Source: https://www.federalregister.gov/documents/2016/08/04/2016-18058/appraisals-for-higher-priced-mortgage-loans-exemption-threshold
Timestamp: 2017-11-24 06:42:51
Document Index: 753795007

Matched Legal Cases: ['§\u200934', 'art 34', '§\u2009226', '§\u20091026', 'art 1026', 'art 34', 'art 226', '§\u2009226', 'art 1026', '§\u20091026']

A Proposed Rule by the Comptroller of the Currency, the Federal Reserve System, and the Consumer Financial Protection Bureau on 08/04/2016
51394-51400 (7 pages)
OCC-2015-0021
Appraisals for Higher-Priced Mortgage Loans Exemption
https://www.federalregister.gov/d/2016-18058 https://www.federalregister.gov/d/2016-18058
The OCC, the Board and the Bureau are publishing proposed rules amending the official interpretations for their regulations that implement section 129H of the Truth in Lending Act (TILA). Section 129H of TILA establishes special appraisal requirements for “higher-risk mortgages,” termed “higher-priced mortgage loans” or “HPMLs” in the agencies' regulations. The OCC, the Board, the Bureau, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA) and the Federal Housing Finance Agency (FHFA) (collectively, the Agencies) issued joint final rules implementing these requirements, effective January 18, 2014. The Agencies' rules exempted, among other loan types, transactions of $25,000 or less, and required that this loan amount be adjusted annually based on any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is no annual percentage increase in the CPI-W, the OCC, the Board and the Bureau will not adjust this exemption threshold from the prior year. The proposal would memorialize this as well as the agencies' calculation method for determining the adjustment in years following a year in which there is no annual percentage increase in the CPI-W.
Interested parties are encouraged to submit written comments jointly to the OCC, the Board, and the Bureau. Commenters are encouraged to use the title “Appraisals for Higher-Priced Mortgage Loans” to facilitate the organization and distribution of comments among the agencies. Interested parties are invited to submit written comments to:
OCC: Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by the Federal eRulemaking Portal or email, if possible. Please use the title “Appraisals for Higher-Priced Mortgage Loans” to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods:
Federal eRulemaking Portal—“regulations.gov”: Go to http://www.regulations.gov. Enter “Docket ID OCC-2015-0021” in the Search box and click “Search.” Results can be filtered using the filtering tools on the left side of the screen. Click on “Comment Now” to submit public comments.
Mail: Legislative and Regulatory Activities Division, 400 7th Street SW., suite 3E-218, mail stop 9W-11, Washington, DC 20219.
Instructions: You must include “OCC” as the agency name and “Docket ID OCC-2015-0021” in your comment. In general, OCC will enter all comments received into the docket and publish them on the Regulations.gov Web site without change, including any business or personal information that you provide such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not enclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
Viewing Comments Electronically: Go to http://www.regulations.gov. Enter “Docket ID OCC-2015-0021” in the Search box and click “Search.” Comments can be filtered by Agency using the filtering tools on the left side of the screen.
Board: You may submit comments, identified by Docket No. R-1443 or RIN 7100 AD-90, by any of the following methods:
Bureau: You may submit comments, identified by Docket No. CFPB-2016-0035 or RIN 3170-AA11, by any of the following methods:
Email: FederalRegisterComments@cfpb.gov. Include Docket No. CFPB-2016-0035 or RIN 3170-AA11 in the subject line of the email.
OCC: MaryAnn Nash, Counsel, Legislative and Regulatory Affairs Division, (202) 649-6287; for persons who are deaf and hard of hearing TTY, (202) 649-5597. Board: Lorna M. Neill, Senior Counsel, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, at (202) 452-3667; for users of Telecommunications Device for the Deaf (TDD) only, contact (202) 263-4869.
The OCC, the Board and the Bureau are proposing new commentary to memorialize the calculation method used by the agencies each year to adjust the exemption threshold. The new commentary is substantively identical for § 34.203(b)(2) of subpart G of part 34 of the OCC's regulations, § 226.43(b)(2) of the Board's Regulation Z, and § 1026.35(c)(2)(ii) of the Bureau's Regulation Z. For ease of reference, the “Commentary Revision” refers only to the section numbers of the commentary that will published in the Bureau's Regulation Z at 12 CFR part 1026, Supplement I.
Comment 35(c)(2)(ii)-1 to the Bureau's Regulation Z currently provides the threshold amount in effect during a particular period and details the rules the agencies use for rounding the threshold calculation to the nearest $100 or $1,000 increment, as discussed above in part I, “Background.” The OCC, the Board and the Bureau are proposing to revise comment 35(c)(2)(ii)-1 by moving the text regarding the threshold amount that is in effect during a particular period to a new proposed comment 35(c)(2)(ii)-3. The discussion of how the agencies round the threshold calculation would remain in comment 35(c)(2)(ii)-1. Current comments 35(c)(2)(ii)-2 and 35(c)(2)(ii)-3 would be renumbered as proposed comments 35(c)(2)(ii)-5 and 35(c)(2)(ii)-6, respectively.Start Printed Page 51396
As the Agencies have stated previously,[8] if there is no annual percentage increase in the CPI-W, the OCC, the Board, and the Bureau will not adjust the exemption threshold from the prior year. This position is consistent with the Board's and the Bureau's approach in adjusting the coverage thresholds for the Consumer Leasing Act (CLA) and TILA, based on Section 1100E(b) of the Dodd-Frank Act, which states that the threshold must be adjusted by the “annual percentage increase” in the CPI-W (emphasis added). The Board and the Bureau are publishing similar amendments to the commentaries to each of their respective regulations implementing the CLA (Regulation M) and TILA (Regulation Z) elsewhere in the Federal Register.[9]
For the HPML appraisal rule exemption for smaller loans, the OCC, the Board, and the Bureau are proposing to memorialize this concept in proposed comment 35(c)(2)(ii)-2, which would provide that if the CPI-W in effect on June 1 does not increase from the CPI-W in effect on June 1 of the previous year, the threshold amount effective the following January 1 through December 31 will not change from the previous year. For example, if the threshold in effect from January 1, 2019, through December 31, 2019, is $27,500 and the CPI-W in effect on June 1 of 2019, indicates a 1.1 percent decrease from the CPI-W in effect on June 1, 2018, the threshold in effect for January 1, 2020, through December 31, 2020, will remain $27,500.
Proposed comment 35(c)(2)(ii)-2 would further set forth the calculation method the agencies would use in years following a year in which the exemption threshold was not adjusted because there was no increase in the CPI-W from the previous year. Specifically, as set forth under proposed comment 35(c)(2)(ii)-2, for the years after a year in which the threshold did not change because the CPI-W in effect on June 1 decreased from the CPI-W in effect on June 1 of the previous year, the threshold is calculated by applying the annual percentage change in the CPI-W to the dollar amount that would have resulted if the decreases and any subsequent increases in the CPI-W had been taken into account. Proposed comment 35(c)(2)(ii)-2.i further states that, if the resulting amount is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly.
For example, assume that the threshold in effect from January 1, 2019, through December 31, 2019, is $27,500 and that, due to a 1.1 percent decrease from the CPI-W in effect on June 1, 2018, to the CPI-W in effect on June 1, 2019, the threshold in effect from January 1, 2020, through December 31, 2020, remains at $27,500. If, however, the threshold had been adjusted downward to reflect the decrease in the CPI-W over that time period, the threshold in effect from January 1, 2020, through December 31, 2020, would have been $27,200. Further assume that the CPI-W in effect on June 1, 2020, increased by 1.6 percent from the CPI-W in effect on June 1, 2019. The calculation for the threshold that will be in effect from January 1, 2021, through December 31, 2021, is based on the impact of a 1.6 percent increase in the CPI-W on $27,200, rather than $27,500, resulting in a 2021 threshold of $27,600.
Furthermore, comment 35(c)(2)(ii)-2.ii states that, if the resulting amount calculated is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted. To illustrate, assume in the example above that the CPI-W in effect on June 1, 2020, increased by only 0.6 percent from the CPI-W in effect on June 1, 2019. The calculation for the threshold that will be in effect from January 1, 2021, through December 31, 2021, is based on the impact of a 0.6 percent increase in the CPI-W on $27,200. The resulting amount is $27,400, which is lower than $27,500, the threshold in effect from January 1, 2020, through December 31, 2020. Therefore, the threshold in effect from January 1, 2021, through December 31, 2021, will remain $27,500. However, the calculation for the threshold that will be in effect from January 1, 2022, through December 31, 2022, will apply the percentage change in the CPI-W to $27,400, the amount that would have resulted based on the 0.6 percent change from the CPI-W in effect on June 1, 2019, to the CPI-W in effect on June 1, 2020.
The Bureau has chosen to evaluate the benefits, costs and impacts of the proposed commentary against the current state of the world, which takes into account the current regulatory regime. The Bureau is not aware of any significant benefits or costs to consumers or covered persons associated with the proposal relative to the baseline. The OCC, the Board, and the Bureau previously stated that if there is no annual percentage increase in the CPI-W, then the agencies will not adjust the exemption threshold from the prior year.[11] The proposal memorializes this in official commentary. The proposal also clarifies how the threshold would be calculated for years after a year in which the threshold did not change. The Bureau believes that this clarification memorializes the method that the Bureau would be expected to use: This method holds the threshold fixed until a notional threshold calculated using the Bureau's methodology, but taking into account both decreases and increases in the CPI-W, exceeds the actual threshold. The Bureau requests comment on this point. Thus, the Bureau believes that the proposed rule does not change the regulatory regime relative to the baseline and creates no significant benefits, costs, or impacts.
OCC: The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA) requires an agency, in connection with a proposed Start Printed Page 51397rule, to prepare an Initial Regulatory Flexibility Analysis describing the impact of the proposed rule on small entities (defined by the Small Business Administration for purposes of the RFA to include banking entities with total assets of $550 million or less) or to certify that the proposed rule would not have a significant economic impact on a substantial number of small entities.
As explained in the Commentary Revision section of the preamble, this proposed rule memorializes the calculation method used by the OCC, the Board, and the Bureau each year to adjust the threshold for exemption from the special appraisal requirements for HPMLs and clarifies the agencies' calculation method for determining the adjustment in the years following a year in which there is no annual percentage increase in the CPI-W. The economic impact of this proposed rule on national banks and Federal savings associations, regardless of size, is not expected to be significant. Accordingly, the OCC certifies that the proposed rule would not have a significant economic impact on a substantial number of OCC-supervised small entities.
Board: The Regulatory Flexibility Act (RFA) requires an agency to publish an initial regulatory flexibility analysis with a proposed rule or certify that the proposed rule will not have a significant economic impact on a substantial number of small entities.[12] Based on its analysis, and for the reasons stated below, the Board believes that the rule will not have a significant economic impact on a substantial number of small entities. Nevertheless, the Board is publishing an initial regulatory flexibility analysis and requests public comment on all aspects of its analysis. The Board will, if necessary, conduct a final regulatory flexibility analysis after considering the comments received during the public comment period.
1. Statement of the need for, and objectives of, the proposed rule. The proposed rule would memorialize the calculation method used by the Board each year to adjust the exemption threshold in accordance with Regulation Z, 12 CFR 226.43(b)(2).
2. Small entities affected by the proposed rule. The Board invites comment on the effect of the proposed rule on small entities. For purposes of the RFA, the Small Business Administration defines small entities to include banking entities with total assets of $550 million or less. Of Board supervised institutions with an asset size of $550 million or less as of March 2016, 223 reported making 5,135 higher-priced mortgage loans in 2015.[13]
Bureau: The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a final regulatory flexibility analysis (FRFA) of any rule subject to notice-and-comment rulemaking requirements.[14] These analyses must “describe the impact of the proposed rule on small entities”.[15] An IRFA or FRFA is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities.[16] The Bureau also is subject to certain additional procedures under the RFA involving the convening of a panel to consult with small business representatives prior to proposing a rule for which an IRFA is required.[17]
In accordance with the Paperwork Reduction Act of 1995,[18] the agencies reviewed this proposed rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the proposed rule.
The proposed rule memorializes the calculation method used by the OCC, the Board, and the Bureau each year to adjust the threshold for exemption from the special appraisal requirements for HPMLs and clarifies the agencies' calculation method for determining the adjustment in the years following a year in which there is no annual percentage increase in the CPI-W. Because the proposed rule is designed to clarify existing rules, and does not introduce any new requirements, the OCC has determined that it would not result in expenditures by State, local, and Tribal governments or by the private sector, of $100 million or more. Accordingly, the OCC has not prepared a written statement to accompany its proposed rule.
For the reasons set forth in the preamble, the OCC proposes to amend 12 CFR part 34 as set forth below:
2. In Appendix C to Subpart G, under Section 34.203—Appraisals for Higher-Priced Mortgage Loans, under paragraph (b)(2):
i. Paragraph 1 is revised;
ii. Paragraphs 2 and 3 are re-designated as paragraphs 4 and 5, respectively; and
iii. Paragraphs 2 and 3 are added.
iii. From January 1, 2016 through December 31, 2016, the threshold amount is $25,500.
4. In Supplement I to part 226, under Section 226.43—Appraisals for Higher-Risk Mortgage Loans, under paragraph 43(b)(2), paragraph 1 is revised, paragraphs 2 and 3 are re-numbered paragraphs 4 and 5, respectively, and new paragraphs 2 and 3 are added, to read as follows:
1. Threshold amount. For purposes of § 226.43(b)(2), the threshold amount in effect during a particular period is the amount stated in comment 43(b)(2)-3 for that period. The threshold amount is adjusted effective January 1 of each year by any annual percentage increase in the Consumer Price Index for Urban Start Printed Page 51399Wage Earners and Clerical Workers (CPI-W) that was in effect on the preceding June 1. Comment 43(b)(2)-3 will be amended to provide the threshold amount for the upcoming year after the annual percentage change in the CPI-W that was in effect on June 1 becomes available. Any increase in the threshold amount will be rounded to the nearest $100 increment. For example, if the annual percentage increase in the CPI-W would result in a $950 increase in the threshold amount, the threshold amount will be increased by $1,000. However, if the annual percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900.
6. In Supplement I to part 1026, under Section 1026.35—Requirements for Higher-Priced Mortgage Loans, under paragraph 35(c)(2)(ii), paragraphs 1 through 3 are revised, and paragraphs 4 and 5 are added, to read as follows:
4. Qualifying for exemption—in general. A transaction is exempt under § 1026.35(c)(2)(ii) if the creditor makes an extension of credit at consummation that is equal to or below the threshold amount in effect at the time of consummation.Start Printed Page 51400
11. 78 FR 48547, 48565 (Aug. 8, 2013) and 80 FR 73943, 73944 (Nov. 27, 2015).
13. Board supervised institutions include State Member Banks, uninsured state branches and agencies of foreign banks. The number of institutions making higher-priced mortgage loans and the number of higher-priced mortgage loans is based on data reported pursuant to the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. 2801 et seq.
15. Id. at 603(a). For purposes of assessing the impacts of the proposed rule on small entities, “small entities” is defined in the RFA to include small businesses, small not-for-profit organizations, and small government jurisdictions. Id. at 601(6). A “small business” is determined by application of Small Business Administration regulations and reference to the North American Industry Classification System (NAICS) classifications and size standards. Id. at 601(3). A “small organization” is any “not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” Id. at 601(4). A “small governmental jurisdiction” is the government of a city, county, town, township, village, school district, or special district with a population of less than 50,000. Id. at 601(5).
16. Id. at 605(b).
17. Id. at 609.
18. 44 U.S.C. 3506; 5 CFR 1320.
[FR Doc. 2016-18058 Filed 8-3-16; 8:45 am]