80_FR_80475 80 FR 80228 - 2013 Integrated Mortgage Disclosures Rule Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z); Correction

80 FR 80228 - 2013 Integrated Mortgage Disclosures Rule Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z); Correction

BUREAU OF CONSUMER FINANCIAL PROTECTION

Federal Register Volume 80, Issue 247 (December 24, 2015)

Page Range80228-80232
FR Document2015-32463

The Consumer Financial Protection Bureau (Bureau) is making technical corrections to Regulation Z (Truth in Lending) and the Official Interpretations of Regulation Z. These corrections republish certain provisions of Regulation Z and the Official Interpretations that were inadvertently removed from or not incorporated into the Code of Federal Regulations by the ``Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z)'' final rule (TILA-RESPA Final Rule).

Federal Register, Volume 80 Issue 247 (Thursday, December 24, 2015)
[Federal Register Volume 80, Number 247 (Thursday, December 24, 2015)]
[Rules and Regulations]
[Pages 80228-80232]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-32463]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

RIN 3170-AA19


2013 Integrated Mortgage Disclosures Rule Under the Real Estate 
Settlement Procedures Act (Regulation X) and the Truth in Lending Act 
(Regulation Z); Correction

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; Official interpretations; Correction.

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SUMMARY: The Consumer Financial Protection Bureau (Bureau) is making 
technical corrections to Regulation Z (Truth in Lending) and the 
Official Interpretations of Regulation Z. These corrections republish 
certain provisions of Regulation Z and the Official Interpretations 
that were inadvertently removed from or not incorporated into the Code 
of Federal Regulations by the ``Integrated Mortgage Disclosures Under 
the Real Estate Settlement Procedures Act (Regulation X) and the Truth 
in Lending Act (Regulation Z)'' final rule (TILA-RESPA Final Rule).

DATES: These corrections are effective on December 24, 2015.

FOR FURTHER INFORMATION CONTACT: Paul Ceja, Senior Counsel and Special 
Advisor, Office of Regulations, Consumer Financial Protection Bureau, 
1700 G Street NW., Washington, DC 20552, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Background

    In November 2013, pursuant to sections 1098 and 1100A of the Dodd-
Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 
Act),\1\ the Bureau issued the TILA-RESPA Final Rule, combining certain 
disclosures that consumers receive in connection with applying for and 
closing on a mortgage loan.\2\ On January 20, 2015, the Bureau issued 
the ``Amendments to the 2013 Integrated Mortgage Disclosures Rule Under 
the Real Estate Settlement Procedures Act (Regulation X) and the Truth 
in Lending Act (Regulation Z) and the 2013 Loan Originator Rule Under 
the Truth in Lending Act (Regulation Z)'' final rule (Amendments).\3\ 
On July 21, 2015, the Bureau issued a final rule to delay the effective 
date of the TILA-RESPA Final Rule and Amendments to October 3, 2015, 
and to finalize certain technical amendments and corrections.\4\
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    \1\ Public Law 111-203, 124 Stat. 1376, 2103-04, 2107-09 (2010).
    \2\ 78 FR 79730 (Dec. 31, 2013). The TILA-RESPA Final Rule 
finalized a proposal the Bureau had issued on July 9, 2012, 77 FR 
51116 (Aug. 23, 2012).
    \3\ 80 FR 8767 (Feb. 19, 2015). The Amendments finalized a 
proposal the Bureau had issued on October 10, 2014, 79 FR 64336 
(Oct. 29, 2014).
    \4\ 80 FR 43911 (July 24, 2015). This rule finalized a proposal 
the Bureau had issued on June 24, 2015, 80 FR 36727 (June 26, 2015).
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    The publication of the TILA-RESPA Final Rule in the Federal 
Register resulted in several unintended deletions of existing 
regulatory text from Regulation Z and the Official Interpretations 
(commentary) in the Code of Federal Regulations (CFR) and, in one case, 
the omission of regulatory language in the TILA-RESPA Final Rule from 
the CFR. To correct the CFR, the Bureau is now republishing the deleted 
and omitted text, consistent with the Bureau's intent in the TILA-RESPA 
Final Rule.
    Specifically, this final rule makes the following corrections to 
reinsert existing regulatory text that was inadvertently deleted from 
Regulation Z and its commentary:

     Amends Sec.  1026.22(a)(5) to restore subparagraphs (i) 
and (ii).
     Amends the commentary to Sec.  1026.17 at paragraph 
17(c)(1)-2 to restore subparagraphs i, ii, and iii.
     Amends commentary paragraph 17(c)(1)-4 to restore 
subparagraphs i.A, and i.B.
     Amends commentary paragraph 17(c)(1)-10 to restore 
introductory text and subparagraphs iii, iv, and vi.
     Amends commentary paragraph 17(c)(1)-11 to restore 
subparagraphs i, ii, iii, and iv.
     Amends commentary paragraph 17(c)(1)-12 to restore 
subparagraphs i, ii, and iii.
     Amends commentary paragraph 17(c)(4)-1 to restore 
subparagraphs i and ii.
     Amends commentary paragraph 17(g)-1 to restore 
subparagraphs i and ii.
     Amends the commentary to Sec.  1026.18 at paragraph 
18(g)-4 to restore text to subparagraph i.

    This rule also amends the commentary to appendix D to Regulation Z 
to add paragraph 7 that had been included in the TILA-RESPA Final Rule 
published in the Federal Register but that was inadvertently omitted 
from the commentary to appendix D in the CFR.
    These technical corrections are non-substantive changes to the 
TILA-RESPA Final Rule. No changes have been made to the deleted or 
omitted text or any text of the TILA-RESPA Final Rule that has already 
been codified in the CFR. To eliminate confusion among interested 
persons, the Bureau is republishing all paragraphs containing the 
deleted and omitted text in their entirety.

II. Basis for the Corrections

    The Bureau is issuing these technical corrections solely to correct 
the CFR. The Bureau finds that there is good cause to publish these 
corrections without seeking public comment, consistent with 5 U.S.C. 
553(b)(B). Public comment is unnecessary because the rule merely makes 
technical changes to ensure that the TILA-RESPA Final Rule appears in 
the CFR as the Bureau intended and because it corrects inadvertent, 
technical errors about

[[Page 80229]]

which there is minimal, if any, basis for substantive disagreement. 
Additionally, the Bureau finds good cause to dispense with a 30-day 
delay of the effective date. See 5 U.S.C. 553(d)(3). With these 
corrections, the Bureau is only clarifying how the TILA-RESPA Final 
Rule should have been codified in the CFR, and preventing incorrect 
codification in the 2016 hard copy edition of the CFR, which 
incorporates CFR changes made prior to January 1, 2016. Therefore, the 
Bureau is publishing these corrections as a final rule that will be 
effective upon publication in the Federal Register because the need to 
implement the corrections immediately outweighs any need for providing 
additional time to comply with this rule.

List of Subjects in 12 CFR Part 1026

    Advertising, 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 above, 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.

Subpart C--Closed End Credit

0
2. Section 1026.22 is amended by revising paragraph (a)(5) to read as 
follows:


Sec.  1026.22  Determination of annual percentage rate.

    (a) * * *
    (5) Additional tolerance for mortgage loans. In a transaction 
secured by real property or a dwelling, in addition to the tolerances 
applicable under paragraphs (a)(2) and (3) of this section, if the 
disclosed finance charge is calculated incorrectly but is considered 
accurate under Sec.  1026.18(d)(1) or Sec.  1026.38(o)(2), as 
applicable, or Sec.  1026.23(g) or (h), the disclosed annual percentage 
rate shall be considered accurate:
    (i) If the disclosed finance charge is understated, and the 
disclosed annual percentage rate is also understated but it is closer 
to the actual annual percentage rate than the rate that would be 
considered accurate under paragraph (a)(4) of this section;
    (ii) If the disclosed finance charge is overstated, and the 
disclosed annual percentage rate is also overstated but it is closer to 
the actual annual percentage rate than the rate that would be 
considered accurate under paragraph (a)(4) of this section.
* * * * *

0
3. In Supplement I to Part 1026--Official Interpretations, under 
Subpart C--Closed-End Credit:
0
A. In Section 1026.17--General Disclosure Requirements:
0
i. Under 17(c) Basis of Disclosures and Use of Estimates:
0
a. Under Paragraph 17(c)(1), paragraphs 2,4,10,11, and 12 are revised.
0
b. Under Paragraph 17(c)(4), paragraph 1 is revised.
0
ii. Under 17(g) Mail or Telephone Orders--Delay in Disclosures, 
paragraph 1 is revised.
0
B. In Section 1026.18--Content of Disclosures, under 18(g) Payment 
Schedule, paragraph 4 is revised.
0
C. In Appendix D--Multiple-Advance Construction Loans, paragraph 7 is 
added.
    The revisions and addition read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Subpart C--Closed End Credit

    Section 1026.17--General Disclosure Requirements
* * * * *

17(c) Basis of Disclosures and Use of Estimates

Paragraph 17(c)(1)

* * * * *
    2. Modification of obligation. The legal obligation normally is 
presumed to be contained in the note or contract that evidences the 
agreement between the consumer and the creditor. But this presumption 
is rebutted if another agreement between the consumer and creditor 
legally modifies that note or contract. If the consumer and creditor 
informally agree to a modification of the legal obligation, the 
modification should not be reflected in the disclosures unless it rises 
to the level of a change in the terms of the legal obligation. For 
example:
    i. If the creditor offers a preferential rate, such as an employee 
preferred rate, the disclosures should reflect the terms of the legal 
obligation. (See the commentary to Sec.  1026.19(b) for an example of a 
preferred-rate transaction that is a variable-rate transaction.)
    ii. If the contract provides for a certain monthly payment schedule 
but payments are made on a voluntary payroll deduction plan or an 
informal principal-reduction agreement, the disclosures should reflect 
the schedule in the contract.
    iii. If the contract provides for regular monthly payments but the 
creditor informally permits the consumer to defer payments from time to 
time, for instance, to take account of holiday seasons or seasonal 
employment, the disclosures should reflect the regular monthly 
payments.
* * * * *
    4. Consumer buydowns. In certain transactions, the consumer may pay 
an amount to the creditor to reduce the payments on the transaction. 
Consumer buydowns must be reflected as an amendment to the contract's 
interest rate provision in the disclosure of the finance charge and 
other disclosures affected by it given for that transaction. To 
illustrate, in a mortgage transaction, the creditor and consumer agree 
to a note specifying a 14 percent interest rate. However, in a separate 
document, the consumer agrees to pay an amount to the creditor at 
consummation in return for lower payments for a portion of the mortgage 
term. The amount paid by the consumer may be deposited in an escrow 
account or may be retained by the creditor. Depending upon the buydown 
plan, the consumer's prepayment of the obligation may or may not result 
in a portion of the amount being credited or refunded to the consumer. 
In the disclosure of the finance charge and other disclosures affected 
by it given for the mortgage, the creditor must reflect the terms of 
the buydown agreement.
    i. For example:
    A. The amount paid by the consumer is a prepaid finance charge 
(even if deposited in an escrow account).
    B. A composite annual percentage rate must be calculated, taking 
into account both interest rates, as well as the effect of the prepaid 
finance charge.
    C. The disclosures under Sec. Sec.  1026.18(g) and (s), 1026.37(c), 
and 1026.38(c), as applicable, must reflect the multiple rate and 
payment levels resulting from the buydown, except as otherwise provided 
in those sections. Further, for example, the disclosures must reflect 
that the transaction is a step rate product under Sec. Sec.  
1026.37(a)(10)(B) and 1026.38(a)(5)(iii).
    ii. The rules regarding consumer buydowns do not apply to 
transactions known as ``lender buydowns.'' In lender buydowns, a 
creditor pays an amount (either into an account or to the party to

[[Page 80230]]

whom the obligation is sold) to reduce the consumer's payments or 
interest rate for all or a portion of the credit term. Typically, these 
transactions are structured as a buydown of the interest rate during an 
initial period of the transaction with a higher than usual rate for the 
remainder of the term. The disclosure of the finance charge and other 
disclosures affected by it for lender buydowns should be based on the 
terms of the legal obligation between the consumer and the creditor. 
See comment 17(c)(1)-3 for the analogous rules concerning third-party 
buydowns.
* * * * *
    10. Discounted and premium variable-rate transactions. In some 
variable-rate transactions, creditors may set an initial interest rate 
that is not determined by the index or formula used to make later 
interest rate adjustments. Typically, this initial rate charged to 
consumers is lower than the rate would be if it were calculated using 
the index or formula. However, in some cases the initial rate may be 
higher. In a discounted transaction, for example, a creditor may 
calculate interest rates according to a formula using the six-month 
Treasury bill rate plus a 2 percent margin. If the Treasury bill rate 
at consummation is 10 percent, the creditor may forgo the 2 percent 
spread and charge only 10 percent for a limited time, instead of 
setting an initial rate of 12 percent.
    i. When creditors use an initial interest rate that is not 
calculated using the index or formula for later rate adjustments, the 
disclosures should reflect a composite annual percentage rate based on 
the initial rate for as long as it is charged and, for the remainder of 
the term, the rate that would have been applied using the index or 
formula at the time of consummation. The rate at consummation need not 
be used if a contract provides for a delay in the implementation of 
changes in an index value. For example, if the contract specifies that 
rate changes are based on the index value in effect 45 days before the 
change date, creditors may use any index value in effect during the 45 
day period before consummation in calculating a composite annual 
percentage rate.
    ii. The effect of the multiple rates must also be reflected in the 
calculation and disclosure of the finance charge, total of payments, 
and the disclosures required under Sec. Sec.  1026.18(g) and (s), 
1026.37(c), 1026.37(l)(1) and (3), 1026.38(c), and 1026.38(o)(5), as 
applicable.
    iii. If a loan contains a rate or payment cap that would prevent 
the initial rate or payment, at the time of the first adjustment, from 
changing to the rate determined by the index or formula at 
consummation, the effect of that rate or payment cap should be 
reflected in the disclosures.
    iv. Because these transactions involve irregular payment amounts, 
an annual percentage rate tolerance of \1/4\ of 1 percent applies, in 
accordance with Sec.  1026.22(a)(3).
    v. Examples of discounted variable-rate transactions include:
    A. A 30-year loan for $100,000 with no prepaid finance charges and 
rates determined by the Treasury bill rate plus two percent. Rate and 
payment adjustments are made annually. Although the Treasury bill rate 
at the time of consummation is 10 percent, the creditor sets the 
interest rate for one year at 9 percent, instead of 12 percent 
according to the formula. The disclosures should reflect a composite 
annual percentage rate of 11.63 percent based on 9 percent for one year 
and 12 percent for 29 years. Reflecting those two rate levels, the 
payment schedule disclosed pursuant to Sec.  1026.18(g) should show 12 
payments of $804.62 and 348 payments of $1,025.31. Similarly, the 
disclosures required by Sec. Sec.  1026.18(s), 1026.37(c), 
1026.37(l)(1) and (3), 1026.38(c), and 1026.38(o)(5) should reflect the 
effect of this calculation. The finance charge should be $266,463.32 
and, for transactions subject to Sec.  1026.18, the total of payments 
should be $366,463.32.
    B. Same loan as above, except with a two-percent rate cap on 
periodic adjustments. The disclosures should reflect a composite annual 
percentage rate of 11.53 percent based on 9 percent for the first year, 
11 percent for the second year, and 12 percent for the remaining 28 
years. Reflecting those three rate levels, the payment schedule 
disclosed pursuant to Sec.  1026.18(g) should show 12 payments of 
$804.62, 12 payments of $950.09, and 336 payments of $1,024.34. 
Similarly, the disclosures required by Sec. Sec.  1026.18(s), 
1026.37(c), 1026.37(l)(1) and (3), 1026.38(c), and 1026.38(o)(5) should 
reflect the effect of this calculation. The finance charge should be 
$265,234.76 and, for transactions subject to Sec.  1026.18, the total 
of payments should be $365,234.76.
    C. Same loan as above, except with a 7\1/2\ percent cap on payment 
adjustments. The disclosures should reflect a composite annual 
percentage rate of 11.64 percent, based on 9 percent for one year and 
12 percent for 29 years. Because of the payment cap, five levels of 
payments should be reflected. The payment schedule disclosed pursuant 
to Sec.  1026.18(g) should show 12 payments of $804.62, 12 payments of 
$864.97, 12 payments of $929.84, 12 payments of $999.58, and 312 
payments of $1,070.04. Similarly, the disclosures required by 
Sec. Sec.  1026.18(s), 1026.37(c), 1026.37(l)(1) and (3), 1026.38(c), 
and 1026.38(o)(5) should reflect the effect of this calculation. The 
finance charge should be $277,040.60, and, for transactions subject to 
Sec.  1026.18, the total of payments should be $377,040.60.
    vi. A loan in which the initial interest rate is set according to 
the index or formula used for later adjustments but is not set at the 
value of the index or formula at consummation is not a discounted 
variable-rate loan. For example, if a creditor commits to an initial 
rate based on the formula on a date prior to consummation, but the 
index has moved during the period between that time and consummation, a 
creditor should base its disclosures on the initial rate.
    11. Examples of variable-rate transactions. Variable-rate 
transactions include:
    i. Renewable balloon-payment instruments where the creditor is both 
unconditionally obligated to renew the balloon-payment loan at the 
consumer's option (or is obligated to renew subject to conditions 
within the consumer's control) and has the option of increasing the 
interest rate at the time of renewal. Disclosures must be based on the 
payment amortization (unless the specified term of the obligation with 
renewals is shorter) and on the rate in effect at the time of 
consummation of the transaction. (Examples of conditions within a 
consumer's control include requirements that a consumer be current in 
payments or continue to reside in the mortgaged property. In contrast, 
setting a limit on the rate at which the creditor would be obligated to 
renew or reserving the right to change the credit standards at the time 
of renewal are examples of conditions outside a consumer's control.) 
If, however, a creditor is not obligated to renew as described above, 
disclosures must be based on the term of the balloon-payment loan. 
Disclosures also must be based on the term of the balloon-payment loan 
in balloon-payment instruments in which the legal obligation provides 
that the loan will be renewed by a ``refinancing'' of the obligation, 
as that term is defined by Sec.  1026.20(a). If it cannot be determined 
from the legal obligation that the loan will be renewed by a 
``refinancing,'' disclosures must be based either on the term of the 
balloon-payment loan or on the payment amortization, depending

[[Page 80231]]

on whether the creditor is unconditionally obligated to renew the loan 
as described above. (This discussion does not apply to construction 
loans subject to Sec.  1026.17(c)(6).)
    ii. ``Shared-equity'' or ``shared-appreciation'' mortgages that 
have a fixed rate of interest and an appreciation share based on the 
consumer's equity in the mortgaged property. The appreciation share is 
payable in a lump sum at a specified time. Disclosures must be based on 
the fixed interest rate. (As discussed in the commentary to Sec.  
1026.2, other types of shared-equity arrangements are not considered 
``credit'' and are not subject to Regulation Z.)
    iii. Preferred-rate loans where the terms of the legal obligation 
provide that the initial underlying rate is fixed but will increase 
upon the occurrence of some event, such as an employee leaving the 
employ of the creditor, and the note reflects the preferred rate. The 
disclosures are to be based on the preferred rate.
    iv. Graduated-payment mortgages and step-rate transactions without 
a variable-rate feature are not considered variable-rate transactions.
    v. ``Price level adjusted mortgages'' or other indexed mortgages 
that have a fixed rate of interest but provide for periodic adjustments 
to payments and the loan balance to reflect changes in an index 
measuring prices or inflation. Disclosures are to be based on the fixed 
interest rate, except as otherwise provided in Sec. Sec.  1026.18(s), 
1026.37, and 1026.38, as applicable.
    12. Graduated payment adjustable rate mortgages. These mortgages 
involve both a variable interest rate and scheduled variations in 
payment amounts during the loan term. For example, under these plans, a 
series of graduated payments may be scheduled before rate adjustments 
affect payment amounts, or the initial scheduled payment may remain 
constant for a set period before rate adjustments affect the payment 
amount. In any case, the initial payment amount may be insufficient to 
cover the scheduled interest, causing negative amortization from the 
outset of the transaction. In these transactions, except as otherwise 
provided in Sec. Sec.  1026.18(s), 1026.37(c), and 1026.38(c), the 
disclosures should treat these features as follows:
    i. The finance charge includes the amount of negative amortization 
based on the assumption that the rate in effect at consummation remains 
unchanged.
    ii. The amount financed does not include the amount of negative 
amortization.
    iii. As in any variable-rate transaction, the annual percentage 
rate is based on the terms in effect at consummation.
    iv. The disclosures required by Sec.  1026.18(g) and (s) reflect 
the amount of any scheduled initial payments followed by an adjusted 
level of payments based on the initial interest rate. Since some 
mortgage plans contain limits on the amount of the payment adjustment, 
the disclosures required by Sec.  1026.18(g) and (s) may require 
several different levels of payments, even with the assumption that the 
original interest rate does not increase. For transactions subject to 
Sec.  1026.19(e) and (f), see Sec.  1026.37(c) and its commentary for a 
discussion of different rules for graduated payment adjustable rate 
mortgages.
* * * * *

Paragraph 17(c)(4)

    1. Payment schedule irregularities. When one or more payments in a 
transaction differ from the others because of a long or short first 
period, the variations may be ignored in disclosing the payment 
schedule pursuant to Sec.  1026.18(g), the disclosures required 
pursuant to Sec. Sec.  1026.18(s), 1026.37(c), or 1026.38(c), or the 
finance charge, annual percentage rate, and other terms. For example:
    i. A 36-month auto loan might be consummated on June 8 with 
payments due on July 1 and the first of each succeeding month. The 
creditor may base its calculations on a payment schedule that assumes 
36 equal intervals and 36 equal installment payments, even though a 
precise computation would produce slightly different amounts because of 
the shorter first period.
    ii. By contrast, in the same example, if the first payment were not 
scheduled until August 1, the irregular first period would exceed the 
limits in Sec.  1026.17(c)(4); the creditor could not use the special 
rule and could not ignore the extra days in the first period in 
calculating its disclosures.
* * * * *
    17(g) Mail or Telephone Orders--Delay in Disclosures.
    1. Conditions for use. Except for extensions of credit subject to 
Sec.  1026.19(a) or (e) and (f), when the creditor receives a mail or 
telephone request for credit, the creditor may delay making the 
disclosures until the first payment is due if the following conditions 
are met:
    i. The credit request is initiated without face-to-face or direct 
telephone solicitation. (Creditors may, however, use the special rule 
when credit requests are solicited by mail.)
    ii. The creditor has supplied the specified credit information 
about its credit terms either to the individual consumer or to the 
public generally. That information may be distributed through 
advertisements, catalogs, brochures, special mailers, or similar means.
* * * * *

Section 1026.18--Content of Disclosures

* * * * *

18(g) Payment Schedule

* * * * *
    4. Timing of payments. i. General rule. Section 1026.18(g) requires 
creditors to disclose the timing of payments. To meet this requirement, 
creditors may list all of the payment due dates. They also have the 
option of specifying the ``period of payments'' scheduled to repay the 
obligation. As a general rule, creditors that choose this option must 
disclose the payment intervals or frequency, such as ``monthly'' or 
``bi-weekly,'' and the calendar date that the beginning payment is due. 
For example, a creditor may disclose that payments are due ``monthly 
beginning on July 1, 1998.'' This information, when combined with the 
number of payments, is necessary to define the repayment period and 
enable a consumer to determine all of the payment due dates.
    ii. Exception. In a limited number of circumstances, the beginning-
payment date is unknown and difficult to determine at the time 
disclosures are made. For example, a consumer may become obligated on a 
credit contract that contemplates the delayed disbursement of funds 
based on a contingent event, such as the completion of repairs. 
Disclosures may also accompany loan checks that are sent by mail, in 
which case the initial disbursement and repayment dates are solely 
within the consumer's control. In such cases, if the beginning-payment 
date is unknown the creditor may use an estimated date and label the 
disclosure as an estimate pursuant to Sec.  1026.17(c). Alternatively, 
the disclosure may refer to the occurrence of a particular event, for 
example, by disclosing that the beginning payment is due ``30 days 
after the first loan disbursement.'' This information also may be 
included with an estimated date to explain the basis for the creditor's 
estimate. See comment 17(a)(1)-5.iii.
* * * * *

Appendix D--Multiple-Advance Construction Loans

* * * * *

[[Page 80232]]

    7. Relation to Sec. Sec.  1026.37 and 1026.38. A creditor must 
disclose a projected payments table for certain transactions secured by 
real property, pursuant to Sec. Sec.  1026.37(c) and 1026.38(c), 
instead of the general payment schedule required by Sec.  1026.18(g) or 
the interest rate and payments summary table required by Sec.  
1026.18(s). Accordingly, some home construction loans that are secured 
by real property are subject to Sec. Sec.  1026.37(c) and 1026.38(c) 
and not Sec.  1026.18(g). See comment app. D-6 for a discussion of 
transactions that are subject to Sec.  1026.18(s). Under Sec.  
1026.17(c)(6)(ii), when a multiple-advance construction loan may be 
permanently financed by the same creditor, the construction phase and 
the permanent phase may be treated as either one transaction or more 
than one transaction. Following are illustrations of the application of 
appendix D to transactions subject to Sec. Sec.  1026.37(c) and 
1026.38(c), under each of these two alternatives:
    i. If a creditor uses appendix D and elects pursuant to Sec.  
1026.17(c)(6)(ii) to disclose the construction and permanent phases as 
separate transactions, the construction phase must be disclosed 
according to the rules in Sec. Sec.  1026.37(c) and 1026.38(c). Under 
Sec. Sec.  1026.37(c) and 1026.38(c), the creditor must disclose the 
periodic payments during the construction phase in a projected payments 
table. The provision in appendix D, part I.A.3, which allows the 
creditor to omit the number and amounts of any interest payments ``in 
disclosing the payment schedule under Sec.  1026.18(g)'' does not apply 
because the transaction is governed by Sec. Sec.  1026.37(c) and 
1026.38(c) rather than Sec.  1026.18(g). The creditor determines the 
amount of the interest-only payment to be made during the construction 
phase using the assumption in appendix D, part I.A.1. Also, because the 
construction phase is being disclosed as a separate transaction and its 
terms do not repay all principal, the creditor must disclose the 
construction phase transaction as a product with a balloon payment 
feature, pursuant to Sec. Sec.  1026.37(a)(10)(ii)(D) and 
1026.38(a)(5)(iii), in addition to reflecting the balloon payment in 
the projected payments table.
    ii. If the creditor elects to disclose the construction and 
permanent phases as a single transaction, the repayment schedule must 
be disclosed pursuant to appendix D, part II.C.2. Under appendix D, 
part II.C.2, the projected payments table must reflect the interest-
only payments during the construction phase in a first column, followed 
by the appropriate column(s) reflecting the amortizing payments for the 
permanent phase. The creditor determines the amount of the interest-
only payment to be made during the construction phase using the 
assumption in appendix D, part II.A.1.
* * * * *

    Dated: December 15, 2015.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2015-32463 Filed 12-21-15; 4:15 pm]
BILLING CODE 4810-AM-P



                                            80228            Federal Register / Vol. 80, No. 247 / Thursday, December 24, 2015 / Rules and Regulations

                                              (ii) Be light sources other than                       energy conservation standards in                          must use an electronic ballast and be
                                            compact fluorescent lamps that have                      paragraph (s)(2)(i) of this section.                      packaged with lamps to fill all sockets.
                                            lumens per watt performance at least                       (3) Ceiling fan light kits manufactured                 These lamp ballast platforms must meet
                                            equivalent to comparably configured                      on or after January 1, 2007 with pin-                     the following requirements:
                                            compact fluorescent lamps meeting the                    based sockets for fluorescent lamps

                                                                                   Factor                                                                          Requirement

                                            System Efficacy Per Lamp Ballast Platform in Lumens Per Watt (lm/w)                   ≥   50   lm/w for all lamps below 30 total listed lamp watts.
                                                                                                                                  ≥   60   lm/w for all lamps that are ≤ 24 inches and
                                                                                                                                  ≥   30   total listed lamp watts.
                                                                                                                                  ≥   70   lm/w for all lamps that are > 24 inches and
                                                                                                                                  ≥   30   total listed lamp watts.



                                               (4) Ceiling fan light kits manufactured               SUPPLEMENTARY INFORMATION:                                   • Amends § 1026.22(a)(5) to restore
                                            on or after January 1, 2009 with socket                                                                            subparagraphs (i) and (ii).
                                                                                                     I. Background                                                • Amends the commentary to § 1026.17 at
                                            types other than those covered in
                                            paragraphs (s)(2) or (3) of this section,                   In November 2013, pursuant to                          paragraph 17(c)(1)–2 to restore subparagraphs
                                                                                                     sections 1098 and 1100A of the Dodd-                      i, ii, and iii.
                                            including candelabra screw base                                                                                       • Amends commentary paragraph
                                            sockets, shall be packaged with lamps to                 Frank Wall Street Reform and Consumer
                                                                                                                                                               17(c)(1)–4 to restore subparagraphs i.A, and
                                            fill all sockets and shall not be capable                Protection Act (Dodd-Frank Act),1 the                     i.B.
                                            of operating with lamps that total more                  Bureau issued the TILA–RESPA Final                           • Amends commentary paragraph
                                            than 190 watts.                                          Rule, combining certain disclosures that                  17(c)(1)–10 to restore introductory text and
                                            *      *     *     *     *                               consumers receive in connection with                      subparagraphs iii, iv, and vi.
                                            [FR Doc. 2015–32283 Filed 12–23–15; 8:45 am]             applying for and closing on a mortgage                       • Amends commentary paragraph
                                            BILLING CODE 6450–01–P
                                                                                                     loan.2 On January 20, 2015, the Bureau                    17(c)(1)–11 to restore subparagraphs i, ii, iii,
                                                                                                     issued the ‘‘Amendments to the 2013                       and iv.
                                                                                                     Integrated Mortgage Disclosures Rule                         • Amends commentary paragraph
                                                                                                     Under the Real Estate Settlement                          17(c)(1)–12 to restore subparagraphs i, ii, and
                                            BUREAU OF CONSUMER FINANCIAL                                                                                       iii.
                                                                                                     Procedures Act (Regulation X) and the
                                            PROTECTION                                                                                                            • Amends commentary paragraph
                                                                                                     Truth in Lending Act (Regulation Z) and                   17(c)(4)–1 to restore subparagraphs i and ii.
                                            12 CFR Part 1026                                         the 2013 Loan Originator Rule Under                          • Amends commentary paragraph 17(g)–1
                                                                                                     the Truth in Lending Act (Regulation                      to restore subparagraphs i and ii.
                                            RIN 3170–AA19                                            Z)’’ final rule (Amendments).3 On July                       • Amends the commentary to § 1026.18 at
                                                                                                     21, 2015, the Bureau issued a final rule                  paragraph 18(g)–4 to restore text to
                                            2013 Integrated Mortgage Disclosures
                                                                                                     to delay the effective date of the TILA–                  subparagraph i.
                                            Rule Under the Real Estate Settlement                    RESPA Final Rule and Amendments to
                                            Procedures Act (Regulation X) and the                                                                                 This rule also amends the
                                                                                                     October 3, 2015, and to finalize certain                  commentary to appendix D to
                                            Truth in Lending Act (Regulation Z);                     technical amendments and corrections.4
                                            Correction                                                                                                         Regulation Z to add paragraph 7 that
                                                                                                        The publication of the TILA–RESPA                      had been included in the TILA–RESPA
                                            AGENCY:  Bureau of Consumer Financial                    Final Rule in the Federal Register                        Final Rule published in the Federal
                                            Protection.                                              resulted in several unintended deletions                  Register but that was inadvertently
                                            ACTION: Final rule; Official                             of existing regulatory text from                          omitted from the commentary to
                                            interpretations; Correction.                             Regulation Z and the Official                             appendix D in the CFR.
                                                                                                     Interpretations (commentary) in the                          These technical corrections are non-
                                            SUMMARY:   The Consumer Financial                        Code of Federal Regulations (CFR) and,                    substantive changes to the TILA–RESPA
                                            Protection Bureau (Bureau) is making                     in one case, the omission of regulatory                   Final Rule. No changes have been made
                                            technical corrections to Regulation Z                    language in the TILA–RESPA Final Rule                     to the deleted or omitted text or any text
                                            (Truth in Lending) and the Official                      from the CFR. To correct the CFR, the                     of the TILA–RESPA Final Rule that has
                                            Interpretations of Regulation Z. These                   Bureau is now republishing the deleted                    already been codified in the CFR. To
                                            corrections republish certain provisions                 and omitted text, consistent with the                     eliminate confusion among interested
                                            of Regulation Z and the Official                         Bureau’s intent in the TILA–RESPA                         persons, the Bureau is republishing all
                                            Interpretations that were inadvertently                  Final Rule.                                               paragraphs containing the deleted and
                                            removed from or not incorporated into                       Specifically, this final rule makes the                omitted text in their entirety.
                                            the Code of Federal Regulations by the                   following corrections to reinsert existing
                                            ‘‘Integrated Mortgage Disclosures Under                  regulatory text that was inadvertently                    II. Basis for the Corrections
                                            the Real Estate Settlement Procedures                    deleted from Regulation Z and its                            The Bureau is issuing these technical
                                            Act (Regulation X) and the Truth in                      commentary:                                               corrections solely to correct the CFR.
                                            Lending Act (Regulation Z)’’ final rule                                                                            The Bureau finds that there is good
                                            (TILA–RESPA Final Rule).                                    1 Public Law 111–203, 124 Stat. 1376, 2103–04,
                                                                                                                                                               cause to publish these corrections
                                                                                                     2107–09 (2010).
                                            DATES: These corrections are effective                      2 78 FR 79730 (Dec. 31, 2013). The TILA–RESPA          without seeking public comment,
                                            on December 24, 2015.                                    Final Rule finalized a proposal the Bureau had            consistent with 5 U.S.C. 553(b)(B).
tkelley on DSK3SPTVN1PROD with RULES




                                            FOR FURTHER INFORMATION CONTACT: Paul                    issued on July 9, 2012, 77 FR 51116 (Aug. 23, 2012).      Public comment is unnecessary because
                                            Ceja, Senior Counsel and Special                            3 80 FR 8767 (Feb. 19, 2015). The Amendments
                                                                                                                                                               the rule merely makes technical changes
                                            Advisor, Office of Regulations,                          finalized a proposal the Bureau had issued on             to ensure that the TILA–RESPA Final
                                                                                                     October 10, 2014, 79 FR 64336 (Oct. 29, 2014).
                                            Consumer Financial Protection Bureau,                       4 80 FR 43911 (July 24, 2015). This rule finalized     Rule appears in the CFR as the Bureau
                                            1700 G Street NW., Washington, DC                        a proposal the Bureau had issued on June 24, 2015,        intended and because it corrects
                                            20552, at (202) 435–7700.                                80 FR 36727 (June 26, 2015).                              inadvertent, technical errors about


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                                                             Federal Register / Vol. 80, No. 247 / Thursday, December 24, 2015 / Rules and Regulations                                         80229

                                            which there is minimal, if any, basis for                   (ii) If the disclosed finance charge is               ii. If the contract provides for a certain
                                            substantive disagreement. Additionally,                  overstated, and the disclosed annual                  monthly payment schedule but
                                            the Bureau finds good cause to dispense                  percentage rate is also overstated but it             payments are made on a voluntary
                                            with a 30-day delay of the effective date.               is closer to the actual annual percentage             payroll deduction plan or an informal
                                            See 5 U.S.C. 553(d)(3). With these                       rate than the rate that would be                      principal-reduction agreement, the
                                            corrections, the Bureau is only                          considered accurate under paragraph                   disclosures should reflect the schedule
                                            clarifying how the TILA–RESPA Final                      (a)(4) of this section.                               in the contract.
                                            Rule should have been codified in the                    *       *     *     *     *                              iii. If the contract provides for regular
                                            CFR, and preventing incorrect                            ■ 3. In Supplement I to Part 1026—
                                                                                                                                                           monthly payments but the creditor
                                            codification in the 2016 hard copy                       Official Interpretations, under Subpart               informally permits the consumer to
                                            edition of the CFR, which incorporates                   C—Closed-End Credit:                                  defer payments from time to time, for
                                            CFR changes made prior to January 1,                     ■ A. In Section 1026.17—General
                                                                                                                                                           instance, to take account of holiday
                                            2016. Therefore, the Bureau is                           Disclosure Requirements:                              seasons or seasonal employment, the
                                            publishing these corrections as a final                  ■ i. Under 17(c) Basis of Disclosures and
                                                                                                                                                           disclosures should reflect the regular
                                            rule that will be effective upon                         Use of Estimates:                                     monthly payments.
                                            publication in the Federal Register                      ■ a. Under Paragraph 17(c)(1),                        *       *      *    *     *
                                            because the need to implement the                        paragraphs 2,4,10,11, and 12 are                         4. Consumer buydowns. In certain
                                            corrections immediately outweighs any                    revised.                                              transactions, the consumer may pay an
                                            need for providing additional time to                    ■ b. Under Paragraph 17(c)(4),                        amount to the creditor to reduce the
                                            comply with this rule.                                   paragraph 1 is revised.                               payments on the transaction. Consumer
                                            List of Subjects in 12 CFR Part 1026                     ■ ii. Under 17(g) Mail or Telephone                   buydowns must be reflected as an
                                                                                                     Orders—Delay in Disclosures, paragraph                amendment to the contract’s interest
                                              Advertising, Consumer protection,                                                                            rate provision in the disclosure of the
                                            Credit, Credit unions, Mortgages,                        1 is revised.
                                                                                                     ■ B. In Section 1026.18—Content of                    finance charge and other disclosures
                                            National banks, Reporting and                                                                                  affected by it given for that transaction.
                                            recordkeeping requirements, Savings                      Disclosures, under 18(g) Payment
                                                                                                     Schedule, paragraph 4 is revised.                     To illustrate, in a mortgage transaction,
                                            associations, Truth in lending.                                                                                the creditor and consumer agree to a
                                                                                                     ■ C. In Appendix D—Multiple-Advance
                                            Authority and Issuance                                   Construction Loans, paragraph 7 is                    note specifying a 14 percent interest
                                              For the reasons set forth above, the                   added.                                                rate. However, in a separate document,
                                            Bureau amends Regulation Z, 12 CFR                          The revisions and addition read as                 the consumer agrees to pay an amount
                                            part 1026, as set forth below:                           follows:                                              to the creditor at consummation in
                                                                                                                                                           return for lower payments for a portion
                                                                                                     Supplement I to Part 1026—Official                    of the mortgage term. The amount paid
                                            PART 1026—TRUTH IN LENDING
                                                                                                     Interpretations                                       by the consumer may be deposited in an
                                            (REGULATION Z)
                                                                                                     *      *      *      *       *                        escrow account or may be retained by
                                            ■ 1. The authority citation for part 1026                                                                      the creditor. Depending upon the
                                            continues to read as follows:                            Subpart C—Closed End Credit                           buydown plan, the consumer’s
                                              Authority: 12 U.S.C. 2601, 2603–2605,                                                                        prepayment of the obligation may or
                                                                                                       Section 1026.17—General Disclosure
                                            2607, 2609, 2617, 3353, 5511, 5512, 5532,                                                                      may not result in a portion of the
                                                                                                     Requirements
                                            5581; 15 U.S.C. 1601 et seq.                                                                                   amount being credited or refunded to
                                                                                                     *    *     *    *  *                                  the consumer. In the disclosure of the
                                            Subpart C—Closed End Credit                              17(c) Basis of Disclosures and Use of                 finance charge and other disclosures
                                                                                                     Estimates                                             affected by it given for the mortgage, the
                                            ■ 2. Section 1026.22 is amended by
                                                                                                                                                           creditor must reflect the terms of the
                                            revising paragraph (a)(5) to read as                     Paragraph 17(c)(1)                                    buydown agreement.
                                            follows:
                                                                                                     *      *     *     *     *                               i. For example:
                                            § 1026.22 Determination of annual                          2. Modification of obligation. The                     A. The amount paid by the consumer
                                            percentage rate.                                         legal obligation normally is presumed to              is a prepaid finance charge (even if
                                               (a) * * *                                             be contained in the note or contract that             deposited in an escrow account).
                                               (5) Additional tolerance for mortgage                 evidences the agreement between the                      B. A composite annual percentage rate
                                            loans. In a transaction secured by real                  consumer and the creditor. But this                   must be calculated, taking into account
                                            property or a dwelling, in addition to                   presumption is rebutted if another                    both interest rates, as well as the effect
                                            the tolerances applicable under                          agreement between the consumer and                    of the prepaid finance charge.
                                            paragraphs (a)(2) and (3) of this section,               creditor legally modifies that note or                   C. The disclosures under
                                            if the disclosed finance charge is                       contract. If the consumer and creditor                §§ 1026.18(g) and (s), 1026.37(c), and
                                            calculated incorrectly but is considered                 informally agree to a modification of the             1026.38(c), as applicable, must reflect
                                            accurate under § 1026.18(d)(1) or                        legal obligation, the modification should             the multiple rate and payment levels
                                            § 1026.38(o)(2), as applicable, or                       not be reflected in the disclosures                   resulting from the buydown, except as
                                            § 1026.23(g) or (h), the disclosed annual                unless it rises to the level of a change              otherwise provided in those sections.
                                            percentage rate shall be considered                      in the terms of the legal obligation. For             Further, for example, the disclosures
                                            accurate:                                                example:                                              must reflect that the transaction is a step
                                               (i) If the disclosed finance charge is                  i. If the creditor offers a preferential            rate product under §§ 1026.37(a)(10)(B)
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                                            understated, and the disclosed annual                    rate, such as an employee preferred rate,             and 1026.38(a)(5)(iii).
                                            percentage rate is also understated but                  the disclosures should reflect the terms                 ii. The rules regarding consumer
                                            it is closer to the actual annual                        of the legal obligation. (See the                     buydowns do not apply to transactions
                                            percentage rate than the rate that would                 commentary to § 1026.19(b) for an                     known as ‘‘lender buydowns.’’ In lender
                                            be considered accurate under paragraph                   example of a preferred-rate transaction               buydowns, a creditor pays an amount
                                            (a)(4) of this section;                                  that is a variable-rate transaction.)                 (either into an account or to the party to


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                                            80230            Federal Register / Vol. 80, No. 247 / Thursday, December 24, 2015 / Rules and Regulations

                                            whom the obligation is sold) to reduce                   initial rate or payment, at the time of the           § 1026.18(g) should show 12 payments
                                            the consumer’s payments or interest rate                 first adjustment, from changing to the                of $804.62, 12 payments of $864.97, 12
                                            for all or a portion of the credit term.                 rate determined by the index or formula               payments of $929.84, 12 payments of
                                            Typically, these transactions are                        at consummation, the effect of that rate              $999.58, and 312 payments of
                                            structured as a buydown of the interest                  or payment cap should be reflected in                 $1,070.04. Similarly, the disclosures
                                            rate during an initial period of the                     the disclosures.                                      required by §§ 1026.18(s), 1026.37(c),
                                            transaction with a higher than usual rate                   iv. Because these transactions involve             1026.37(l)(1) and (3), 1026.38(c), and
                                            for the remainder of the term. The                       irregular payment amounts, an annual                  1026.38(o)(5) should reflect the effect of
                                            disclosure of the finance charge and                     percentage rate tolerance of 1⁄4 of 1                 this calculation. The finance charge
                                            other disclosures affected by it for                     percent applies, in accordance with                   should be $277,040.60, and, for
                                            lender buydowns should be based on                       § 1026.22(a)(3).                                      transactions subject to § 1026.18, the
                                            the terms of the legal obligation between                   v. Examples of discounted variable-                total of payments should be
                                            the consumer and the creditor. See                       rate transactions include:                            $377,040.60.
                                            comment 17(c)(1)–3 for the analogous                        A. A 30-year loan for $100,000 with                   vi. A loan in which the initial interest
                                            rules concerning third-party buydowns.                   no prepaid finance charges and rates                  rate is set according to the index or
                                                                                                     determined by the Treasury bill rate                  formula used for later adjustments but is
                                            *       *      *    *    *                               plus two percent. Rate and payment
                                               10. Discounted and premium                                                                                  not set at the value of the index or
                                                                                                     adjustments are made annually.                        formula at consummation is not a
                                            variable-rate transactions. In some                      Although the Treasury bill rate at the
                                            variable-rate transactions, creditors may                                                                      discounted variable-rate loan. For
                                                                                                     time of consummation is 10 percent, the               example, if a creditor commits to an
                                            set an initial interest rate that is not                 creditor sets the interest rate for one               initial rate based on the formula on a
                                            determined by the index or formula                       year at 9 percent, instead of 12 percent              date prior to consummation, but the
                                            used to make later interest rate                         according to the formula. The                         index has moved during the period
                                            adjustments. Typically, this initial rate                disclosures should reflect a composite                between that time and consummation, a
                                            charged to consumers is lower than the                   annual percentage rate of 11.63 percent               creditor should base its disclosures on
                                            rate would be if it were calculated using                based on 9 percent for one year and 12                the initial rate.
                                            the index or formula. However, in some                   percent for 29 years. Reflecting those                   11. Examples of variable-rate
                                            cases the initial rate may be higher. In                 two rate levels, the payment schedule                 transactions. Variable-rate transactions
                                            a discounted transaction, for example, a                 disclosed pursuant to § 1026.18(g)                    include:
                                            creditor may calculate interest rates                    should show 12 payments of $804.62                       i. Renewable balloon-payment
                                            according to a formula using the six-                    and 348 payments of $1,025.31.                        instruments where the creditor is both
                                            month Treasury bill rate plus a 2                        Similarly, the disclosures required by                unconditionally obligated to renew the
                                            percent margin. If the Treasury bill rate                §§ 1026.18(s), 1026.37(c), 1026.37(l)(1)              balloon-payment loan at the consumer’s
                                            at consummation is 10 percent, the                       and (3), 1026.38(c), and 1026.38(o)(5)                option (or is obligated to renew subject
                                            creditor may forgo the 2 percent spread                  should reflect the effect of this                     to conditions within the consumer’s
                                            and charge only 10 percent for a limited                 calculation. The finance charge should                control) and has the option of increasing
                                            time, instead of setting an initial rate of              be $266,463.32 and, for transactions                  the interest rate at the time of renewal.
                                            12 percent.                                              subject to § 1026.18, the total of                    Disclosures must be based on the
                                               i. When creditors use an initial                      payments should be $366,463.32.                       payment amortization (unless the
                                            interest rate that is not calculated using                  B. Same loan as above, except with a               specified term of the obligation with
                                            the index or formula for later rate                      two-percent rate cap on periodic                      renewals is shorter) and on the rate in
                                            adjustments, the disclosures should                      adjustments. The disclosures should                   effect at the time of consummation of
                                            reflect a composite annual percentage                    reflect a composite annual percentage                 the transaction. (Examples of conditions
                                            rate based on the initial rate for as long               rate of 11.53 percent based on 9 percent              within a consumer’s control include
                                            as it is charged and, for the remainder                  for the first year, 11 percent for the                requirements that a consumer be current
                                            of the term, the rate that would have                    second year, and 12 percent for the                   in payments or continue to reside in the
                                            been applied using the index or formula                  remaining 28 years. Reflecting those                  mortgaged property. In contrast, setting
                                            at the time of consummation. The rate                    three rate levels, the payment schedule               a limit on the rate at which the creditor
                                            at consummation need not be used if a                    disclosed pursuant to § 1026.18(g)                    would be obligated to renew or
                                            contract provides for a delay in the                     should show 12 payments of $804.62,                   reserving the right to change the credit
                                            implementation of changes in an index                    12 payments of $950.09, and 336                       standards at the time of renewal are
                                            value. For example, if the contract                      payments of $1,024.34. Similarly, the                 examples of conditions outside a
                                            specifies that rate changes are based on                 disclosures required by §§ 1026.18(s),                consumer’s control.) If, however, a
                                            the index value in effect 45 days before                 1026.37(c), 1026.37(l)(1) and (3),                    creditor is not obligated to renew as
                                            the change date, creditors may use any                   1026.38(c), and 1026.38(o)(5) should                  described above, disclosures must be
                                            index value in effect during the 45 day                  reflect the effect of this calculation. The           based on the term of the balloon-
                                            period before consummation in                            finance charge should be $265,234.76                  payment loan. Disclosures also must be
                                            calculating a composite annual                           and, for transactions subject to                      based on the term of the balloon-
                                            percentage rate.                                         § 1026.18, the total of payments should               payment loan in balloon-payment
                                               ii. The effect of the multiple rates                  be $365,234.76.                                       instruments in which the legal
                                            must also be reflected in the calculation                   C. Same loan as above, except with a               obligation provides that the loan will be
                                            and disclosure of the finance charge,                    71⁄2 percent cap on payment                           renewed by a ‘‘refinancing’’ of the
                                            total of payments, and the disclosures                   adjustments. The disclosures should                   obligation, as that term is defined by
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                                            required under §§ 1026.18(g) and (s),                    reflect a composite annual percentage                 § 1026.20(a). If it cannot be determined
                                            1026.37(c), 1026.37(l)(1) and (3),                       rate of 11.64 percent, based on 9 percent             from the legal obligation that the loan
                                            1026.38(c), and 1026.38(o)(5), as                        for one year and 12 percent for 29 years.             will be renewed by a ‘‘refinancing,’’
                                            applicable.                                              Because of the payment cap, five levels               disclosures must be based either on the
                                               iii. If a loan contains a rate or                     of payments should be reflected. The                  term of the balloon-payment loan or on
                                            payment cap that would prevent the                       payment schedule disclosed pursuant to                the payment amortization, depending


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                                                             Federal Register / Vol. 80, No. 247 / Thursday, December 24, 2015 / Rules and Regulations                                       80231

                                            on whether the creditor is                                 iii. As in any variable-rate transaction,             ii. The creditor has supplied the
                                            unconditionally obligated to renew the                   the annual percentage rate is based on                specified credit information about its
                                            loan as described above. (This                           the terms in effect at consummation.                  credit terms either to the individual
                                            discussion does not apply to                               iv. The disclosures required by                     consumer or to the public generally.
                                            construction loans subject to                            § 1026.18(g) and (s) reflect the amount               That information may be distributed
                                            § 1026.17(c)(6).)                                        of any scheduled initial payments                     through advertisements, catalogs,
                                               ii. ‘‘Shared-equity’’ or ‘‘shared-                    followed by an adjusted level of                      brochures, special mailers, or similar
                                            appreciation’’ mortgages that have a                     payments based on the initial interest                means.
                                            fixed rate of interest and an appreciation               rate. Since some mortgage plans contain               *     *     *     *     *
                                            share based on the consumer’s equity in                  limits on the amount of the payment
                                            the mortgaged property. The                              adjustment, the disclosures required by               Section 1026.18—Content of Disclosures
                                            appreciation share is payable in a lump                  § 1026.18(g) and (s) may require several              *        *   *    *   *
                                            sum at a specified time. Disclosures                     different levels of payments, even with
                                            must be based on the fixed interest rate.                the assumption that the original interest             18(g) Payment Schedule
                                            (As discussed in the commentary to                       rate does not increase. For transactions              *      *    *     *     *
                                            § 1026.2, other types of shared-equity                   subject to § 1026.19(e) and (f), see                    4. Timing of payments. i. General
                                            arrangements are not considered                          § 1026.37(c) and its commentary for a                 rule. Section 1026.18(g) requires
                                            ‘‘credit’’ and are not subject to                        discussion of different rules for                     creditors to disclose the timing of
                                            Regulation Z.)                                           graduated payment adjustable rate                     payments. To meet this requirement,
                                               iii. Preferred-rate loans where the                   mortgages.                                            creditors may list all of the payment due
                                            terms of the legal obligation provide that               *      *    *     *     *                             dates. They also have the option of
                                            the initial underlying rate is fixed but                                                                       specifying the ‘‘period of payments’’
                                            will increase upon the occurrence of                     Paragraph 17(c)(4)
                                                                                                                                                           scheduled to repay the obligation. As a
                                            some event, such as an employee                             1. Payment schedule irregularities.                general rule, creditors that choose this
                                            leaving the employ of the creditor, and                  When one or more payments in a                        option must disclose the payment
                                            the note reflects the preferred rate. The                transaction differ from the others                    intervals or frequency, such as
                                            disclosures are to be based on the                       because of a long or short first period,              ‘‘monthly’’ or ‘‘bi-weekly,’’ and the
                                            preferred rate.                                          the variations may be ignored in                      calendar date that the beginning
                                               iv. Graduated-payment mortgages and                   disclosing the payment schedule                       payment is due. For example, a creditor
                                            step-rate transactions without a                         pursuant to § 1026.18(g), the disclosures             may disclose that payments are due
                                            variable-rate feature are not considered                 required pursuant to §§ 1026.18(s),                   ‘‘monthly beginning on July 1, 1998.’’
                                            variable-rate transactions.                              1026.37(c), or 1026.38(c), or the finance
                                               v. ‘‘Price level adjusted mortgages’’ or                                                                    This information, when combined with
                                                                                                     charge, annual percentage rate, and                   the number of payments, is necessary to
                                            other indexed mortgages that have a                      other terms. For example:
                                            fixed rate of interest but provide for                                                                         define the repayment period and enable
                                                                                                        i. A 36-month auto loan might be
                                            periodic adjustments to payments and                                                                           a consumer to determine all of the
                                                                                                     consummated on June 8 with payments
                                            the loan balance to reflect changes in an                                                                      payment due dates.
                                                                                                     due on July 1 and the first of each
                                            index measuring prices or inflation.                     succeeding month. The creditor may                      ii. Exception. In a limited number of
                                            Disclosures are to be based on the fixed                 base its calculations on a payment                    circumstances, the beginning-payment
                                            interest rate, except as otherwise                       schedule that assumes 36 equal                        date is unknown and difficult to
                                            provided in §§ 1026.18(s), 1026.37, and                  intervals and 36 equal installment                    determine at the time disclosures are
                                            1026.38, as applicable.                                  payments, even though a precise                       made. For example, a consumer may
                                               12. Graduated payment adjustable                      computation would produce slightly                    become obligated on a credit contract
                                            rate mortgages. These mortgages involve                  different amounts because of the shorter              that contemplates the delayed
                                            both a variable interest rate and                        first period.                                         disbursement of funds based on a
                                            scheduled variations in payment                             ii. By contrast, in the same example,              contingent event, such as the
                                            amounts during the loan term. For                        if the first payment were not scheduled               completion of repairs. Disclosures may
                                            example, under these plans, a series of                  until August 1, the irregular first period            also accompany loan checks that are
                                            graduated payments may be scheduled                      would exceed the limits in                            sent by mail, in which case the initial
                                            before rate adjustments affect payment                   § 1026.17(c)(4); the creditor could not               disbursement and repayment dates are
                                            amounts, or the initial scheduled                        use the special rule and could not                    solely within the consumer’s control. In
                                            payment may remain constant for a set                    ignore the extra days in the first period             such cases, if the beginning-payment
                                            period before rate adjustments affect the                in calculating its disclosures.                       date is unknown the creditor may use
                                            payment amount. In any case, the initial                 *      *      *    *     *                            an estimated date and label the
                                            payment amount may be insufficient to                       17(g) Mail or Telephone Orders—                    disclosure as an estimate pursuant to
                                            cover the scheduled interest, causing                    Delay in Disclosures.                                 § 1026.17(c). Alternatively, the
                                            negative amortization from the outset of                    1. Conditions for use. Except for                  disclosure may refer to the occurrence
                                            the transaction. In these transactions,                  extensions of credit subject to                       of a particular event, for example, by
                                            except as otherwise provided in                          § 1026.19(a) or (e) and (f), when the                 disclosing that the beginning payment is
                                            §§ 1026.18(s), 1026.37(c), and                           creditor receives a mail or telephone                 due ‘‘30 days after the first loan
                                            1026.38(c), the disclosures should treat                 request for credit, the creditor may                  disbursement.’’ This information also
                                            these features as follows:                               delay making the disclosures until the                may be included with an estimated date
                                               i. The finance charge includes the                    first payment is due if the following                 to explain the basis for the creditor’s
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                                            amount of negative amortization based                    conditions are met:                                   estimate. See comment 17(a)(1)–5.iii.
                                            on the assumption that the rate in effect                   i. The credit request is initiated                 *      *    *     *     *
                                            at consummation remains unchanged.                       without face-to-face or direct telephone
                                               ii. The amount financed does not                      solicitation. (Creditors may, however,                Appendix D—Multiple-Advance
                                            include the amount of negative                           use the special rule when credit                      Construction Loans
                                            amortization.                                            requests are solicited by mail.)                      *        *   *    *   *


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                                            80232            Federal Register / Vol. 80, No. 247 / Thursday, December 24, 2015 / Rules and Regulations

                                               7. Relation to §§ 1026.37 and 1026.38.                phase. The creditor determines the                    through a different mail processing
                                            A creditor must disclose a projected                     amount of the interest-only payment to                facility. This facility change required
                                            payments table for certain transactions                  be made during the construction phase                 that FHFA use a new zip code. As a
                                            secured by real property, pursuant to                    using the assumption in appendix D,                   result, the zip code in the addresses for
                                            §§ 1026.37(c) and 1026.38(c), instead of                 part II.A.1.                                          the FHFA included in 12 CFR 1200.1(b),
                                            the general payment schedule required                    *     *      *  *     *                               1200.2(g), 1202.3(c), 1202.5(a),
                                            by § 1026.18(g) or the interest rate and                                                                       1202.9(a), 1204.3(b), 1204.5(b)(2),
                                                                                                       Dated: December 15, 2015.
                                            payments summary table required by                                                                             1209.102(a)(1), and 1215.7(b) are now
                                            § 1026.18(s). Accordingly, some home                     Richard Cordray,
                                                                                                     Director, Bureau of Consumer Financial                out-of-date. This final rule amends those
                                            construction loans that are secured by
                                                                                                     Protection.                                           regulations to replace the FHFA’s zip
                                            real property are subject to §§ 1026.37(c)
                                                                                                     [FR Doc. 2015–32463 Filed 12–21–15; 4:15 pm]          code, which changed from 20024 to
                                            and 1026.38(c) and not § 1026.18(g). See
                                            comment app. D–6 for a discussion of                     BILLING CODE 4810–AM–P
                                                                                                                                                           20219. The street address of 400 7th
                                            transactions that are subject to                                                                               Street SW., Washington, DC remains the
                                            § 1026.18(s). Under § 1026.17(c)(6)(ii),                                                                       same.
                                            when a multiple-advance construction                     FEDERAL HOUSING FINANCE                                  FHFA submitted a change-of-address
                                            loan may be permanently financed by                      AGENCY                                                request to the local United States Post
                                            the same creditor, the construction                                                                            Office to forward mail containing the
                                            phase and the permanent phase may be                     12 CFR Parts 1200, 1202, 1203, 1204,                  old zip code; however, mail addressed
                                            treated as either one transaction or more                1209, 1215, 1263, and 1264                            with the zip code 20024 after November
                                            than one transaction. Following are                      RIN 2590–AA79                                         1, 2015, may result in delayed delivery
                                            illustrations of the application of                                                                            to all FHFA offices.
                                            appendix D to transactions subject to                    Technical Amendments: FHFA
                                            §§ 1026.37(c) and 1026.38(c), under                      Address and Zip Code Change                           II. Notice and Comment
                                            each of these two alternatives:
                                               i. If a creditor uses appendix D and                  AGENCY:  Federal Housing Finance                         Pursuant to the Administrative
                                            elects pursuant to § 1026.17(c)(6)(ii) to                Agency.                                               Procedure Act (APA), notice and
                                            disclose the construction and                            ACTION: Final rule.                                   comment are not required prior to the
                                            permanent phases as separate                                                                                   issuance of a final rule if an agency, for
                                            transactions, the construction phase                     SUMMARY:    The Federal Housing Finance               good cause, finds that ‘‘notice and
                                            must be disclosed according to the rules                 Agency (FHFA) is issuing this final rule              public procedure thereon are
                                            in §§ 1026.37(c) and 1026.38(c). Under                   as a technical change to correct                      impracticable, unnecessary, or contrary
                                            §§ 1026.37(c) and 1026.38(c), the                        regulatory references to FHFA’s address               to the public interest.’’ 1 FHFA finds
                                            creditor must disclose the periodic                      and postal zip code.                                  that public notice and comment on this
                                            payments during the construction phase                   DATES: Effective December 24, 2015. For               final rule are unnecessary. The final
                                            in a projected payments table. The                       additional information, see                           rule’s update of FHFA’s address and
                                            provision in appendix D, part I.A.3,                     SUPPLEMENTARY INFORMATION.                            postal zip code is purely a technical
                                            which allows the creditor to omit the                    FOR FURTHER INFORMATION CONTACT:                      change to the Agency’s regulations and
                                            number and amounts of any interest                       Crystal Miller, Crystal.Miller@fhfa.gov,              provides FHFA’s regulated entities,
                                            payments ‘‘in disclosing the payment                     (202) 649–3079, Paralegal Specialist (not             interested parties, and other members of
                                            schedule under § 1026.18(g)’’ does not                   a toll-free number), Office of General                the public with FHFA’s current and
                                            apply because the transaction is                         Counsel, Federal Housing Finance                      accurate location and mailing address
                                            governed by §§ 1026.37(c) and                            Agency, Constitution Center, Eighth
                                            1026.38(c) rather than § 1026.18(g). The                                                                       information. For these reasons, FHFA
                                                                                                     Floor (OGC), 400 7th Street SW.,                      has good cause to conclude that advance
                                            creditor determines the amount of the                    Washington, DC 20219. The telephone
                                            interest-only payment to be made                                                                               notice and comment under the APA for
                                                                                                     number for the Telecommunications                     this rulemaking are unnecessary.
                                            during the construction phase using the                  Device for the Hearing Impaired is (800)
                                            assumption in appendix D, part I.A.1.                    877–8339.                                             III. Effective Date
                                            Also, because the construction phase is
                                                                                                     SUPPLEMENTARY INFORMATION:
                                            being disclosed as a separate transaction                                                                        This final rule is effective on
                                            and its terms do not repay all principal,                I. Background                                         December 24, 2015. Pursuant to the
                                            the creditor must disclose the                                                                                 APA, a final rule may be effective
                                                                                                     FHFA Headquarters Address Change
                                            construction phase transaction as a                                                                            without 30 days advance publication in
                                            product with a balloon payment feature,                    In January 2012, FHFA moved to a                    the Federal Register if an agency finds
                                            pursuant to §§ 1026.37(a)(10)(ii)(D) and                 new headquarters building in Southwest                good cause and publishes its finding
                                            1026.38(a)(5)(iii), in addition to                       Washington, DC. As a result, the                      with the final rule.2 As described above,
                                            reflecting the balloon payment in the                    addresses for FHFA’s former locations                 the updates made by this final rule to
                                            projected payments table.                                in Northwest Washington, DC, included
                                                                                                                                                           FHFA’s physical addresses and zip code
                                               ii. If the creditor elects to disclose the            in 12 CFR 1203.29, 1209.15(a),
                                            construction and permanent phases as a                                                                         are technical changes and will have no
                                                                                                     1263.5(a)(2), and 1264.6(a) are now out-
                                            single transaction, the repayment                        of-date. This final rule amends those                 substantive effect on FHFA’s regulated
                                            schedule must be disclosed pursuant to                   regulations to replace the FHFA’s                     entities, interested parties, or other
                                            appendix D, part II.C.2. Under appendix                  former addresses with its current                     members of the public. Therefore, the
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                                            D, part II.C.2, the projected payments                   address, 400 7th Street SW.,                          FHFA finds good cause to dispense with
                                            table must reflect the interest-only                     Washington, DC 20219.                                 a delayed effective date.
                                            payments during the construction phase
                                            in a first column, followed by the                       FHFA Zip Code Change
                                            appropriate column(s) reflecting the                       Effective November 1, 2015, all mail                  15   U.S.C. 553(b).
                                            amortizing payments for the permanent                    addressed to FHFA is being processed                    25   U.S.C. 553(d)(3).



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Document Created: 2015-12-24 02:25:03
Document Modified: 2015-12-24 02:25:03
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionRules and Regulations
ActionFinal rule; Official interpretations; Correction.
DatesThese corrections are effective on December 24, 2015.
ContactPaul Ceja, Senior Counsel and Special Advisor, Office of Regulations, Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 20552, at (202) 435-7700.
FR Citation80 FR 80228 
RIN Number3170-AA19
CFR AssociatedAdvertising; Consumer Protection; Credit; Credit Unions; Mortgages; National Banks; Reporting and Recordkeeping Requirements; Savings Associations and Truth in Lending

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