, when a creditor provides 

early TILA disclosures and the APR 

subsequently changes beyond the 

specified tolerance, the creditor must 

redisclose the APR and other changed 

terms no later than consummation or 

settlement. The MDIA amends TILA 

Section 128(b)(2), 15 U.S.C. 1638(b)(2), 

to require that in such cases creditors 

make corrected disclosures so that 

consumers receive them not later than 

the third business day before 

consummation. The MDIA removes the 

reference to ‘‘settlement’’ for purposes 

of this requirement. The Board proposed 

to amend § 226.19(a)(2) to reflect these 

changes to TILA. The Board also 

proposed that consummation could 

occur any time on the third business 

day after the consumer receives the 

corrected disclosure. 

In addition, under the proposed rule, 

if the corrected disclosures are mailed, 

the consumer is considered to receive 

the disclosures three business days after 

mailing. This is consistent with the 

presumption the Board adopted in the 

July 2008 final rule in § 226.19(a)(1)(ii) 

for determining when fees may be 

imposed on the consumer. The MDIA 

subsequently codified that presumption. 

In this rulemaking, the Board proposed 

to apply the same presumption for 

purposes of the rule that a consumer 

must receive corrected disclosures no 

later than the third business day before 

consummation. The Board also 

proposed to revise comment 19(a)(2)–1 

to provide examples illustrating the 

effect of the three-business-day waiting 

period and when consummation may 

occur. 

The Board proposed to revise 

comment 19(a)(2)–3 to clarify that the 

three-business-day waiting period 

before consummation begins when the 

disclosures are received by the 

consumer and not when they are 

mailed. This is consistent with the 

MDIA and is also consistent with the 

rules for certain high-cost loans and 

reverse mortgage transactions, which 

also require a creditor to make 

disclosures at least three business days 

before consummation. See § 226.31(c) 

and comment 31(c)–1. 

Public Comment 

Several financial institutions and 

financial services trade associations 

stated that the Board’s rules should 

specifically address the timing 

requirements for the early disclosures 

when a creditor provides electronic 

disclosures or uses overnight courier or 

other delivery methods. Also, many 

financial institutions and financial 

services trade associations stated that a 

three-business-day waiting period 

before consummation is not warranted if 

corrected disclosures state an APR that 

is lower than the APR stated in the early 

disclosures, because the change benefits 

consumers. One financial institution 

stated that there should be no threebusiness-day waiting period before 

consummation when corrected 

disclosures are provided if the 

consumer has three business days to 

rescind the loan after consummation 

under § 226.23(a). 

A financial services trade association 

and a financial institution requested 

guidance for situations where a creditor 

makes corrected disclosures and 

thereafter the APR becomes inaccurate 

again. These commenters stated that, to 

determine whether the new APR is 

within the tolerance specified in 

§ 226.22, creditors should be permitted 

to compare what the APR will be at 

consummation to the APR stated in the 

most recent corrected disclosures, not 

the initial early disclosures. One 

financial institution stated that the 

three-business-day waiting period 

should begin on the date the corrected 

disclosures are delivered or placed in 

the mail and not when received. 

Final Rule 

The Board is adopting § 226.19(a)(2) 

as proposed; however, the requirement 

to deliver or mail the early disclosures 

to the consumer not later than the 

seventh business day before 

consummation has been moved to 

§ 226.19(a)(2). (In the proposal, the 

seven-business-day waiting period was 

in § 226.19(a)(1)(i).) Under the final rule, 

when creditors provide corrected 

disclosures under § 226.19(a)(2), the 

disclosures must state an accurate APR 

and all changed terms. Existing 

comment 19(a)(2)–2 has been 

redesignated as comment 19(a)(2)(ii)–2. 

The final rule also applies the more 

precise definition of ‘‘business day’’ (all 

calendar days except Sundays and 

specified legal public holidays) to the 

seven-business-day waiting period. This 

is a change from the proposal, which 

would have applied the general 

definition of ‘‘business day’’ to this 

provision. This change has been made 

so that the same ‘‘business day’’ 

definition will be used for purposes of 

both the seven-business-day waiting 

period and the three-business-day 

waiting period, which will make 

compliance easier, as discussed in detail 

in part III.D of the SUPPLEMENTARY

INFORMATION. The final rule also applies 

the more precise definition to the threebusiness-day waiting period, as 

proposed. Under the proposal, 

commentary on the applicable 

‘‘business day’’ definition was 

contained in proposed comment 

19(a)(2)–3; under the final rule, 

commentary on the applicable 

‘‘business day’’ definition appears in 

comment 19(a)(2)–1. Further, a new 

comment 19(a)(2)–2 clarifies that where 

corrected disclosures are required 

consummation may not occur until both 

the seven-business-day waiting period 

and the three-business-day waiting 

period have expired. 

Seven-business-day waiting period for 

early disclosures. The final rule (like the 

proposal) provides that the sevenbusiness-day waiting period begins 

when the creditor delivers or places the 

early disclosures in the mail—not when 

the consumer receives or is deemed to 

receive the early disclosures. See 

comment 19(a)(2)(i)–1. This is 

consistent with the statutory language of 

the MDIA. The final rule applies the 

more precise definition of ‘‘business 

day’’ to the seven-business-day waiting 

period. Proposed comment 19(a)(1)(i)–6 

clarified that consummation may occur 

any time on the seventh business day 

following delivery or mailing and 

provided examples to facilitate 

compliance. That commentary has been 

revised to reflect the use of the more 

precise definition of ‘‘business day’’ and 

redesignated as new comment 

19(a)(2)(i)–1. 

Three-business-day waiting period for 

corrected disclosures. As proposed, the 

final rule provides that consummation 

may not occur until three business days 

after the consumer receives corrected 

disclosures required by 

§ 226.19(a)(2)(ii). This is consistent with 

the MDIA and is also consistent with 

the three-business-day waiting period in 

§ 226.31(c)(1) for high-cost mortgages 

described in § 226.32(a) (HOEPA loans). 

The final rule applies the more precise 

definition of ‘‘business day’’ (all 

calendar days except Sundays and 

specified legal public holidays) to the 

three-business-day waiting period, as 

discussed below in part III.D of the 

SUPPLEMENTARY INFORMATION. 

Also as proposed, the final rule 

provides that if a creditor places 

corrected disclosures in the mail, the 

consumer is deemed to receive the 

corrected disclosures three business 

days after they are mailed. Comment 

19(a)(2)(ii)–3 clarifies that if the creditor 

provides the corrected disclosures by 

mail, the consumer is considered to 

have received them three business days 

after they are placed in the mail, for 

purposes of determining when the 


erowe on PROD1PC63 with RULES
Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 23293 

three-business-day waiting period 

required under § 226.19(a)(2)(ii) begins. 

The comment also clarifies that 

creditors that use e-mail or a courier 

other than the postal service may also 

follow this approach. For example, if a 

creditor provides disclosures through a 

courier service, the creditor may 

presume that the consumer receives the 

disclosures three business days after 

they are deposited with the courier 

service, for purposes of determining 

when the three-business-day waiting 

period required by § 226.19(a)(2)(ii) 

begins. The Board is not adopting 

separate rules or presumptions 

regarding the delivery of disclosures by 

overnight courier, electronic 

transmission, or other means. Although 

these methods may be faster than 

delivery by regular mail, the Board 

believes that, in light of the variety of 

delivery methods and options offered by 

service providers, it is not feasible to 

define with sufficient clarity what may 

be considered acceptable ‘‘overnight 

delivery’’ or to delineate a separate time 

period for presumption of receipt for 

each available delivery method, as 

previously stated in the supplementary 

information to the Board’s July 2008 

final rule (see 73 FR at 44593; July 30, 

2008). 

A creditor is not required to use the 

presumption of receipt to determine 

when the waiting period required by 

§ 226.19(a)(2)(ii) begins. Thus, if a 

creditor delivers corrected disclosures 

electronically consistent with the E– 

Sign Act or delivers disclosures by 

overnight courier, the creditor may rely 

on evidence of actual delivery (such as 

documentation that the mortgage loan 

disclosure was delivered by certified 

mail or overnight delivery or e-mail (if 

similar documentation is available)) to 

determine when the three-business-day 

waiting period begins. 

The rules for corrected disclosures are 

contained in new § 226.19(a)(2)(ii). 

Therefore, comments 19(a)(2)–1 through 

19(a)(2)–4 have been redesignated (as 

revised) as comments 19(a)(2)(ii)–1 

through 19(a)(2)(ii)–4. 

APR accuracy for corrected 

disclosures. New comment 19(a)(2)–4 

has been added to address commenters’ 

request for guidance in cases where 

corrected disclosures have been given 

and the APR subsequently changes. The 

new comment clarifies that in such 

cases, the creditor should compare the 

APR at consummation with the APR in 

the most recently provided corrected 

disclosures (not the first set of 

disclosures provided) to determine 

whether the creditor must provide 

another set of corrected disclosures. 

Commenters requested guidance on 

whether corrected disclosures are 

required if the APR initially disclosed 

under § 226.19(a)(1)(i) overstates the 

actual APR. Comment 19(a)(2)(ii)–1 

provides that corrected disclosures are 

not required when the APR previously 

disclosed is considered accurate under 

the tolerances in § 226.22. 

D. Definition of ‘‘Business Day’’— 

§ 226.2(a)(6) 

Proposed Rule 

The MDIA provides that if the early 

disclosures are mailed to the consumer, 

the consumer is considered to have 

received them three business days after 

they are mailed for purposes of the 

prohibition on collecting fees before the 

consumer receives the early disclosures. 

This is consistent with the July 2008 

final rule (see 73 FR at 44600–44601; 

July 30, 2008). In the rulemaking to 

implement the MDIA, the Board 

proposed to adopt that same 

presumption for purposes of the 

requirement that consumers receive 

corrected disclosures, if necessary, not 

later than the third business day before 

consummation, as discussed above in 

part III.C of the SUPPLEMENTARY

INFORMATION. In the July 2008 final rule, 

the Board also clarified how creditors 

should count weekends and Federal 

legal public holidays in determining 

when mailed disclosures are presumed 

to be received and how long the 

restriction on fees applies under 

§ 226.19(a)(1)(ii) (see 73 FR at 44599; 

July 30, 2008). In this rulemaking, the 

Board proposed to further clarify that 

creditors should count ‘‘business days’’ 

the same way for purposes of the 

presumption in § 226.19(a)(2) that 

consumers receive corrected disclosures 

three business days after they are 

mailed. 

Currently, § 226.2(a)(6) contains two 

definitions of ‘‘business day.’’ Under the 

general definition, a ‘‘business day’’ is a 

day on which the creditor’s offices are 

open to the public for carrying on 

substantially all of its business 

functions. However, for some purposes 

a more precise definition applies; 

‘‘business day’’ means all calendar days 

except Sundays and specified Federal 

legal public holidays, for purposes of 

§§ 226.15(a), 226.23(a), and 226.31(c)(1) 

and (2). The July 2008 final rule adopted 

the more precise definition for use in 

determining when mailed disclosures 

are presumed to be received under 

§ 226.19(a)(1)(ii). The Board also 

proposed to apply this definition for 

purposes of determining when 

disclosures are presumed to be received 

for purposes of the three-business-day 

waiting period in § 226.19(a)(2). As 

explained below, this approach is being 

adopted in this final rule. 

Under the MDIA, creditors must 

deliver the early disclosures, or place 

them in the mail, no later than three 

business days after receiving a 

consumer’s application for a dwellingsecured mortgage loan; the delivery or 

mailing also must occur not later than 

the seventh business day before 

consummation. The Board proposed to 

use the general definition of ‘‘business 

day’’ for purposes of satisfying these 

timing requirements, both of which 

were contained in proposed 

§ 226.19(a)(1)(i). This approach was 

consistent with RESPA’s requirement 

that creditors provide good faith 

estimates of settlement costs not later 

than three business days after the 

creditor receives the consumer’s 

application for a Federally related 

mortgage loan. See 24 CFR 3500.2(b) 

and 3500.7. To simplify the rule, the 

Board proposed that the general 

definition of ‘‘business day’’ also would 

be used for determining when the 

seven-business-day waiting period 

expires and consummation may occur. 

The Board requested comment, 

however, on whether the more precise 

definition of business day should be 

used to facilitate compliance with the 

seven-business-day waiting period 

requirement. 

Public Comment 

Many commenters addressed which 

definition of ‘‘business day’’ should 

apply for purposes of determining when 

the seven-business-day waiting period 

expires and consummation may occur. 

Most of these commenters stated that 

the more precise definition of ‘‘business 

day’’ under § 226.2(a)(6)—all calendar 

days except Sunday and specified legal 

public holidays—should be used for this 

purpose. 

Several consumer advocacy 

organizations stated that using the more 

precise definition for all purposes under 

§ 226.19(a) would allow creditors and 

supervisory agencies to determine easily 

whether timing requirements have been 

satisfied. A financial services trade 

association and a financial institution 

stated that the general definition creates 

uncertainty for a creditor if it has many 

offices, branches, and operation centers 

and only some of them are open on 

Saturdays. 

Several commenters supported using 

the general definition of ‘‘business day’’ 

for purposes of the requirement that 

creditors deliver or mail the early 

disclosures within three business days 

after receiving the consumer’s 

application, to maintain consistency 


erowe on PROD1PC63 with RULES
23294 Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 

with the RESPA rules. However, these 

commenters supported using the more 

precise definition for all other timing 

requirements. 

A financial services trade association 

supported using the more precise 

definition of ‘‘business day’’ for 

purposes of the seven-business-day 

waiting period so that the timing 

requirement would apply uniformly to 

all creditors, regardless of when their 

offices are open. A few commenters 

stated that using the general definition 

would disadvantage institutions whose 

offices are open only five days per week, 

including many community banks. 

One financial institution and a 

realtors’ trade association asserted, 

however, that the general definition of 

‘‘business day’’ should be used for 

purposes of the seven-business-day 

waiting period. The realtors’ trade 

association stated that the general 

definition should be used for all timing 

requirements to ensure consistency with 

RESPA, facilitate compliance, and 

reduce confusion for consumers. Two 

credit union trade associations and a 

financial institution stated that a single 

definition should be used for all timing 

requirements, but these commenters did 

not state a preference for one definition 

over the other. 

Final Rule 

As the Board proposed, the final rule 

requires that creditors use the general 

definition of ‘‘business day’’ to calculate 

the three-business-day period for 

providing the early disclosures. Both 

TILA and RESPA require creditors to 

provide disclosures within three 

business days after the creditor receives 

the consumer’s application. Using the 

general definition of ‘‘business day’’ (a 

day on which the creditor’s offices are 

open to the public for carrying on 

substantially all of its business 

functions) will maintain consistency 

between the TILA and RESPA 

requirements. 

Under the final rule, the more precise 

definition of ‘‘business day’’ (all 

calendar days except Sundays and 

specified Federal legal public holidays) 

is used for purposes of the requirements 

that creditors deliver or mail the early 

disclosures no later than the seventh 

business day before consummation and 

that consumers receive corrected 

disclosures (if applicable) no later than 

the third business day before 

consummation. The more precise 

definition of ‘‘business day’’ also is used 

for purposes of the rule prohibiting the 

collection of a fee (other than a fee for 

obtaining a consumer’s credit history) 

before the consumer receives the early 

disclosures, under the final rule 

published on July 30, 2008. This is 

consistent with HUD’s Regulation X (24 

CFR 3500.7(a)(4) and 3500.7(b)(4)), 

which provides that if a creditor or 

broker mails good faith estimates of 

settlement costs, a consumer is 

considered to receive them three 

calendar days after they are mailed, not 

including Sundays and specified legal 

public holidays. 

The Board believes that it is 

appropriate to use the more precise 

definition of ‘‘business day’’ for 

purposes of both the seven-business-day 

waiting period and the three-businessday waiting period, for several reasons. 

It is easier for a creditor to determine 

how to meet timing requirements using 

the more precise definition, especially a 

creditor with multiple offices that are 

not open on the same days. Using the 

more precise definition also will mean 

that the standard for determining when 

a waiting period ends is the same for all 

creditors. Moreover, whether a 

creditor’s offices are open or closed does 

not affect the time that a consumer has 

to receive and review disclosures. 

E. Consumer’s Waiver of Waiting Period 

Before Consummation—§ 226.19(a)(3) 

Proposed Rule 

Under the MDIA, to expedite 

consummation of a mortgage 

transaction, a consumer may modify or 

waive the timing requirements for the 

early disclosures when the consumer 

determines that the credit extension is 

needed to meet a bona fide personal 

financial emergency. However, the 

consumer must receive the disclosures 

required by TILA Section 128(a), 15 

U.S.C. 1638(a), at or before the time of 

the consumer’s modification or waiver. 

To implement this provision, the 

Board proposed to permit a consumer to 

shorten or waive either the sevenbusiness-day period required by 

§ 226.19(a)(1)(i) or the three-businessday waiting period required by 

§ 226.19(a)(2), provided the consumer 

has received accurate TILA disclosures 

reflecting the mortgage transaction’s 

final costs and terms. Thus, under the 

proposed rule, if the consumer waives 

the seven-business-day waiting period 

after receiving the early disclosures and 

a change occurs that makes the APR 

inaccurate (as determined under 

§ 226.22), the consumer would have to 

receive corrected disclosures with all 

changed terms not later than the third 

business day before consummation. In 

such cases, the consumer could waive 

the three-business-day waiting period in 

§ 226.19(a)(2) after receiving the 

corrected disclosures. Proposed 

comment 19(a)(3)–2 provided examples 

to facilitate compliance. 

Under proposed § 226.19(a)(3), the 

consumer would have to give the 

creditor a dated written statement 

describing the emergency and 

specifically modifying or waiving the 

waiting period(s). The use of pre-printed 

forms for this purpose would be 

prohibited and all consumers entitled to 

receive the disclosures would have to 

sign the statement. The proposal’s 

procedures for waiving the waiting 

periods were substantially similar to the 

existing rules for waiving the threebusiness-day rescission period for 

certain home-secured loans and the 

three-business-day waiting period 

before consummating certain high-cost 

mortgage loans. See §§ 226.15(e), 

226.23(e), and 226.31(c)(1)(iii). The 

Board solicited comment on whether 

the proposed rule should be more or 

less flexible than the existing 

procedures. 

The Board proposed comment 

19(a)(3)–1 to clarify that a consumer 

may modify or waive the required 

waiting period(s) only if the consumer 

has a bona fide personal financial 

emergency that must be met before the 

end of the waiting period(s). This 

proposed comment was designed to be 

consistent with the commentary on 

waiving the rescission period and the 

pre-consummation waiting period 

required for certain high-cost mortgage 

loans. See comments 15(e)–1, 23(e)–1, 

and 31(c)(1)(iii)–1. The proposed 

comment explained that whether a bona 

fide personal financial emergency exists 

would be determined by the facts 

surrounding individual situations. The 

imminent sale of the consumer’s home 

at foreclosure during the three-businessday waiting period was provided as an 

example, and the Board solicited 

comment on whether there are other 

circumstances that should be expressly 

recognized in the final rule. 

Public Comment 

Consumer advocacy organizations 

generally stated that modification or 

waiver of a waiting period should be 

permitted only in narrow 

circumstances, such as an imminent 

foreclosure, tax, or condemnation sale. 

Many financial institutions and 

financial services trade associations 

stated that much flexibility is needed to 

accommodate consumers who want to 

expedite consummation. A credit union 

association stated that the ‘‘financial 

emergency’’ exception should be 

available only in unusual and 

unforeseeable financial circumstances, 

however. 


erowe on PROD1PC63 with RULES
Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 23295 

Waiver of either waiting period. 

Consumer advocacy organizations stated 

that the final rule should permit 

consumers to waive or modify only the 

seven-business-day waiting period and 

asserted that the MDIA does not allow 

consumers to waive or modify the threebusiness-day waiting period. They 

asserted that a bona fide personal 

financial emergency seldom would arise 

unexpectedly after the creditor makes 

early disclosures and before 

consummation. Consumer advocates 

also stated that even if waiver of the 

three-business-day waiting period is 

permitted in some circumstances, it 

should not be permitted when the 

consumer already has waived the sevenbusiness-day waiting period. They 

noted that consumers must receive 

‘‘final disclosures’’ before waiving the 

seven-business-day waiting period and 

stated that the Board should interpret 

the MDIA to prohibit changes in APR 

after a creditor provides these 

disclosures and obtains the consumer’s 

signed waiver. Thus, under their 

interpretation of the statute, corrected 

disclosures and a new three-businessday waiting period would be 

unnecessary. 

Few of the financial institutions and 

financial services trade associations 

specifically discussed waiver of the 

three-business-day waiting period after 

a consumer receives corrected 

disclosures, but those that did address 

the issue supported allowing such 

waiver. A financial institution stated 

that, in cases where the creditor 

provides corrected disclosures, the 

consumer’s previous waiver of the 

seven-business-day waiting period 

under § 226.19(a)(3) automatically 

should waive the three-business-day 

waiting period as well. 

Waiver procedures and conditions. 

Consumer advocacy organizations 

supported the waiver procedures as 

proposed and stated that the waiver 

should be handwritten, to prevent 

consumers from unwittingly signing a 

creditor’s pre-printed waiver forms. On 

the other hand, two financial 

institutions stated that waiver using preprinted forms should be permitted. One 

financial institution recommended 

clarifying whether each consumer 

primarily liable on the obligation should 

sign the written waiver, even though 

under § 226.17(d) a creditor need only 

provide the disclosures to one of the 

consumers who is primarily liable on 

the obligation. A consumer advocacy 

organization urged the Board to require 

creditors to give early disclosures to all 

of the consumers who will be obligated 

on a mortgage transaction. By contrast, 

a financial services trade association 

stated that creditors should be allowed 

to accept a waiver from one consumer, 

even where multiple consumers will be 

obligated on the loan. 

Most financial institutions and 

financial services trade associations 

stated that the final rule should specify 

that creditors do not have to investigate 

a consumer’s determination that the 

credit extension is needed to meet a 

bona fide personal financial emergency. 

Two financial institutions stated that 

the Board should allow consumers to 

waive a waiting period even when a 

bona fide personal financial emergency 

does not have to be met during the 

waiting period. A credit union stated 

that the Board should allow consumers 

to waive a waiting period where a bona 

fide personal financial emergency must 

be satisfied within a few days after the 

waiting period, for example, where a 

consumer facing imminent foreclosure 

must make payments before the actual 

date of a foreclosure sale. Most 

consumer advocacy organizations 

opposed allowing waiver unless a bona 

fide personal financial emergency must 

be met during the waiting period. 

Examples of a bona fide personal 

financial emergency. Proposed 

comment 19(a)(3)–1 states that the 

imminent sale of a consumer’s home at 

foreclosure during the waiting period is 

an example of a bona fide personal 

financial emergency. This example is 

consistent with commentary on waiving 

a pre-consummation waiting period that 

is required for HOEPA loans under 

§ 226.31(c)(1)(iii). Most of the financial 

institutions and financial services trade 

associations that discussed this 

commentary stated that the Board 

should provide additional guidance on 

when waiver is permitted and how it 

may be accomplished. Several of these 

commenters stated that without such 

guidance, creditors will rarely, if ever, 

allow a consumer to waive a waiting 

period. Most of these commenters stated 

that the final rule should provide 

additional examples of circumstances 

that are considered to be a bona fide 

personal financial emergency. Two 

financial services trade associations 

stated that the Board should clarify that 

any examples are merely illustrative and 

that a bona fide personal financial 

emergency may exist in other 

circumstances. Two financial services 

trade associations stated that the final 

rule should permit a consumer to waive 

a waiting period to avoid a foreclosure 

on a dwelling occupied by tenants. 

Several financial institutions and 

financial services trade associations 

stated that consumers should be able to 

waive a waiting period if they plan to 

use the loan proceeds to pay a tuition 

expense. On the other hand, a credit 

union association stated that tuition 

expenses should not be considered to be 

a bona fide personal financial 

emergency, especially if the payment 

deadline was known well in advance. 

Other circumstances that commenters 

stated should be considered as a bona 

fide personal financial emergency 

included cases where a borrower needs 

to: pay an emergency medical expense; 

consummate a transaction before an 

upcoming increase in a land transfer 

tax; make repairs after a natural disaster 

to prevent additional property damage; 

obtain a refinance loan before a payment 

increase on an adjustable-rate mortgage; 

and avoid paying a late charge on an 

existing obligation. 

Final Rule 

The Board is adopting § 226.19(a)(3) 

substantially as proposed, which is 

consistent with Regulation Z’s existing 

provisions for waiving the threebusiness-day right of rescission for 

certain mortgage transactions. Under the 

final rule, if a consumer determines that 

an extension of credit is needed to meet 

a bona fide personal financial 

emergency, the consumer may shorten 

or waive the seven business-day waiting 

period or the three-business-day waiting 

period required by § 226.19(a)(2) after 

the consumer receives accurate TILA 

disclosures that reflect the final costs 

and terms. To shorten or waive a 

waiting period, the consumer must give 

the creditor a dated written statement 

that describes the emergency, 

specifically modifies or waives the 

waiting period, and bears the signature 

of all the consumers who will be 

primarily liable on the legal obligation. 

Creditors may not use pre-printed forms 

for this purpose. 

Waiver of either waiting period. The 

final rule permits consumers to waive 

either the seven-business-day or the 

three-business-day waiting period and 

thus recognizes that a bona fide 

personal financial emergency could 

occur at any time, including after the 

consumer receives the initial early 

disclosures. For example, a consumer 

might receive the initial early 

disclosures with the expectation of 

closing the loan within 60 days. 

However, the consumer’s financial 

circumstances might change in the 

interim, creating a need to consummate 

the loan immediately. Under the final 

rule, if the APR stated in the early 

disclosures is no longer accurate, after 

receiving a corrected disclosure the 

consumer can provide a signed 

statement describing the financial 

emergency in order to waive the threebusiness-day waiting period and close 


erowe on PROD1PC63 with RULES
23296 Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 

the loan. New comment 19(a)(3)–3 

illustrates the case where a consumer 

does not modify or waive the sevenbusiness-day waiting period but 

modifies the three-business-day waiting 

period, after receiving a corrected 

disclosure. 

Consumer advocates asserted that the 

MDIA does not provide for waiver of the 

three-business-day waiting period. The 

Board disagrees with that interpretation 

of the statute. Under the MDIA, 

consumers may waive or modify the 

timing requirements (and thus the 

waiting periods) for the disclosures 

required under TILA Section 

128(b)(2)(A). The Board interprets this 

provision in the MDIA to apply to the 

‘‘good faith estimates’’ provided under 

section 128(b)(2)(A)—whether they are 

the creditor’s initial early disclosures or 

a corrected version provided 

subsequently. The requirement in TILA 

Section 128(b)(2)(D) for a creditor to 

provide a corrected disclosure is 

essentially a requirement for the 

creditor to provide an additional set of 

the early disclosures required by TILA 

Section 128(b)(2)(A). 

Consumer advocates further asserted 

that even if the Board determines that 

the three-business-day waiting period 

can be waived in some circumstances, 

consumers should not be permitted to 

waive the three-business-day waiting 

period if they have previously waived 

the seven-business-day waiting period. 

In their view, once a consumer receives 

the initial early disclosures and waives 

the seven-business-day waiting period, 

the APR may not be changed, even 

though the transaction has not been 

consummated. The consumer advocates 

note that under the MDIA consumers 

can waive the seven-business-day 

waiting period only after they receive 

‘‘final’’ TILA disclosures. The Board 

does not agree with the consumer 

advocates’ interpretation of the statute. 

The MDIA seeks to ensure that a 

consumer’s decision to waive the 

waiting period and immediately 

consummate the loan is informed by an 

accurate ‘‘final’’ TILA disclosure. There 

is no indication, however, that the 

Congress intended to make the rate or 

other terms stated in the disclosures 

binding on the parties. Although 

creditors must provide an accurate 

‘‘final’’ disclosure before the consumer 

waives the seven-business-day waiting 

period and consummates the loan, 

providing such a disclosure by itself 

does not assure that the APR (or other 

loan terms) cannot change. Thus, if the 

APR subsequently increases by more 

that the specified tolerance, the 

consumer’s previous waiver is no longer 

effective and a new ‘‘final’’ disclosure 

must be given. After receiving the new 

‘‘final’’ disclosure, a consumer may 

decide whether to provide another 

signed waiver statement. 

Waiver procedures and conditions. 

The final rule requires that waivers be 

written, not pre-printed, consistent with 

regulatory requirements for waiver of a 

rescission period or of the waiting 

period before consummation of a 

HOEPA loan. The Board is revising 

comment 19(a)(3)–1 to clarify that each 

consumer who will be primarily liable 

on the legal obligation must sign the 

written statement, in order for a waiver 

to be effective. The MDIA states that a 

waiver statement ‘‘shall bear the 

signature of all consumers entitled to 

receive the disclosures required by’’ 

TILA Section 128(b), 15 U.S.C. 1638(b), 

and proposed comment 19(a)(3)–1 

contained similar language. However, in 

a transaction where multiple consumers 

are primarily liable on the legal 

obligation, a creditor may provide 

disclosures to one of those consumers 

rather than to all of them. TILA Section 

121(a), 15 U.S.C. 1631(a); 12 CFR 

226.17(d). To avoid confusion, the 

Board has revised comment 19(a)(3)–1 

to provide that a statement that shortens 

or waives a pre-consummation waiting 

period must be signed by each 

consumer who is primarily liable on the 

legal obligation. This is consistent with, 

yet more specific than, comment 23(e), 

which states that a waiver statement 

must be signed by each consumer 

entitled to rescind, and comment 

31(c)(iii)–1, which states that a waiver 

statement must be signed by each 

consumer entitled to the waiting period 

for HOEPA loans. 

Some commenters requested that the 

Board adopt a comment stating that the 

existence of a consumer’s waiver 

insulates a creditor from liability in 

connection with such waiver. The Board 

is not adopting such commentary. 

Comments 15(e)–1 and 23(e)–1 state that 

the existence of a consumer’s waiver 

will not, of itself, automatically insulate 

the creditor from liability for failing to 

provide the right of rescission. The 

Board expects to consider Regulation 

Z’s modification and waiver rules for 

the MDIA, rescission, and HOEPA in 

connection with its broader review of 

regulations for closed-end consumer 

credit. 

Some commenters suggested that 

consumers may need to obtain the loan 

proceeds during the waiting period to 

prevent an emergency, such as 

foreclosure, that will not occur until 

after the waiting period. For example, if 

a foreclosure sale is scheduled to occur 

a few days after a waiting period ends, 

a consumer may need to obtain funds 

within the waiting period to reinstate 

the mortgage before the date of the 

scheduled foreclosure sale. However, 

the longer the period before an adverse 

event will occur, the less likely it is that 

consummation actually needs to occur 

during the waiting period to avoid the 

adverse event. 

Example of a bona fide personal 

financial emergency. Comment 19(a)(3)– 

1 has been revised to clarify that 

consumers who need to obtain the funds 

during the waiting period may execute 

the waiver in such cases. The example 

stated in comment 19(a)(3)–1 is merely 

illustrative; a consumer may determine 

that a credit extension is necessary to 

meet a bona fide personal financial 

emergency in circumstances other than 

foreclosure. The Board believes that it is 

not necessary to state additional 

examples of a bona fide personal 

financial emergency at this time. 

Whether credit must be extended before 

a waiting period expires, in order to 

meet a bona fide personal financial 

emergency, is determined based on the 

facts associated with individual 

situations, as comment 19(a)(3)–1 states. 

The Board believes waivers should not 

be used routinely to expedite 

consummation for reasons of 

convenience. As the MDIA requires, 

under the final rule a waiver statement 

must be written by the consumer. As 

proposed, the final rule prohibits the 

use of pre-printed forms to further 

protect against routine modification or 

waiver of the waiting periods. 

F. Notice—§ 226.19(a)(4) 

Proposed Rule 

The MDIA requires that the early 

disclosures contain a clear and 

conspicuous notice containing the 

following statement: ‘‘You are not 

required to complete this agreement 

merely because you have received these 

disclosures or signed a loan 

application.’’ The Board proposed to 

implement this requirement in a new 

§ 226.19(a)(4), for the early disclosures 

required by § 226.19(a)(1)(i), as well as 

any corrected disclosures required by 

§ 226.19(a)(2). The Board solicited 

comment on the costs and benefits of 

the proposed rule. The Board also 

solicited comment on the language used 

in the disclosures and whether other 

language might be easier for consumers 

to understand. 

Public Comment 

Consumer advocacy organizations 

stated that the Board should not alter 

the statutory language without a 

compelling reason. These commenters 

noted that the statutory text for the 


erowe on PROD1PC63 with RULES
Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 23297 

notice is almost identical to the 

statutory text for the notice required for 

HOEPA loans. Two financial services 

trade associations and a financial 

institution stated that using the phrase 

‘‘this agreement’’ in the required 

statement would mislead consumers, 

because the disclosures are not in fact 

an agreement. Several industry 

commenters recommended that the 

Board publish model forms or clarify 

how creditors can make the disclosure 

in ‘‘conspicuous type size and format.’’ 

A credit union trade association stated 

that the MDIA’s notice requirements 

would not benefit consumers but would 

increase financial institutions’ costs 

considerably. 

A financial institution stated that 

many creditors routinely provide new 

disclosures under § 226.18 to the 

consumer on the day of consummation, 

even where the creditor is not required 

to provide corrected disclosures. The 

bank stated that such ‘‘final’’ disclosures 

should be permitted to contain the 

statement required by § 226.19(a)(4) so 

that creditors may use a single form. 

Final Rule 

The Board is adopting § 226.19(a)(4) 

as proposed using the text contained in 

the statute. The statement required by 

§ 226.19(a)(4) must be grouped together 

with the other disclosures required by 

§ 226.19(a)(1) and § 226.19(a)(2). Most 

creditors provide TILA disclosures at 

consummation, even if the early 

disclosures remain accurate and 

corrected disclosures are not required. 

To facilitate compliance for creditors 

that use the same form for the initial 

disclosures and final disclosures, new 

comment 17(a)(1)–5(xvi) clarifies that 

creditors may also include the notice 

described in § 226.19(a)(4) on the 

disclosures provided at consummation 

and may group the notice together with 

the disclosures required by § 226.18. 

The Board believes that the reference 

to an ‘‘agreement’’ is sufficiently clear as 

a reference to the loan agreement that 

the disclosures summarize. The Board is 

not proposing new model disclosures at 

this time because the Board anticipates 

proposing new model disclosure forms 

and clauses during 2009, in connection 

with consumer testing and the 

comprehensive review of closed-end 

mortgage disclosures that currently is 

underway. 

G. Timeshare Transactions— 

§ 226.19(a)(5) 

Proposed Rule 

The Board proposed a new 

§ 226.19(a)(5) containing the early 

disclosure requirements for mortgage 

loans secured by a consumer’s interest 

in a ‘‘timeshare plan’’ (timeshare 

transactions), as defined in the 

bankruptcy laws (see 11 U.S.C. 

101(53D)). Pursuant to amendments in 

the Stabilization Act, the disclosure 

timing requirements and the fee 

restriction added by the MDIA are not 

applicable to timeshare transactions, 

which instead are subject to the same 

disclosure timing requirements that 

applied to ‘‘residential mortgage 

transactions’’ under TILA Section 

128(b)(2), 15 U.S.C. 1638(b), before the 

MDIA was enacted. Accordingly, for 

timeshare transactions, proposed 

§ 226.19(a)(5) required that creditors 

make good faith estimates of the 

disclosures required by § 226.18 that 

must be delivered or placed in the mail 

within three business days after the 

creditor receives the consumer’s 

application or before the credit is 

extended, whichever is earlier. The 

seven-business-day waiting period and 

three-business-day waiting period 

before consummation contained in 

§ 226.19(a)(2) do not apply to timeshare 

transactions. 

For timeshare transactions, if the APR 

stated in the early disclosures changes 

beyond the specified tolerance, under 

proposed § 226.19(a)(5)(iii), creditors 

would have to disclose all the changed 

terms no later than consummation or 

settlement of the transaction, consistent 

with the existing rules for residential 

mortgage transactions in § 226.19(a)(2). 

Currently, comment 19(a)(2)–3 states 

that ‘‘consummation’’ is defined in 

§ 226.2(a), and ‘‘date of settlement’’ is 

defined in HUD’s Regulation X (24 CFR 

3500.2(a)). As discussed above, for 

transactions other than timeshare 

transactions, the MDIA amends TILA to 

remove reference to ‘‘settlement’’ from 

TILA’s provisions requiring creditors to 

make corrected disclosures. 

The Board solicited comment on the 

costs and benefits of basing the timing 

for corrected disclosures on the time of 

consummation or settlement for 

timeshare transactions but solely on the 

time of consummation for other 

mortgage loans. The Board asked 

whether Regulation Z’s timing 

requirements for corrected disclosures 

should be made consistent for all 

closed-end mortgage transactions by 

requiring creditors to make corrected 

disclosures at the time of consummation 

for timeshare transactions. The Board 

also asked, in the alternative, whether 

Regulation Z should require creditors to 

make corrected disclosures three 

business days before consummation or 

settlement, whichever is later, for 

closed-end mortgage loans other than 

timeshare transactions. 

Public Comment 

Most consumer advocacy 

organizations stated that corrected 

disclosures for all mortgage loans other 

than timeshare transactions should be 

provided before consummation, which 

marks the time when the consumer’s 

legal obligation begins. These 

commenters stated that allowing 

corrected disclosures to be given at the 

time of settlement would be less 

advantageous for consumers, because 

they would be obligated on the 

transaction before they received the 

corrected disclosures. They 

recommended that the same rules 

should apply to timeshare transactions 

as well. A community bank trade 

association stated that the disclosure 

timing requirements for timeshare 

transactions should be the same as for 

other closed-end mortgage transactions, 

to facilitate compliance with Regulation 

Z. 

Final Rule 

The Board is adopting § 226.19(a)(5) 

as proposed. The final rule, like the 

proposed rule, tracks the MDIA’s 

requirements for timeshare transactions 

in TILA Section 128(b)(2)(G), as 

amended. In particular, under 

§ 226.19(a)(5)(iii), if the APR stated in 

the early disclosures becomes 

inaccurate, the creditor must disclose all 

the changed terms no later than 

consummation or settlement. By 

contrast, for loans other than timeshare 

transactions, the creditor must make 

corrected disclosures (if required) not 

later than the third business day before 

consummation, which conforms with 

TILA Section 128(b)(2)(D), as added by 

the MDIA. 

For timeshare transactions, the 

general definition of ‘‘business day’’ 

(days the creditor’s offices are open to 

the public for carrying on substantially 

all of its business functions) is used for 

purposes of § 226.19(a)(5)(ii), as 

proposed. This is consistent with the 

rules for providing early disclosures for 

other types of mortgage transactions. 

Also, the commentary accompanying 

§ 226.19(a)(5) has been revised for 

clarity. 

H. Solicitation of Comments on Timing 

of Disclosures for Home Equity Lines of 

Credit 

The MDIA applies only to closed-end 

loans secured by a consumer’s dwelling 

and does not affect the disclosure 

requirements for open-end credit plans 

secured by a dwelling (home equity 

lines of credit, or HELOCs). In 

connection with the Board’s 

comprehensive review of Regulation Z, 


erowe on PROD1PC63 with RULES
23298 Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 

the Board’s staff is currently reviewing 

the content and format of HELOC 

disclosures and subjecting them to 

consumer testing. To aid in this review, 

the Board sought comment on whether 

it is necessary or appropriate to change 

the timing of HELOC disclosures and, if 

so, what changes should be made. The 

Board is considering the comments 

received and anticipates issuing a 

proposal to improve the disclosures 

later in 2009. 

I. Effective Date 

This final rule becomes effective on 

July 30, 2009, consistent with the 

requirements of the MDIA. The 

provisions in TILA Section 105(d), 15 

U.S.C. 1604(d), regarding the effective 

date of new disclosure requirements is 

superseded by the effective date of the 

MDIA. 

Many financial institutions and 

financial services trade associations 

stated that the final rules implementing 

the MDIA should apply only to 

mortgage transactions for which 

creditors receive the consumer’s 

application on or after July 30, 2009. 

The final rule adopts this approach, 

which is consistent with comment 

1(d)(5)–1, contained in the July 2008 

final rule. 

The Board is adopting new comment 

1(d)(3)–1 to facilitate compliance by 

specifying which provisions of the July 

2008 final rule will become effective on 

July 30, 2009 as revised by this final 

rule. Compliance with those provisions, 

as revised, is mandatory for covered 

loans for which the creditor receives an 

application on or after July 30, 2009. 

The specific amended subsections are 

§§ 226.2(a)(6), 226.17(b) and (f), and 

226.19(a)(1) through (a)(5). Covered 

loans include refinance loans and 

assumptions that are considered to be 

new transactions under § 226.20(a) or 

(b). 

IV. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act (PRA) of 1995 (44 U.S.C. 

3506; 5 CFR Part 1320 Appendix A.1), 

the Board reviewed the final rule under 

the authority delegated to the Board by 

the Office of Management and Budget 

(OMB). The collection of information 

that is required by this final rule is 

found in 12 CFR part 226. The Board 

may not conduct or sponsor, and an 

organization is not required to respond 

to, this information collection unless the 

information collection displays a 

currently valid OMB control number. 

The OMB control number is 7100–0199. 

This information collection is 

required to provide benefits for 

consumers and is mandatory (15 U.S.C. 

1601 et seq.). Since the Board does not 

collect any information, no issue of 

confidentiality arises. The respondents/ 

recordkeepers are creditors and other 

entities subject to Regulation Z, 

including for-profit financial 

institutions and small businesses. 

TILA and Regulation Z are intended 

to ensure effective disclosure of the 

costs and terms of credit to consumers. 

For closed-end loans, such as mortgage 

and installment loans, cost disclosures 

are required to be provided prior to 

consummation. Special disclosures are 

required in connection with certain 

products, such as reverse mortgages, 

certain variable-rate loans, and certain 

mortgages with rates and fees above 

specified thresholds. TILA and 

Regulation Z also contain rules 

concerning credit advertising. Creditors 

are required to retain evidence of 

compliance for twenty-four months 

(§ 226.25), but Regulation Z does not 

specify the types of records that must be 

retained. 

Under the PRA, the Board accounts 

for the paperwork burden associated 

with Regulation Z for the state member 

banks and other creditors supervised by 

the Board that engage in lending 

covered by Regulation Z and, therefore, 

are respondents under the PRA. 

Appendix I of Regulation Z defines the 

institutions supervised by the Federal 

Reserve System as: state member banks, 

branches and agencies of foreign banks 

(other than Federal branches, Federal 

agencies, and insured State branches of 

foreign banks), commercial lending 

companies owned or controlled by 

foreign banks, and organizations 

operating under section 25 or 25A of the 

Federal Reserve Act. Other Federal 

agencies account for the paperwork 

burden imposed on the entities for 

which they have administrative 

enforcement authority under TILA. To 

ease the burden and cost of complying 

with Regulation Z (particularly for small 

entities), the Board provides model 

forms, which are appended to the 

regulation. 

As discussed above, on December 10, 

2008, the Board published in the 

Federal Register a notice of proposed 

rulemaking to implement the MDIA (73 

FR 74989). The comment period for this 

notice expired February 9, 2009. The 

Board received two comment letters 

from banks that specifically addressed 

paperwork burden. The commenters 

asserted that the hourly estimate of the 

cost of compliance should be 

considerably higher than the Board 

projected. The commenters noted that, 

in addition to updating their systems 

and internal procedure manuals, 

compliance would require additional 

staff training but did not provide 

specific estimates of additional burden 

hours that would result from the 

proposal. In response to those 

comments, the Board is increasing the 

burden estimate attributable to 

additional staff training and updates to 

internal procedures. 

Based on this adjustment to the 

estimate published in the proposed rule 

the Board estimates that each of the 

1,138 respondents supervised by the 

Federal Reserve System would take, on 

average, 40 hours (one business week) to 

update their systems, provide additional 

staff training, and update internal 

procedures to comply with the proposed 

disclosure requirements in §§ 226.17 

and 226.19. This one-time revision 

would increase the burden for the 

respondents supervised by the Federal 

Reserve System by 45,520 hours from 

688,607 hours to 734,127 hours. 

The total estimated burden increase 

represents averages for all respondents 

supervised by the Federal Reserve 

System. The Board expects that the 

amount of time required to implement 

each of the changes for a given 

institution may vary based on the size 

and complexity of the respondent. 

The other Federal financial institution 

supervisory agencies (the Office of the 

Comptroller of the Currency (OCC), the 

Office of Thrift Supervision (OTS), the 

Federal Deposit Insurance Corporation 

(FDIC), and the National Credit Union 

Administration (NCUA)) are responsible 

for estimating and reporting to OMB the 

total paperwork burden for the 

domestically chartered commercial 

banks, thrifts, and Federal credit unions 

and U.S. branches and agencies of 

foreign banks for which they have 

primary administrative enforcement 

jurisdiction under TILA Section 108(a), 

15 U.S.C. 1607(a). These agencies may, 

but are not required to, use the Board’s 

burden estimation methodology. Using 

the Board’s method, the total current 

estimated annual burden for the 

approximately 17,200 domestically 

chartered commercial banks, thrifts, and 

Federal credit unions and U.S. branches 

and agencies of foreign banks 

supervised by the Board, OCC, OTS, 

FDIC, and NCUA under TILA would be 

approximately 13,568,725 hours. The 

final rule will impose a one-time 

increase in the estimated annual burden 

for such institutions by 688,000 hours to 

14,256,725 hours. The above estimates 

represent an average across all 

respondents and reflect variations 

between institutions based on their size, 

complexity, and practices. 

The Board has a continuing interest in 

the public’s opinions of its collections 

of information. At any time, comments 


erowe on PROD1PC63 with RULES
Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 23299 

2Under standards the U.S. Small Business 

Administration sets (SBA), an entity is considered 

‘‘small’’ if it has $175 million or less in assets for 

banks and other depository institutions; and $6.5 

million or less in revenues for non-bank mortgage 

lenders, mortgage brokers, and loan servicers. U.S. 

Small Business Administration, Table of Small 

Business Size Standards Matched to North 

American Industry Classification System Codes, 

available at http://www.sba.gov/idc/groups/public/ 

documents/sba_homepage/serv_sstd_tablepdf.pdf. 

3HMDA requires lenders to report information 

annually to their federal supervisory agencies for 

each application and loan acted on during the 

calendar year. See 12 U.S.C. 2801 et seq. The loans 

reported are estimated to represent about 80 percent 

of all home lending nationwide and therefore are 

likely to be broadly representative of home lending 

in the United States. Robert B. Avery, Kenneth P. 

Brevoort, and Glenn B. Canner, The 2007 HMDA 

Data, 84 Federal Reserve Bulletin A107, A107 (Dec. 

2008) (2007 HMDA Data), http:// 

www.federalreserve.gov/pubs/bulletin/2008/pdf/ 

hmda07final.pdf. 

regarding the burden estimate or any 

other aspect of this collection of 

information, including suggestions for 

reducing the burden, may be sent to: 

Secretary, Board of Governors of the 

Federal Reserve System, 20th and C 

Streets, NW., Washington, DC 20551; 

and to the Office of Management and 

Budget, Paperwork Reduction Project 

(7100–0199), Washington, DC 20503. 

V. Final Regulatory Flexibility Analysis 

In accordance with section 4 of the 

Regulatory Flexibility Act (RFA), 5 

U.S.C. 601–612, the Board is publishing 

a final regulatory flexibility analysis for 

the proposed amendments to Regulation 

Z. The RFA generally requires an agency 

to perform an assessment of the impact 

a rule is expected to have on small 

entities.2 However, under Section 605(b) 

of the RFA, 5 U.S.C. 605(b), the 

regulatory flexibility analysis otherwise 

required under section 604 of the RFA 

is not required if an agency certifies that 

the rule will not have a significant 

economic impact on a substantial 

number of small entities and states the 

factual basis for such certification. The 

Board continues to believe that this final 

rule will not have a significant 

economic impact on a substantial 

number of small entities. The final 

amendments to Regulation Z are 

narrowly designed to implement the 

revisions to TILA made by the MDIA. 

Creditors must comply with the MDIA’s 

requirements when they become 

effective on July 30, 2009, whether or 

not the Board amends Regulation Z to 

conform the regulation to the statute. 

The Board’s final rule is intended to 

facilitate compliance by eliminating 

inconsistencies between Regulation Z’s 

existing requirements and the statutory 

requirements imposed by the MDIA 

starting July 30, 2009. 

A. Statement of the Need for, and 

Objectives of, the Final Rule 

Congress enacted the TILA based on 

findings that economic stability would 

be enhanced and competition among 

consumer credit providers would be 

strengthened by the informed use of 

credit resulting from consumers’ 

awareness of the cost of credit. One of 

the stated purposes of TILA is to 

provide a meaningful disclosure of 

credit terms to enable consumers to 

compare credit terms available in the 

marketplace more readily and avoid the 

uninformed use of credit. TILA also 

contains procedural and substantive 

protections for consumers. TILA directs 

the Board to prescribe regulations to 

carry out the purposes of the statute. 

The Board’s Regulation Z implements 

TILA. 

Congress enacted the MDIA in 2008 as 

an amendment to TILA. The MDIA 

amends TILA’s disclosure requirements 

for closed-end mortgage transactions 

that are secured by a consumer’s 

dwelling and subject to the Real Estate 

Settlement Procedures Act (RESPA). In 

July 2008, the Board revised Regulation 

Z to expand the number of transactions 

in which creditors must give a good 

faith estimate of the required 

disclosures (early disclosures). 

Previously, early disclosures were 

required only for loans made to finance 

the purchase or initial construction of a 

consumer’s principal dwelling. Under 

the July 2008 final rule, creditors must 

provide early disclosures for any 

mortgage loan secured by the 

consumer’s principal dwelling, such as 

a home refinance loan or home equity 

loan. The MDIA amends TILA to require 

early disclosures for consumer loans 

secured by any dwelling, even if it is not 

the consumer’s principal dwelling. As 

explained in parts I and III of the 

SUPPLEMENTARY INFORMATION, the MDIA 

and the Board’s final rule require 

creditors to delay consummating a loan 

for seven business days after the 

creditor makes early disclosures, and 

three business days after the consumer 

receives any required corrected 

disclosures. 

B. Summary of Issues Raised by 

Comments in Response to the Initial 

Regulatory Flexibility Analysis 

Parts I and III of the SUPPLEMENTARY

INFORMATION contain a detailed 

discussion of the objectives and legal 

basis for this final rulemaking. In 

summary, the amendments to 

Regulation Z are designed to implement 

changes that the MDIA makes to TILA. 

The legal basis for the final rule is in 

Section 105(a) of TILA. 

In connection with the proposed rule 

to implement the MDIA, the Board 

sought information and comment on 

any costs, compliance requirements, or 

changes in operating procedures arising 

from the application of the rule to small 

institutions. The Board received several 

comments from small banks and trade 

associations that represent small banks. 

The commenters asserted that 

compliance with a final rule to 

implement the MDIA would increase 

costs and delay consummation of loans 

secured by a consumer’s dwelling and 

subject to RESPA. However, these 

comments did not contain specific 

information about costs that will be 

incurred or changes in operating 

procedures that will be required to 

comply with the final rule. In general, 

the comments discussed the impact of 

statutory requirements rather than any 

impact that the Board’s proposed rule 

itself would generate. The Board 

continues to believe that this final rule 

will not have a significant impact on a 

substantial number of small entities. 

C. Description and Estimate of Small 

Entities to Which the Final Rule Will 

Apply 

The final regulations will apply to all 

institutions and entities that engage in 

closed-end, dwelling-secured lending 

that is for consumer purposes and 

subject to RESPA. TILA and Regulation 

Z have broad applicability to 

individuals and businesses that 

originate even small numbers of homesecured loans. See § 226.1(c)(1). As 

discussed in the initial Regulatory 

Flexibility Analysis, through data from 

Reports of Condition and Income (Call 

Reports) of depository institutions and 

certain subsidiaries of banks and bank 

holding companies, as well as data 

reported under the Home Mortgage 

Disclosure Act (HMDA),3 the Board can 

estimate the approximate number of 

small depository institutions that would 

be subject to the rules. For the majority 

of HMDA respondents that are not 

depository institutions, exact asset size 

information is not available, although 

the Board has estimates based on selfreporting from approximately five 

percent of the non-depository 

respondents. 

Based on the best information 

available, the Board makes the following 

estimate of small entities that would be 

affected by this final rule: According to 

December 2008 Call Report data, 

approximately 9,418 small depository 

institutions would be subject to the rule. 

Approximately 16,648 depository 

institutions in the United States filed 

Call Report data, approximately 12,034 

of which had total domestic assets of 


erowe on PROD1PC63 with RULES
23300 Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 

4 2007 HMDA Data at A109 and tbl. 2. 

$175 million or less and thus were 

considered small entities for purposes of 

the RFA. Of the 4,230 banks, 564 thrifts, 

7,111 credit unions, and 129 branches of 

foreign banks that filed Call Report data 

and were considered small entities, 

4,090 banks, 529 thrifts, 4,796 credit 

unions, and 3 branches of foreign banks, 

totaling 9,418 institutions, extended 

mortgage credit. For purposes of this 

Call Report analysis, thrifts include 

savings banks, savings and loan entities, 

co-operative banks and industrial banks. 

Further, 1,752 non-depository 

institutions (independent mortgage 

companies, subsidiaries of a depository 

institution, or affiliates of a bank 

holding company) filed HMDA reports 

in 2008 for 2007 lending activities.4

Based on the small volume of lending 

activity reported by these institutions, 

most are likely to be small entities. 

D. Reporting, Recordkeeping, and Other 

Compliance Requirements 

The compliance requirements of the 

final rule are described in parts I and III 

of the SUPPLEMENTARY INFORMATION. To 

comply with the revised rules, many 

small entities will be required to modify 

their procedures for making credit 

disclosures for dwelling-secured 

mortgage loans. The precise costs to 

small entities of updating their systems 

and disclosures are difficult to predict. 

These costs will depend on a number of 

unknown factors, including, among 

other things, the specifications of the 

current systems used by such entities to 

prepare and provide disclosures. 

E. Steps Taken To Minimize the 

Economic Impact on Small Entities 

As discussed in part III of the 

SUPPLEMENTARY INFORMATION, TILA and 

RESPA both require disclosures for 

dwelling-secured loans that must be 

given within three business days of 

application. Under Regulation Z, the 

Board has interpreted TILA’s timing 

requirement to be consistent with the 

timing of RESPA disclosures. Thus, 

where possible, the Board has made 

terms and definitions used in 

Regulation Z consistent with those 

terms as they are used in HUD’s 

Regulation X. For example, Regulation Z 

provides that creditors may rely on 

RESPA and Regulation X (including any 

interpretations issued by HUD) in 

deciding whether a ‘‘written 

application’’ has been received. As a 

further example, the definition of 

‘‘business day’’ that is used under the 

Board’s final rule for purposes of 

requirements for a creditor to deliver or 

mail good faith estimates of loan terms 

(also known as the ‘‘early disclosures’’) 

within three business days after the 

creditor receives a consumer’s 

application is consistent with the 

‘‘business day’’ definition used under 

Regulation X for purposes of 

requirements for creditors to provide 

good faith estimates of settlement 

charges within three business days after 

the creditor receives the consumer’s 

application. Many creditors send the 

good faith estimates required by 

Regulation Z and Regulation X together; 

these creditors may continue to send 

these disclosures together, under the 

Board’s final rule. Moreover, under both 

Regulation Z and Regulation X, 

creditors count all calendar days except 

Sundays and specified legal holidays to 

determine when a consumer is 

considered to have received disclosures 

provided by means other than delivery 

in person. Using common definitions for 

terms that apply under both Regulation 

Z and Regulation X reduces the impact 

of the MDIA on all creditors, including 

small creditors. 

The Board has made one change in 

the final rule that further reduces the 

impact of the MDIA’s amendments to 

TILA on small creditors and other 

creditors. The MDIA adds two preconsummation waiting periods—one of 

seven business days after the creditor 

delivers the early disclosures, and the 

other of three business days after a 

consumer receives corrected 

disclosures, if any are required—to 

TILA’s requirements. Under the Board’s 

final rule, the same definition of 

‘‘business day’’ is used for purposes of 

each waiting period. Further, the 

definition of ‘‘business day’’ that will 

apply for purposes of determining when 

a waiting period expires and 

consummation may occur is an 

objective definition: all calendar days 

except Sundays and specified legal 

public holidays. The Board is not 

adopting its proposal to apply 

Regulation Z’s general definition of 

‘‘business day’’ (days on which the 

creditor’s offices are open to the public 

for carrying on substantially all of its 

business functions), for purposes of this 

requirement. Under the Board’s 

proposal, creditors whose offices are 

open seven days per week would be 

able to consummate mortgage 

transactions that are subject to the 

MDIA sooner than creditors whose 

offices are open fewer days per week. 

This will not be the case under the final 

rule. To the extent that small creditors’ 

offices are less likely than large 

creditors’ offices to be open on Saturday 

or Sunday, the final rule creates parity 

between small and large entities by 

applying the more precise definition of 

‘‘business day’’ for purposes of 

determining when the seven-businessday waiting period expires and 

consummation may occur. 

This regulatory flexibility analysis 

does not discuss alternatives to the final 

rule because the Board is revising 

Regulation Z for the narrow purpose of 

carrying out its statutory mandate to 

implement statutory amendments to 

TILA. 

List of Subjects in 12 CFR Part 226 

Advertising, Consumer protection, 

Federal Reserve System, Mortgages, 

Reporting and recordkeeping 

requirements, Truth in lending. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the effective date for the 

amendments to 12 CFR 226.2(a)(6), 

226.17(b) and (f), and 226.19(a)(1), and, 

in Supplement I (Official Staff 

Interpretations) to part 226, under 

Section 226.1 Authority, Purpose, 

Coverage, Organization, Enforcement 

and Liability, under Section 226.2 

Definitions and Rules of Construction, 

under Section 226.17 General 

Disclosure Requirements, and under 

Section 226.19 Certain Residential 

Mortgage and Variable-Rate 

Transactions, published on July 30, 

2008 (73 FR 44600), previously October 

1, 2009, is now July 30, 2009; and the 

Board amends Regulation Z, 12 CFR 

part 226 further, as set forth below: 

PART 226—TRUTH IN LENDING 

(REGULATION Z) 

■ 1. The authority citation for part 226 

continues to read as follows: 

Authority: 12 U.S.C. 3806; 15 U.S.C. 1604, 

and 1637(c)(5). 

Subpart A—General 

■ 2. Section 226.2 is amended by 

revising paragraph (a)(6) to read as 

follows: 

§ 226.2 Definitions and rules of 

construction. 

(a) * * * 

(6) Business Day means a day on 

which the creditor’s offices are open to 

the public for carrying on substantially 

all of its business functions. However, 

for purposes of rescission under 

§§ 226.15 and 226.23, and for purposes 

of § 226.19(a)(1)(ii), § 226.19(a)(2), and 

§ 226.31, the term means all calendar 

days except Sundays and the legal 

public holidays specified in 5 U.S.C. 

6103(a), such as New Year’s Day, the 

Birthday of Martin Luther King, Jr., 

Washington’s Birthday, Memorial Day, 


erowe on PROD1PC63 with RULES
Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 23301 

39 [Reserved.] 

Independence Day, Labor Day, 

Columbus Day, Veterans Day, 

Thanksgiving Day, and Christmas Day. 

* * * * * 

Subpart C—Closed-End Credit 

■ 3. Section 226.17 is amended by 

revising paragraph (f) to read as follows: 

§ 226.17 General disclosure requirements. 

* * * * * 

(f) Early disclosures. If disclosures 

required by this subpart are given before 

the date of consummation of a 

transaction and a subsequent event 

makes them inaccurate, the creditor 

shall disclose before consummation 

(subject to the provisions of 

§ 226.19(a)(2) and § 226.19(a)(5)(iii)): 39

(1) Any changed term unless the term 

was based on an estimate in accordance 

with § 226.17(c)(2) and was labelled an 

estimate; 

(2) All changed terms, if the annual 

percentage rate at the time of 

consummation varies from the annual 

percentage rate disclosed earlier by 

more than 1⁄8 of 1 percentage point in a 

regular transaction, or more than 1⁄4 of 

1 percentage point in an irregular 

transaction, as defined in § 226.22(a). 

* * * * * 

■ 4. Section 226.19 is amended by 

revising paragraph (a) to read as follows: 

§ 226.19 Certain mortgage and variablerate transactions. 

(a) Mortgage transactions subject to 

RESPA—(1)(i) Time of disclosures. In a 

mortgage transaction subject to the Real 

Estate Settlement Procedures Act (12 

U.S.C. 2601 et seq.) that is secured by 

the consumer’s dwelling, other than a 

home equity line of credit subject to 

§ 226.5b or mortgage transaction subject 

to paragraph (a)(5) of this section, the 

creditor shall make good faith estimates 

of the disclosures required by § 226.18 

and shall deliver or place them in the 

mail not later than the third business 

day after the creditor receives the 

consumer’s written application. 

(ii) Imposition of fees. Except as 

provided in paragraph (a)(1)(iii) of this 

section, neither a creditor nor any other 

person may impose a fee on a consumer 

in connection with the consumer’s 

application for a mortgage transaction 

subject to paragraph (a)(1)(i) of this 

section before the consumer has 

received the disclosures required by 

paragraph (a)(1)(i) of this section. If the 

disclosures are mailed to the consumer, 

the consumer is considered to have 

received them three business days after 

they are mailed. 

(iii) Exception to fee restriction. A 

creditor or other person may impose a 

fee for obtaining the consumer’s credit 

history before the consumer has 

received the disclosures required by 

paragraph (a)(1)(i) of this section, 

provided the fee is bona fide and 

reasonable in amount. 

(2) Waiting periods for early 

disclosures and corrected disclosures. 

(i) The creditor shall deliver or place in 

the mail the good faith estimates 

required by paragraph (a)(1)(i) of this 

section not later than the seventh 

business day before consummation of 

the transaction. 

(ii) If the annual percentage rate 

disclosed under paragraph (a)(1)(i) of 

this section becomes inaccurate, as 

defined in § 226.22, the creditor shall 

provide corrected disclosures with all 

changed terms. The consumer must 

receive the corrected disclosures no 

later than three business days before 

consummation. If the corrected 

disclosures are mailed to the consumer 

or delivered to the consumer by means 

other than delivery in person, the 

consumer is deemed to have received 

the corrected disclosures three business 

days after they are mailed or delivered. 

(3) Consumer’s waiver of waiting 

period before consummation. If the 

consumer determines that the extension 

of credit is needed to meet a bona fide 

personal financial emergency, the 

consumer may modify or waive the 

seven-business-day waiting period or 

the three-business-day waiting period 

required by paragraph (a)(2) of this 

section, after receiving the disclosures 

required by § 226.18. To modify or 

waive a waiting period, the consumer 

shall give the creditor a dated written 

statement that describes the emergency, 

specifically modifies or waives the 

waiting period, and bears the signature 

of all the consumers who are primarily 

liable on the legal obligation. Printed 

forms for this purpose are prohibited. 

(4) Notice. Disclosures made pursuant 

to paragraph (a)(1) or paragraph (a)(2) of 

this section shall contain the following 

statement: ‘‘You are not required to 

complete this agreement merely because 

you have received these disclosures or 

signed a loan application.’’ The 

disclosure required by this paragraph 

shall be grouped together with the 

disclosures required by paragraphs 

(a)(1) or (a)(2) of this section. 

(5) Timeshare plans. In a mortgage 

transaction subject to the Real Estate 

Settlement Procedures Act (12 U.S.C. 

2601 et seq.) that is secured by a 

consumer’s interest in a timeshare plan 

described in 11 U.S.C. 101(53(D)): 

(i) The requirements of paragraphs 

(a)(1) through (a)(4) of this section do 

not apply; 

(ii) The creditor shall make good faith 

estimates of the disclosures required by 

§ 226.18 before consummation, or shall 

deliver or place them in the mail not 

later than three business days after the 

creditor receives the consumer’s written 

application, whichever is earlier; and 

(iii) If the annual percentage rate at 

the time of consummation varies from 

the annual percentage rate disclosed 

under paragraph (a)(5)(ii) of this section 

by more than 1⁄8 of 1 percentage point 

in a regular transaction or more than 1⁄4

of 1 percentage point in an irregular 

transaction, as defined in § 226.22, the 

creditor shall disclose all the changed 

terms no later than consummation or 

settlement. 

* * * * * 

■ 5. In Supplement I to Part 226, under 

Section 226.1—Authority, Purpose, 

Coverage, Organization, Enforcement 

and Liability: 

(A) Heading 1(d) Organization is 

republished; 

(B) New Paragraph 1(d)(1) through 

Paragraph 1(d)(4) are added; 

(C) Under Paragraph 1(d)(5), 

paragraph 1(d)(5)–1 is revised; and 

(D) New Paragraph 1(d)(6) is added. 

Supplement I to Part 226—Official Staff 

Interpretations 

* * * * * 

Subpart A—General 

§ 226.1 Authority, Purpose, Coverage, 

Organization, Enforcement and Liability. 

* * * * * 

1(d) Organization. 

Paragraph 1(d)(1) 

1. [Reserved.] 

Paragraph 1(d)(2) 

1. [Reserved.] 

Paragraph 1(d)(3) 

1. Effective date. The Board’s 

amendments to Regulation Z published 

on May 19, 2009 apply to covered loans 

(including refinance loans and 

assumptions considered new 

transactions under § 226.20) for which 

the creditor receives an application on 

or after July 30, 2009. 

Paragraph 1(d)(4) 

1. [Reserved.] 

Paragraph 1(d)(5) 

1. Effective dates. The Board’s 

revisions published on July 30, 2008 

(the ‘‘final rules’’) apply to covered 

loans (including refinance loans and 


erowe on PROD1PC63 with RULES
23302 Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 

assumptions considered new 

transactions under § 226.20) for which 

the creditor receives an application on 

or after October 1, 2009, except for the 

final rules on advertising, escrows, and 

loan servicing. But see comment 

1(d)(3)–1. The final rules on escrow in 

§ 226.35(b)(3) are effective for covered 

loans (including refinancings and 

assumptions in § 226.20) for which the 

creditor receives an application on or 

after April 1, 2010; but for such loans 

secured by manufactured housing on or 

after October 1, 2010. The final rules 

applicable to servicers in § 226.36(c) 

apply to all covered loans serviced on 

or after October 1, 2009. The final rules 

on advertising apply to advertisements 

occurring on or after October 1, 2009. 

For example, a radio ad occurs on the 

date it is first broadcast; a solicitation 

occurs on the date it is mailed to the 

consumer. The following examples 

illustrate the application of the effective 

dates for the final rules. 

i. General. A refinancing or 

assumption as defined in § 226.20(a) or 

(b) is a new transaction and is covered 

by a provision of the final rules if the 

creditor receives an application for the 

transaction on or after that provision’s 

effective date. For example, if a creditor 

receives an application for a refinance 

loan covered by § 226.35(a) on or after 

October 1, 2009, and the refinance loan 

is consummated on October 15, 2009, 

the provision restricting prepayment 

penalties in § 226.35(b)(2) applies. 

However, if the transaction were a 

modification of an existing obligation’s 

terms that does not constitute a 

refinance loan under § 226.20(a), the 

final rules, including for example the 

restriction on prepayment penalties, 

would not apply. 

ii. Escrows. Assume a consumer 

applies for a refinance loan to be 

secured by a dwelling (that is not a 

manufactured home) on March 15, 2010, 

and the loan is consummated on April 

2, 2010. The escrow rule in 

§ 226.35(b)(3) does not apply. 

iii. Servicing. Assume that a consumer 

applies for a new loan on August 1, 

2009. The loan is consummated on 

September 1, 2009. The servicing rules 

in § 226.36(c) apply to the servicing of 

that loan as of October 1, 2009. 

Paragraph 1(d)(6) 

1. [Reserved.] 

■ 6. In Supplement I to Part 226, under 

Section 226.2—Definitions and Rules of 

Construction, 2(a) Definitions, 2(a)(6) 

Business day, paragraph 2(a)(6)–2 is 

revised to read as follows: 

§ 226.2 Definitions and Rules of 

Construction. 

2(a) Definitions. 

* * * * * 

2(a)(6) Business day. 

* * * * * 

2. Rule for rescission and disclosures 

for certain mortgage transactions. A 

more precise rule for what is a business 

day (all calendar days except Sundays 

and the Federal legal holidays specified 

in 5 U.S.C. 6103(a)) applies when the 

right of rescission or the receipt of 

disclosures for certain dwelling-secured 

mortgage transactions under 

§§ 226.19(a)(1)(ii), 226.19(a)(2), or 

226.31(c) is involved. Four Federal legal 

holidays are identified in 5 U.S.C. 

6103(a) by a specific date: New Year’s 

Day, January 1; Independence Day, July 

4; Veterans Day, November 11; and 

Christmas Day, December 25. When one 

of these holidays (July 4, for example) 

falls on a Saturday, Federal offices and 

other entities might observe the holiday 

on the preceding Friday (July 3). In 

cases where the more precise rule 

applies, the observed holiday (in the 

example, July 3) is a business day. 

* * * * * 

■ 7. In Supplement I to Part 226, under 

Section 226.17—General Disclosure 

Requirements, 17(a)(1) Form of 

disclosures, new paragraph 17(a)(1)– 

5(xvi) is added, to read as follows: 

Subpart C—Closed-End Credit 

§ 226.17 General Disclosure 

Requirements. 

17(a) Form of disclosures. 

Paragraph 17(a)(1) 

* * * * * 

5. * * * 

xvi. The notice set forth in 

§ 226.19(a)(4), in a closed-end 

transaction not subject to 

§ 226.19(a)(1)(i). In a mortgage 

transaction subject to § 226.19(a)(1)(i), 

the creditor must disclose the notice 

contained in § 226.19(a)(4) grouped 

together with the disclosures made 

under § 226.18. See comment 19(a)(4)– 

1. 

* * * * * 

■ 8. In Supplement I to Part 226, under 

Section 226.19—Certain Mortgage and 

Variable-Rate Transactions: 

(A) Under 19(a)(1)(i) Time of 

disclosure, paragraphs 19(a)(1)(i)–1 

through 19(a)(1)(i)–5 are revised; 

(B) Paragraph 19(a)(2) Redisclosure 

required is revised; 

(C) Paragraph 19(a)(3) Consumer’s 

waiver of waiting period before 

consummation through Paragraph 

19(a)(5)(iii) Redisclosure for timeshare 

plans are added. 

§ 226.19 Certain Mortgage and VariableRate Transactions. 

19(a)(1)(i) Time of disclosure. 

1. Coverage. This section requires 

early disclosure of credit terms in 

mortgage transactions that are secured 

by a consumer’s dwelling (other than 

home equity lines of credit subject to 

§ 226.5b or mortgage transactions 

secured by an interest in a timeshare 

plan) that are also subject to the Real 

Estate Settlement Procedures Act 

(RESPA) and its implementing 

Regulation X, administered by the 

Department of Housing and Urban 

Development (HUD). To be covered by 

§ 226.19, a transaction must be a 

Federally related mortgage loan under 

RESPA. ‘‘Federally related mortgage 

loan’’ is defined under RESPA (12 

U.S.C. 2602) and Regulation X (24 CFR 

3500.2), and is subject to any 

interpretations by HUD. 

2. Timing and use of estimates. The 

disclosures required by § 226.19(a)(1)(i) 

must be delivered or mailed not later 

than three business days after the 

creditor receives the consumer’s written 

application. The general definition of 

‘‘business day’’ in § 226.2(a)(6)—a day 

on which the creditor’s offices are open 

to the public for substantially all of its 

business functions—is used for 

purposes of § 226.19(a)(1)(i). See 

comment 2(a)(6)–1. This general 

definition is consistent with the 

definition of ‘‘business day’’ in HUD’s 

Regulation X—a day on which the 

creditor’s offices are open to the public 

for carrying on substantially all of its 

business functions. See 24 CFR 3500.2. 

Accordingly, the three-business-day 

period in § 226.19(a)(1)(i) for making 

early disclosures coincides with the 

time period within which creditors 

subject to RESPA must provide good 

faith estimates of settlement costs. If the 

creditor does not know the precise 

credit terms, the creditor must base the 

disclosures on the best information 

reasonably available and indicate that 

the disclosures are estimates under 

§ 226.17(c)(2). If many of the disclosures 

are estimates, the creditor may include 

a statement to that effect (such as ‘‘all 

numerical disclosures except the latepayment disclosure are estimates’’) 

instead of separately labelling each 

estimate. In the alternative, the creditor 

may label as an estimate only the items 

primarily affected by unknown 

information. (See the commentary to 

§ 226.17(c)(2).) The creditor may 

provide explanatory material 

concerning the estimates and the 

contingencies that may affect the actual 

terms, in accordance with the 

commentary to § 226.17(a)(1). 


erowe on PROD1PC63 with RULES
Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 23303 

3. Written application. Creditors may 

rely on RESPA and Regulation X 

(including any interpretations issued by 

HUD) in deciding whether a ‘‘written 

application’’ has been received. In 

general, Regulation X defines 

‘‘application’’ to mean the submission of 

a borrower’s financial information in 

anticipation of a credit decision relating 

to a Federally related mortgage loan. See 

24 CFR 3500.2(b). An application is 

received when it reaches the creditor in 

any of the ways applications are 

normally transmitted—by mail, hand 

delivery, or through an intermediary 

agent or broker. (See comment 19(b)–3 

for guidance in determining whether or 

not the transaction involves an 

intermediary agent or broker.) If an 

application reaches the creditor through 

an intermediary agent or broker, the 

application is received when it reaches 

the creditor, rather than when it reaches 

the agent or broker. 

4. Denied or withdrawn applications. 

The creditor may determine within the 

three-business-day period that the 

application will not or cannot be 

approved on the terms requested, as, for 

example, when a consumer applies for 

a type or amount of credit that the 

creditor does not offer, or the 

consumer’s application cannot be 

approved for some other reason. In that 

case, or if the consumer withdraws the 

application within the three-businessday period, the creditor need not make 

the disclosures under this section. If the 

creditor fails to provide early 

disclosures and the transaction is later 

consummated on the original terms, the 

creditor will be in violation of this 

provision. If, however, the consumer 

amends the application because of the 

creditor’s unwillingness to approve it on 

its original terms, no violation occurs 

for not providing disclosures based on 

the original terms. But the amended 

application is a new application subject 

to § 226.19(a)(1)(i). 

5. Itemization of amount financed. In 

many mortgage transactions, the 

itemization of the amount financed 

required by § 226.18(c) will contain 

items, such as origination fees or points, 

that also must be disclosed as part of the 

good faith estimates of settlement costs 

required under RESPA. Creditors 

furnishing the RESPA good faith 

estimates need not give consumers any 

itemization of the amount financed. 

* * * * * 

19(a)(2) Waiting period(s) required. 

1. Business day definition. For 

purposes of § 226.19(a)(2), ‘‘business 

day’’ means all calendar days except 

Sundays and the legal public holidays 

referred to in § 226.2(a)(6). See comment 

2(a)(6)–2. 

2. Consummation after both waiting 

periods expire. Consummation may not 

occur until both the seven-business-day 

waiting period and the three-businessday waiting period have expired. For 

example, assume a creditor delivers the 

early disclosures to the consumer in 

person or places them in the mail on 

Monday, June 1, and the creditor then 

delivers corrected disclosures in person 

to the consumer on Wednesday, June 3. 

Although Saturday, June 6 is the third 

business day after the consumer 

received the corrected disclosures, 

consummation may not occur before 

Tuesday, June 9, the seventh business 

day following delivery or mailing of the 

early disclosures. 

19(a)(2)(i) Seven-business-day waiting 

period. 

1. Timing. The disclosures required 

by § 226.19(a)(1)(i) must be delivered or 

placed in the mail no later than the 

seventh business day before 

consummation. The seven-business-day 

waiting period begins when the creditor 

delivers the early disclosures or places 

them in the mail, not when the 

consumer receives or is deemed to have 

received the early disclosures. For 

example, if a creditor delivers the early 

disclosures to the consumer in person or 

places them in the mail on Monday, 

June 1, consummation may occur on or 

after Tuesday, June 9, the seventh 

business day following delivery or 

mailing of the early disclosures. 

19(a)(2)(ii) Three-business-day waiting 

period. 

1. Conditions for redisclosure. If, at 

the time of consummation, the annual 

percentage rate disclosed is accurate 

under § 226.22, the creditor does not 

have to make corrected disclosures 

under § 226.19(a)(2). If, on the other 

hand, the annual percentage rate 

disclosed is not accurate under § 226.22, 

the creditor must make corrected 

disclosures of all changed terms 

(including the annual percentage rate) 

so that the consumer receives them not 

later than the third business day before 

consummation. For example, assume 

consummation is scheduled for 

Thursday, June 11 and the early 

disclosures for a regular mortgage 

transaction disclose an annual 

percentage rate of 7.00%: 

i. On Thursday, June 11, the annual 

percentage rate will be 7.10%. The 

creditor is not required to make 

corrected disclosures under 

§ 226.19(a)(2). 

ii. On Thursday, June 11, the annual 

percentage rate will be 7.15%. The 

creditor must make corrected 

disclosures so that the consumer 

receives them on or before Monday, 

June 8. 

2. Content of new disclosures. If 

redisclosure is required, the creditor 

may provide a complete set of new 

disclosures, or may redisclose only the 

changed terms. If the creditor chooses to 

provide a complete set of new 

disclosures, the creditor may but need 

not highlight the new terms, provided 

that the disclosures comply with the 

format requirements of § 226.17(a). If the 

creditor chooses to disclose only the 

new terms, all the new terms must be 

disclosed. For example, a different 

annual percentage rate will almost 

always produce a different finance 

charge, and often a new schedule of 

payments; all of these changes would 

have to be disclosed. If, in addition, 

unrelated terms such as the amount 

financed or prepayment penalty vary 

from those originally disclosed, the 

accurate terms must be disclosed. 

However, no new disclosures are 

required if the only inaccuracies involve 

estimates other than the annual 

percentage rate, and no variable rate 

feature has been added. For a discussion 

of the requirement to redisclose when a 

variable-rate feature is added, see 

comment 17(f)–2. For a discussion of 

redisclosure requirements in general, 

see the commentary on § 226.17(f). 

3. Timing. When redisclosures are 

necessary because the annual 

percentage rate has become inaccurate, 

they must be received by the consumer 

no later than the third business day 

before consummation. (For 

redisclosures triggered by other events, 

the creditor must provide corrected 

disclosures before consummation. See 

§ 226.17(f).) If the creditor delivers the 

corrected disclosures to the consumer in 

person, consummation may occur any 

time on the third business day following 

delivery. If the creditor provides the 

corrected disclosures by mail, the 

consumer is considered to have received 

them three business days after they are 

placed in the mail, for purposes of 

determining when the three-businessday waiting period required under 

§ 226.19(a)(2)(ii) begins. Creditors that 

use electronic mail or a courier other 

than the postal service may also follow 

this approach. 

4. Basis for annual percentage rate 

comparison. To determine whether a 

creditor must make corrected 

disclosures under § 226.22, a creditor 

compares (a) what the annual 

percentage rate will be at consummation 

to (b) the annual percentage rate stated 

in the most recent disclosures the 

creditor made to the consumer. For 


erowe on PROD1PC63 with RULES
23304 Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 

example, assume consummation for a 

regular mortgage transaction is 

scheduled for Thursday, June 11, the 

early disclosures provided in May stated 

an annual percentage rate of 7.00%, and 

corrected disclosures received by the 

consumer on Friday, June 5 stated an 

annual percentage rate of 7.15%: 

i. On Thursday, June 11, the annual 

percentage rate will be 7.25%, which 

exceeds the most recently disclosed 

annual percentage rate by less than the 

applicable tolerance. The creditor is not 

required to make additional corrected 

disclosures or wait an additional three 

business days under § 226.19(a)(2). 

ii. On Thursday, June 11, the annual 

percentage rate will be 7.30%, which 

exceeds the most recently disclosed 

annual percentage rate by more than the 

applicable tolerance. The creditor must 

make corrected disclosures such that the 

consumer receives them on or before 

Monday, June 8. 

19(a)(3) Consumer’s waiver of waiting 

period before consummation. 

1. Modification or waiver. A consumer 

may modify or waive the right to a 

waiting period required by 

§ 226.19(a)(2) only after the creditor 

makes the disclosures required by 

§ 226.18. The consumer must have a 

bona fide personal financial emergency 

that necessitates consummating the 

credit transaction before the end of the 

waiting period. Whether these 

conditions are met is determined by the 

facts surrounding individual situations. 

The imminent sale of the consumer’s 

home at foreclosure, where the 

foreclosure sale will proceed unless 

loan proceeds are made available to the 

consumer during the waiting period, is 

one example of a bona fide personal 

financial emergency. Each consumer 

who is primarily liable on the legal 

obligation must sign the written 

statement for the waiver to be effective. 

2. Examples of waivers within the 

seven-business-day waiting period. 

Assume the early disclosures are 

delivered to the consumer in person on 

Monday, June 1, and at that time the 

consumer executes a waiver of the 

seven-business-day waiting period 

(which would end on Tuesday, June 9) 

so that the loan can be consummated on 

Friday, June 5: 

i. If the annual percentage rate on the 

early disclosures is inaccurate under 

§ 226.22, the creditor must provide a 

corrected disclosure to the consumer 

before consummation, which triggers 

the three-business-day waiting period in 

§ 226.19(a)(2)(ii). After the consumer 

receives the corrected disclosure, the 

consumer must execute a waiver of the 

three-business-day waiting period in 

order to consummate the transaction on 

Friday, June 5. 

ii. If a change occurs that does not 

render the annual percentage rate on the 

early disclosures inaccurate under 

§ 226.22, the creditor must disclose the 

changed terms before consummation, 

consistent with § 226.17(f). Disclosure of 

the changed terms does not trigger an 

additional waiting period, and the 

transaction may be consummated on 

June 5 without the consumer giving the 

creditor an additional modification or 

waiver. 

3. Examples of waivers made after the 

seven-business-day waiting period. 

Assume the early disclosures are 

delivered to the consumer in person on 

Monday, June 1 and consummation is 

scheduled for Friday, June 19. On 

Wednesday, June 17, a change to the 

annual percentage rate occurs: 

i. If the annual percentage rate on the 

early disclosures is inaccurate under 

§ 226.22, the creditor must provide a 

corrected disclosure to the consumer 

before consummation, which triggers 

the three-business-day waiting period in 

§ 226.19(a)(2). After the consumer 

receives the corrected disclosure, the 

consumer must execute a waiver of the 

three-business-day waiting period in 

order to consummate the transaction on 

Friday, June 19. 

ii. If a change occurs that does not 

render the annual percentage rate on the 

early disclosures inaccurate under 

§ 226.22, the creditor must disclose the 

changed terms before consummation, 

consistent with § 226.17(f). Disclosure of 

the changed terms does not trigger an 

additional waiting period, and the 

transaction may be consummated on 

Friday, June 19 without the consumer 

giving the creditor an additional 

modification or waiver. 

19(a)(4) Notice. 

1. Inclusion in other disclosures. The 

notice required by § 226.19(a)(4) must 

be grouped together with the disclosures 

required by § 226.19(a)(1)(i) or 

§ 226.19(a)(2). See comment 17(a)(1)–2 

for a discussion of the rules for 

segregating disclosures. In other cases, 

the notice set forth in § 226.19(a)(4) may 

be disclosed together with or separately 

from the disclosures required under 

§ 226.18. See comment 17(a)(1)–5(xvi). 

19(a)(5)(ii) Time of disclosures for 

timeshare plans. 

1. Timing. A mortgage transaction 

secured by a consumer’s interest in a 

‘‘timeshare plan,’’ as defined in 11 

U.S.C. 101(53D), that is also a Federally 

related mortgage loan under RESPA is 

subject to the requirements of 

§ 226.19(a)(5) instead of the 

requirements of § 226.19(a)(1) through 

§ 226.19(a)(4). See comment 19(a)(1)(i)– 

1. Early disclosures for transactions 

subject to § 226.19(a)(5) must be given 

(a) before consummation or (b) within 

three business days after the creditor 

receives the consumer’s written 

application, whichever is earlier. The 

general definition of ‘‘business day’’ in 

§ 226.2(a)(6)—a day on which the 

creditor’s offices are open to the public 

for substantially all of its business 

functions—applies for purposes of 

§ 226.19(a)(5)(ii). See comment 2(a)(6)– 

1. These timing requirements are 

different from the timing requirements 

under § 226.19(a)(1)(i). Timeshare 

transactions covered by § 226.19(a)(5) 

may be consummated any time after the 

disclosures required by § 226.19(a)(5)(ii) 

are provided. 

2. Use of estimates. If the creditor 

does not know the precise credit terms, 

the creditor must base the disclosures 

on the best information reasonably 

available and indicate that the 

disclosures are estimates under 

§ 226.17(c)(2). If many of the disclosures 

are estimates, the creditor may include 

a statement to that effect (such as ‘‘all 

numerical disclosures except the latepayment disclosure are estimates’’) 

instead of separately labelling each 

estimate. In the alternative, the creditor 

may label as an estimate only the items 

primarily affected by unknown 

information. (See the commentary to 

§ 226.17(c)(2).) The creditor may 

provide explanatory material 

concerning the estimates and the 

contingencies that may affect the actual 

terms, in accordance with the 

commentary to § 226.17(a)(1). 

3. Written application. For timeshare 

transactions, creditors may rely on 

comment 19(a)(1)(i)–3 in determining 

whether a ‘‘written application’’ has 

been received. 

4. Denied or withdrawn applications. 

For timeshare transactions, creditors 

may rely on comment 19(a)(1)(i)–4 in 

determining that disclosures are not 

required by § 226.19(a)(5)(ii) because the 

consumer’s application will not or 

cannot be approved on the terms 

requested or the consumer has 

withdrawn the application. 

5. Itemization of amount financed. 

For timeshare transactions, creditors 

may rely on comment 19(a)(1)(i)–5 in 

determining whether providing the good 

faith estimates of settlement costs 

required by RESPA satisfies the 

requirement of § 226.18(c) to provide an 

itemization of the amount financed. 

19(a)(5)(iii) Redisclosure for timeshare 

plans. 

1. Consummation or settlement. For 

extensions of credit secured by a 

consumer’s timeshare plan, when 

corrected disclosures are required, they 


erowe on PROD1PC63 with RULES
Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules and Regulations 23305 

must be given no later than 

‘‘consummation or settlement.’’ 

‘‘Consummation’’ is defined in 

§ 226.2(a). ‘‘Settlement’’ is defined in 

Regulation X (24 CFR 3500.2(b)) and is 

subject to any interpretations issued by 

HUD. In some cases, a creditor may 

delay redisclosure until settlement, 

which may be at a time later than 

consummation. If a creditor chooses to 

redisclose at settlement, disclosures 

may be based on the terms in effect at 

settlement, rather than at 

consummation. For example, in a 

variable-rate transaction, a creditor may 

choose to base disclosures on the terms 

in effect at settlement, despite the 

general rule in comment 17(c)(1)–8 that 

variable-rate disclosures should be 

based on the terms in effect at 

consummation. 

2. Content of new disclosures. 

Creditors may rely on comment 

19(a)(2)(ii)–2 in determining the content 

of corrected disclosures required under 

§ 226.19(a)(5)(iii). 

■ 9. In Supplement I to Part 226, under 

Section 226.31—General Rules, heading 

Paragraph 31(c)(2) Disclosures for 

reverse mortgages and paragraph 

31(c)(2)–1 are revised, to read as 

follows: 

Subpart E—Special Rules for Certain 

Home Mortgage Transactions 

§ 226.31 General Rules 

* * * * * 

31(c)(2) Disclosures for reverse 

mortgages. 

1. Business days. For purposes of 

providing reverse mortgage disclosures, 

‘‘business day’’ has the same meaning as 

in comment 31(c)(1)–1—all calendar 

days except Sundays and the Federal 

legal holidays listed in 5 U.S.C. 6103(a). 

This means if disclosures are provided 

on a Friday, consummation could occur 

any time on Tuesday, the third business 

day following receipt of the disclosures. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, May 13, 2009. 

Jennifer J. Johnson, 

Secretary of the Board. 

[FR Doc. E9–11567 Filed 5–18–09; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2008–1245; Directorate 

Identifier 2008–NE–27–AD; Amendment 39– 

15912; AD 2009–11–02] 

RIN 2120–AA64 

Airworthiness Directives; CFM 

International S.A. Model CFM56 

Turbofan Engines 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule. 

SUMMARY: The FAA is adopting a new 

airworthiness directive (AD) for CFM 

International S.A. CFM56–2, CFM56–3, 

CFM56–5A, CFM56–5B, CFM56–5C, 

and CFM56–7B series turbofan engines 

with certain part number (P/N) and 

serial number (SN) high-pressure 

compressor (HPC) 4–9 spools installed. 

This AD requires removing certain HPC 

4–9 spools listed by P/N and SN in this 

AD. This AD results from reports of 

certain HPC 4–9 spools that Propulsion 

Technology LLC (PTLLC) improperly 

repaired and returned to service. We are 

issuing this AD to prevent cracking of 

the HPC 4–9 spool, which could result 

in possible uncontained failure of the 

spool and damage to the airplane. 

DATES: This AD becomes effective June 

23, 2009. 

ADDRESSES: The Docket Operations 

office is located at Docket Management 

Facility, U.S. Department of 

Transportation, 1200 New Jersey 

Avenue, SE., West Building Ground 

Floor, Room W12–140, Washington, DC 

20590–0001. 

FOR FURTHER INFORMATION CONTACT: 

Stephen K. Sheely, Aerospace Engineer, 

Engine Certification Office, FAA, Engine 

& Propeller Directorate, 12 New England 

Executive Park, Burlington, MA 01803; 

e-mail: stephen.k.sheely@faa.gov; 

telephone (781) 238–7750; fax (781) 

238–7199. 

SUPPLEMENTARY INFORMATION: The FAA 

proposed to amend 14 CFR part 39 with 

a proposed AD. The proposed AD 

applies to CFM International S.A. 

CFM56–2, CFM56–3, CFM56–5A, 

CFM56–5B, CFM56–5C, and CFM56–7B 

series turbofan engines with certain 

P/N and SN HPC 4–9 spools installed. 

We published the proposed AD in the 

Federal Register on November 26, 2008 

(73 FR 71951). That action proposed to 

require removing certain HPC 4–9 

spools that have a P/N and SN listed in 

Table 1 of this AD before accumulating 

8,900 cycles since repair at PTLLC or 

within 1,100 cycles from the effective 

date of this AD, whichever occurs later. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Operations office between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The AD docket 

contains this AD, the regulatory 

evaluation, any comments received, and 

other information. The street address for 

the Docket Operations office (telephone 

(800) 647–5527) is provided in the 

ADDRESSES section. Comments will be 

available in the AD docket shortly after 

receipt. 

Comments 

We provided the public the 

opportunity to participate in the 

development of this AD. We have 

considered the comments received. 

Incorrect SN in Table 1 of the Proposed 

AD 

Three commenters, the Air Transport 

Association (ATA), United Airlines, and 

CFM International, point out a 

typographical error in the SN for a 4– 

9 spool, P/N 1590M29G01. They state 

that the Special Airworthiness 

Information Bulletin (SAIB) NE–08–17 

shows SN GWNFY924 for that P/N and 

the proposed rule shows SN 

GWNFY824 for the same P/N. 

We agree. Serial number GWNFY924 

is the correct SN. We changed Table 1, 

P/N 1590M29G01 SN ‘‘GWNFY824,’’ to 

‘‘GWNFY924’’ in this AD. 

Request To Clarify the Relationship 

Between SAIB NE–08–17 and the 

Proposed AD 

One commenter, the ATA, suggests 

the proposed AD doesn’t show a clear 

relationship between its requirements 

and those contained in SAIB NE–08–17. 

The ATA suggests we provide a 

clarification and a better understanding 

of why we wrote SAIB NE–08–17 and 

the proposed rule. The ATA also asks if 

the recommendations or the hardware 

listed in SAIB NE–08–17 is still in 

effect. 

We partially agree. The proposed AD 

specifies the same twenty-six 4–9 spools 

as SAIB NE–08–17. Special 

Airworthiness Information Bulletin NE– 

08–17 still provides recommendations 

for dispositioning other parts listed in 

that SAIB. However, we don’t require 

removing the hardware listed in SAIB 

NE–08–17, other than the 4–9 spools. 

We didn’t change the AD. 


erowe on PROD1PC63 with RULES