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

Published date03 June 2021
Citation86 FR 29685
Record Number2021-11571
SectionRules and Regulations
CourtConsumer Financial Protection Bureau
Federal Register, Volume 86 Issue 105 (Thursday, June 3, 2021)
[Federal Register Volume 86, Number 105 (Thursday, June 3, 2021)]
                [Rules and Regulations]
                [Pages 29685-29687]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2021-11571]
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                BUREAU OF CONSUMER FINANCIAL PROTECTION
                12 CFR Part 1026
                [Docket No. CFPB-2020-0023]
                RIN 3170-AA83
                Higher-Priced Mortgage Loan Escrow Exemption (Regulation Z);
                Correcting Amendments
                AGENCY: Bureau of Consumer Financial Protection.
                ACTION: Final rule; official interpretations; correcting amendments.
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                SUMMARY: This document corrects the Official Interpretations
                (Commentary) to Regulation Z. Specifically, the Bureau of Consumer
                Financial Protection (Bureau) is adding a comment to its Commentary
                that it included in a recent higher-priced mortgage loan escrow
                exemption final rule but that was not incorporated into the Code of
                Federal Regulations (CFR) due to an omission in an amendatory
                instruction. The Bureau is also revising a comment that it included in
                the same recent final rule, but that inadvertently did not appear in a
                subsequently effective final rule.
                DATES: The corrections are effective on June 3, 2021.
                FOR FURTHER INFORMATION CONTACT: Joseph Devlin, Senior Counsel, Office
                of Regulations, at 202-435-7700 or https://reginquiries.consumerfinance.gov/. If you require this document in an
                alternative electronic format, please contact
                [email protected].
                SUPPLEMENTARY INFORMATION:
                I. Background
                 The Bureau is issuing this document to correct two comments in the
                Bureau's Commentary to Regulation Z, which implements the Truth in
                Lending Act.\1\ In the final rule titled ``Higher-Priced Mortgage Loan
                Escrow Exemption (Regulation Z)'' (Escrow Exemption Final Rule),
                published in the Federal Register on February 17, 2021 (86 FR 9840),
                the Bureau included Paragraph 35(b)(2)(vi)(B) in its commentary text
                for the rule, but omitted the related amendatory instruction to add
                that specific paragraph to the Commentary. This omission was a
                scrivener's error. The Bureau is therefore issuing this correction to
                ensure that Paragraph 35(b)(2)(vi)(B) is incorporated into the
                Commentary published in the CFR.
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                 \1\ 15 U.S.C. 1601 et seq.
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                 Additionally, the Bureau is amending the CFR to revise a comment
                that the Bureau amended in the Escrow Exemption Rule but that
                inadvertently
                [[Page 29686]]
                did not appear in a subsequently effective final rule. In the Escrow
                Exemption Rule, the Bureau amended preexisting Paragraph 43(f)(1)(vi).
                This amended comment was incorporated into the CFR on the February 17,
                2021 effective date of the Escrow Exemption Rule; however, an unamended
                version of the preexisting comment was included in the Bureau's final
                rule titled ``Qualified Mortgage Definition Under the Truth in Lending
                Act (General QM Loan Definition)'' (General QM Rule) (85 FR 86308). The
                General QM Rule was published in the Federal Register on December 29,
                2020, but it did not take effect until March 1, 2021.\2\ The unamended
                version of the preexisting comment therefore inadvertently replaced the
                amended version when the General QM Rule was incorporated into the CFR.
                The Bureau is therefore issuing this correction to ensure that the CFR
                contains the intended version of this comment that the Bureau amended
                in the Escrow Exemption Final Rule.
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                 \2\ When amending commentary, the Office of the Federal Register
                requires reprinting of certain subsections being amended in their
                entirety rather than providing more targeted amendatory instructions
                and related text.
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                 Regulatory Requirements: The Bureau finds that public comment on
                this correction is unnecessary because the Bureau is correcting
                inadvertent, technical errors, about which there is minimal, if any,
                basis for substantive disagreement. Because no notice of proposed
                rulemaking is required, the Regulatory Flexibility Act does not require
                an initial or final regulatory flexibility analysis.\3\ The Bureau has
                determined that these corrections do not impose any new or revise any
                existing recordkeeping, reporting, or disclosure requirements on
                covered entities or members of the public that would be collections of
                information requiring OMB approval under the Paperwork Reduction
                Act.\4\
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                 \3\ 5 U.S.C. 603(a) and 604(a).
                 \4\ 44 U.S.C. 3501 et seq.
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                List of Subjects in 12 CFR Part 1026
                 Advertising, Banks, banking, Consumer protection, Credit, Credit
                unions, Mortgages, National Banks, Reporting and recordkeeping
                requirements, Savings associations, Truth-in-lending.
                Authority and Issuance
                 For the reasons set forth in the preamble, the Bureau amends
                Regulation Z, 12 CFR part 1026, as set forth below:
                PART 1026--TRUTH IN LENDING (REGULATION Z)
                0
                1. The authority citation for part 1026 continues to read as follows:
                 Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353,
                5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.
                0
                2. Amend supplement I to part 1026--Official Interpretations by:
                0
                a. Adding Paragraph 35(b)(2)(vi)(B); and
                0
                b. Revising Paragraph 43(f)(1)(vi).
                 The addition and revision read as follows:
                Supplement I to Part 1026--Official Interpretations
                * * * * *
                Section 1026.35--Requirements for Higher-Priced Mortgage Loans
                * * * * *
                35(b) Escrow Accounts
                * * * * *
                35(b)(2) Exemptions
                * * * * *
                 Paragraph 35(b)(2)(vi)(B).
                 1. The transaction threshold in Sec. 1026.35(b)(2)(vi)(B) differs
                from the transaction threshold in Sec. 1026.35(b)(2)(iii)(B) in two
                ways. First, the threshold in Sec. 1026.35(b)(2)(vi)(B) is 1,000 loans
                secured by first liens on a principal dwelling, while the threshold in
                Sec. 1026.35(b)(2)(iii)(B) is 2,000 loans secured by first liens on a
                dwelling. Second, all loans made by the creditor and its affiliates
                secured by a first lien on a principal dwelling count toward the 1,000-
                loan threshold in Sec. 1026.35(b)(2)(vi)(B), whether or not such loans
                are held in portfolio. By contrast, under Sec. 1026.35(b)(2)(iii)(B),
                only loans secured by first liens on a dwelling that were sold,
                assigned, or otherwise transferred to another person, or that were
                subject at the time of consummation to a commitment to be acquired by
                another person, are counted toward the 2,000-loan threshold.
                * * * * *
                Section 1026.43--Minimum Standards for Transactions Secured by a
                Dwelling
                * * * * *
                43(f) Balloon-Payment Qualified Mortgages Made by Certain Creditors
                43(f)(1) Exemption
                * * * * *
                 Paragraph 43(f)(1)(vi).
                 1. Creditor qualifications. Under Sec. 1026.43(f)(1)(vi), to make
                a qualified mortgage that provides for a balloon payment, the creditor
                must satisfy three criteria that are also required under Sec.
                1026.35(b)(2)(iii)(A), (B) and (C), which require:
                 i. During the preceding calendar year or during either of the two
                preceding calendar years if the application for the transaction was
                received before April 1 of the current calendar year, the creditor
                extended a first-lien covered transaction, as defined in Sec.
                1026.43(b)(1), on a property that is located in an area that is
                designated either ``rural'' or ``underserved,'' as defined in Sec.
                1026.35(b)(2)(iv), to satisfy the requirement of Sec.
                1026.35(b)(2)(iii)(A) (the rural-or-underserved test). Pursuant to
                Sec. 1026.35(b)(2)(iv), an area is considered to be rural if it is: A
                county that is neither in a metropolitan statistical area, nor a
                micropolitan statistical area adjacent to a metropolitan statistical
                area, as those terms are defined by the U.S. Office of Management and
                Budget; or a census block that is not in an urban area, as defined by
                the U.S. Census Bureau using the latest decennial census of the United
                States. An area is considered to be underserved during a calendar year
                if, according to HMDA data for the preceding calendar year, it is a
                county in which no more than two creditors extended covered
                transactions secured by first liens on properties in the county five or
                more times.
                 A. The Bureau determines annually which counties in the United
                States are rural or underserved as defined by Sec.
                1026.35(b)(2)(iv)(A)(1) or Sec. 1026.35(b)(2)(iv)(B) and publishes on
                its public website lists of those counties to assist creditors in
                determining whether they meet the criterion at Sec.
                1026.35(b)(2)(iii)(A). Creditors may also use an automated tool
                provided on the Bureau's public website to determine whether specific
                properties are located in areas that qualify as ``rural'' or
                ``underserved'' according to the definitions in Sec. 1026.35(b)(2)(iv)
                for a particular calendar year. In addition, the U.S. Census Bureau may
                also provide on its public website an automated address search tool
                that specifically indicates if a property address is located in an
                urban area for purposes of the Census Bureau's most recent delineation
                of urban areas. For any calendar year that begins after the date on
                which the Census Bureau announced its most recent delineation of urban
                areas, a property is located in an area that qualifies as ``rural''
                according to the definitions in Sec. 1026.35(b)(2)(iv) if the search
                results provided for the property by any such automated address search
                tool available on the Census Bureau's public website
                [[Page 29687]]
                do not identify the property as being in an urban area.
                 B. For example, if a creditor extended during 2017 a first-lien
                covered transaction that is secured by a property that is located in an
                area that meets the definition of rural or underserved under Sec.
                1026.35(b)(2)(iv), the creditor meets this element of the exception for
                any transaction consummated during 2018.
                 C. Alternatively, if the creditor did not extend in 2017 a
                transaction that meets the definition of rural or underserved test
                under Sec. 1026.35(b)(2)(iv), the creditor satisfies this criterion
                for any transaction consummated during 2018 for which it received the
                application before April 1, 2018, if it extended during 2016 a first-
                lien covered transaction that is secured by a property that is located
                in an area that meets the definition of rural or underserved under
                Sec. 1026.35(b)(2)(iv).
                 ii. During the preceding calendar year, or, if the application for
                the transaction was received before April 1 of the current calendar
                year, during either of the two preceding calendar years, the creditor
                together with its affiliates extended no more than 2,000 covered
                transactions, as defined by Sec. 1026.43(b)(1), secured by first
                liens, that were sold, assigned, or otherwise transferred to another
                person, or that were subject at the time of consummation to a
                commitment to be acquired by another person, to satisfy the requirement
                of Sec. 1026.35(b)(2)(iii)(B).
                 iii. As of the preceding December 31st, or, if the application for
                the transaction was received before April 1 of the current calendar
                year, as of either of the two preceding December 31sts, the creditor
                and its affiliates that regularly extended covered transactions secured
                by first liens, together, had total assets that do not exceed the
                applicable asset threshold established by the Bureau, to satisfy the
                requirement of Sec. 1026.35(b)(2)(iii)(C). The Bureau publishes notice
                of the asset threshold each year by amending comment 35(b)(2)(iii)-
                1.iii.
                * * * * *
                 Dated: May 26, 2021.
                David Uejio,
                Acting Director, Bureau of Consumer Financial Protection.
                [FR Doc. 2021-11571 Filed 6-2-21; 8:45 am]
                BILLING CODE 4810-AM-P
                

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