82 FR 51973 - Appraisals for Higher-Priced Mortgage Loans Exemption Threshold

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
FEDERAL RESERVE SYSTEM
BUREAU OF CONSUMER FINANCIAL PROTECTION

Federal Register Volume 82, Issue 216 (November 9, 2017)

The OCC, the Board, and the Bureau are finalizing amendments to the official interpretations for their regulations that implement section 129H of the Truth in Lending Act (TILA). Section 129H of TILA establishes special appraisal requirements for ``higher-risk mortgages,'' termed ``higher-priced mortgage loans'' or ``HPMLs'' in the agencies' regulations. The OCC, the Board, the Bureau, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA) and the Federal Housing Finance Agency (FHFA) (collectively, the Agencies) issued joint final rules implementing these requirements, effective January 18, 2014. The Agencies' rules exempted, among other loan types, transactions of $25,000 or less, and required that this loan amount be adjusted annually based on any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is no annual percentage increase in the CPI-W, the OCC, the Board, and the Bureau will not adjust this exemption threshold from the prior year. However, in years following a year in which the exemption threshold was not adjusted, the threshold is calculated by applying the annual percentage increase in the CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account. Based on the CPI-W in effect as of June 1, 2017, the exemption threshold will increase from $25,500 to $26,000 effective January 1, 2018.

[Federal Register Volume 82, Number 216 (Thursday, November 9, 2017)]
[Rules and Regulations]
[Pages 51973-51975]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-24443]



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Rules and Regulations
                                                Federal Register
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Federal Register / Vol. 82, No. 216 / Thursday, November 9, 2017 / 
Rules and Regulations

[[Page 51973]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 34

[Docket No. OCC-2017-0016]
RIN 1557-AE25

FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Docket No. R-1580]
RIN 7100 AE-87

BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

[Docket No. CFPB-2017-0029]


Appraisals for Higher-Priced Mortgage Loans Exemption Threshold

AGENCY: Board of Governors of the Federal Reserve System (Board); 
Bureau of Consumer Financial Protection (Bureau); and Office of the 
Comptroller of the Currency, Treasury (OCC).

ACTION: Final rules, official interpretations and commentary.

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SUMMARY: The OCC, the Board, and the Bureau are finalizing amendments 
to the official interpretations for their regulations that implement 
section 129H of the Truth in Lending Act (TILA). Section 129H of TILA 
establishes special appraisal requirements for ``higher-risk 
mortgages,'' termed ``higher-priced mortgage loans'' or ``HPMLs'' in 
the agencies' regulations. The OCC, the Board, the Bureau, the Federal 
Deposit Insurance Corporation (FDIC), the National Credit Union 
Administration (NCUA) and the Federal Housing Finance Agency (FHFA) 
(collectively, the Agencies) issued joint final rules implementing 
these requirements, effective January 18, 2014. The Agencies' rules 
exempted, among other loan types, transactions of $25,000 or less, and 
required that this loan amount be adjusted annually based on any annual 
percentage increase in the Consumer Price Index for Urban Wage Earners 
and Clerical Workers (CPI-W). If there is no annual percentage increase 
in the CPI-W, the OCC, the Board, and the Bureau will not adjust this 
exemption threshold from the prior year. However, in years following a 
year in which the exemption threshold was not adjusted, the threshold 
is calculated by applying the annual percentage increase in the CPI-W 
to the dollar amount that would have resulted, after rounding, if the 
decreases and any subsequent increases in the CPI-W had been taken into 
account. Based on the CPI-W in effect as of June 1, 2017, the exemption 
threshold will increase from $25,500 to $26,000 effective January 1, 
2018.

DATES: This final rule is effective January 1, 2018.

FOR FURTHER INFORMATION CONTACT: OCC: MaryAnn Nash, Counsel, 
Legislative and Regulatory Activities Division, (202) 649-6287; for 
persons who are deaf and hard of hearing TTY, (202) 649-5597. Board: 
Lorna M. Neill, Senior Counsel, Division of Consumer and Community 
Affairs, Board of Governors of the Federal Reserve System, at (202) 
452-3667; for users of Telecommunications Device for the Deaf (TDD) 
only, contact (202) 263-4869. Bureau: Jaclyn Maier, Counsel, Office of 
Regulations, Consumer Financial Protection Bureau, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Background

    The Dodd-Frank Wall Street Reform and Consumer Protection Act of 
2010 (Dodd-Frank Act) amended the Truth in Lending Act (TILA) to add 
special appraisal requirements for ``higher-risk mortgages.'' \1\ In 
January 2013, the Agencies issued a joint final rule implementing these 
requirements and adopted the term ``higher-priced mortgage loan'' 
(HPML) instead of ``higher-risk mortgage'' (the January 2013 Final 
Rule).\2\ In July 2013, the Agencies proposed additional exemptions 
from the January 2013 Final Rule (the 2013 Supplemental Proposed 
Rule).\3\ In December 2013, the Agencies issued a supplemental final 
rule with additional exemptions from the January 2013 Final Rule (the 
December 2013 Supplemental Final Rule).\4\ Among other exemptions, the 
Agencies adopted an exemption from the new HPML appraisal rules for 
transactions of $25,000 or less, to be adjusted annually for inflation.
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    \1\ Public Law 111-203, section 1471, 124 Stat. 1376, 2185-87 
(2010), codified at TILA section 129H, 15 U.S.C. 1639h.
    \2\ 78 FR 10368 (Feb. 13, 2013).
    \3\ 78 FR 48548 (Aug. 8, 2013).
    \4\ 78 FR 78520 (Dec. 26, 2013).
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    The OCC's, the Board's, and the Bureau's versions of the January 
2013 Final Rule and December 2013 Supplemental Final Rule and 
corresponding official interpretations are substantively identical. The 
FDIC, NCUA, and FHFA adopted the Bureau's version of the regulations 
under the January 2013 Final Rule and December 2013 Supplemental Final 
Rule.\5\
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    \5\ See NCUA: 12 CFR 722.3; FHFA: 12 CFR part 1222. Although the 
FDIC adopted the Bureau's version of the regulation, the FDIC did 
not issue its own regulation containing a cross-reference to the 
Bureau's version. See 78 FR 10368, 10370 (Feb. 13, 2013).
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    The OCC's, Board's, and Bureau's regulations,\6\ and their 
accompanying interpretations,\7\ provide that the exemption threshold 
for smaller loans will be adjusted effective January 1 of each year 
based on any annual percentage increase in the Consumer Price Index for 
Urban Wage Earners and Clerical Workers (CPI-W) that was in effect on 
the preceding June 1. Any increase in the threshold amount will be 
rounded to the nearest $100 increment. For example, if the annual 
percentage increase in the CPI-W would result in a $950 increase in the 
threshold amount, the threshold amount will be increased by $1,000. 
However, if the annual percentage increase in the CPI-W would result in 
a $949 increase in the threshold amount, the threshold amount will be 
increased by $900. If there is no annual percentage increase in the 
CPI-W, the OCC, the Board, and the Bureau will not adjust the threshold 
amounts from the prior year.\8\
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    \6\ 12 CFR 34.203(b)(2) (OCC); 12 CFR 226.43(b)(2) (Board); and 
12 CFR 1026.35(c)(2)(ii) (Bureau).
    \7\ See 12 CFR part 34, appendix C to subpart G, comment 
203(b)(2)-1 (OCC); 12 CFR part 226, supplement I, comment 43(b)(2)-1 
(Board); and 12 CFR part 1026, supplement I, comment 35(c)(2)(ii)-1 
(Bureau).
    \8\ See 78 FR 48548, 48565 (Aug. 8, 2013) (``Thus, under the 
proposal, if the CPI-W decreases in an annual period, the percentage 
increase would be zero, and the dollar amount threshold for the 
exemption would not change.'').

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[[Page 51974]]

    On November 30, 2016, the OCC, the Board, and the Bureau published 
a final rule in the Federal Register to memorialize the calculation 
method used by the agencies each year to adjust the exemption threshold 
to ensure that the values for the exemption threshold keep pace with 
the CPI-W as contemplated in the December 2013 Supplemental Final Rule 
(HPML Small Dollar Adjustment Calculation Rule).\9\ The HPML Small 
Dollar Adjustment Calculation Rule memorialized the policy that if 
there is no annual percentage increase in the CPI-W, the OCC, the 
Board, and Bureau will not adjust the exemption threshold from the 
prior year. The HPML Small Dollar Adjustment Calculation Rule also 
provided that in years following a year in which the exemption 
threshold was not adjusted because there was a decrease in the CPI-W 
from the previous year, the threshold is calculated by applying the 
annual percentage change in the CPI-W to the dollar amount that would 
have resulted, after rounding, if the decreases and any subsequent 
increases in the CPI-W had been taken into account. If the resulting 
amount calculated, after rounding, is greater than the current 
threshold, then the threshold effective January 1 the following year 
will increase accordingly; if the resulting amount calculated, after 
rounding, is equal to or less than the current threshold, then the 
threshold effective January 1 the following year will not change, but 
future increases will be calculated based on the amount that would have 
resulted, after rounding.
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    \9\ See 81 FR 86250 (Nov. 30, 2016).
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II. 2018 Adjustment and Commentary Revision

    Effective January 1, 2018, the exemption threshold amount is 
increased from $25,500 to $26,000. This is based on the CPI-W in effect 
on June 1, 2017, which was reported on May 12, 2017. The Bureau of 
Labor Statistics publishes consumer-based indices monthly, but does not 
report a CPI change on June 1; adjustments are reported in the middle 
of the prior month. The CPI-W is a subset of the CPI-U index (based on 
all urban consumers) and represents approximately 28 percent of the 
U.S. population. The CPI-W reported on May 12, 2017, reflects a 2.1 
percent increase in the CPI-W from April 2016 to April 2017. 
Accordingly, the 2.1 percent increase in the CPI-W from April 2016 to 
April 2017 results in an exemption threshold amount of $26,000. The 
OCC, the Board, and the Bureau are revising the commentaries to their 
respective regulations to add new comments as follows:
     Comment 203(b)(2)-3.v to 12 CFR part 34, appendix C to 
subpart G (OCC);
     Comment 43(b)(2)-3.v to supplement I of 12 CFR part 226 
(Board); and
     Comment 35(c)(2)(ii)-3.v to supplement I of 12 CFR part 
1026 (Bureau).
    These new comments state that, from January 1, 2018, through 
December 31, 2018, the threshold amount is $26,000. These revisions are 
effective January 1, 2018.

III. Regulatory Analysis

Administrative Procedure Act

    Under the Administrative Procedure Act, notice and opportunity for 
public comment are not required if an agency finds that notice and 
public comment are impracticable, unnecessary, or contrary to the 
public interest.\10\ The amendments in this rule are technical and 
apply the method previously set forth in the 2013 Supplemental Proposed 
Rule \11\ and the HPML Small Dollar Adjustment Calculation Rule. For 
these reasons, the OCC, the Board and the Bureau have determined that 
publishing a notice of proposed rulemaking and providing opportunity 
for public comment are unnecessary. Therefore, the amendments are 
adopted in final form.
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    \10\ 5 U.S.C. 553(b)(B).
    \11\ See 78 FR 48548, 48565 (Aug. 8, 2013) (``Thus, under the 
proposal, if the CPI-W decreases in an annual period, the percentage 
increase would be zero, and the dollar amount threshold for the 
exemption would not change.'').
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Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) does not apply to a rulemaking 
where a general notice of proposed rulemaking is not required.\12\ As 
noted previously, the agencies have determined that it is unnecessary 
to publish a general notice of proposed rulemaking for this joint final 
rule. Accordingly, the RFA's requirements relating to an initial and 
final regulatory flexibility analysis do not apply.
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    \12\ 5 U.S.C. 603 and 604.
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Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\13\ the 
agencies reviewed this final rule. No collections of information 
pursuant to the Paperwork Reduction Act are contained in the final 
rule.
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    \13\ 44 U.S.C. 3506; 5 CFR part 1320.
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Unfunded Mandates Reform Act

    The OCC analyzes proposed rules for the factors listed in Section 
202 of the Unfunded Mandates Reform Act of 1995, before promulgating a 
final rule for which a general notice of proposed rulemaking was 
published.\14\ As discussed above, the OCC has determined that the 
publication of a general notice of proposed rulemaking is unnecessary.
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    \14\ 2 U.S.C. 1532.
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List of Subjects

12 CFR Part 34

    Appraisal, Appraiser, Banks, Banking, Consumer protection, Credit, 
Mortgages, National banks, Reporting and recordkeeping requirements, 
Savings associations, Truth in lending.

12 CFR Part 226

    Advertising, Appraisal, Appraiser, Consumer protection, Credit, 
Federal Reserve System, Mortgages, Reporting and recordkeeping 
requirements, Truth in lending.

12 CFR Part 1026

    Advertising, Appraisal, Appraiser, Banking, Banks, Consumer 
protection, Credit, Credit unions, Mortgages, National banks, Reporting 
and recordkeeping requirements, Savings associations, Truth in lending.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

Authority and Issuance

    For the reasons set forth in the preamble, the OCC amends 12 CFR 
part 34 as set forth below:

PART 34--REAL ESTATE LENDING AND APPRAISALS

0
1. The authority citation for part 34 continues to read as follows:

    Authority: 12 U.S.C. 1 et seq., 25b, 29, 93a, 371, 1463, 1464, 
1465, 1701j-3, 1828(o), 3331 et seq., 5101 et seq., 5412(b)(2)(B) 
and 15 U.S.C. 1639h.

Subpart G--Appraisals for Higher-Priced Mortgage Loans

0
2. In appendix C to subpart G, under Section 34.203--Appraisals for 
Higher-Priced Mortgage Loans, under Paragraph 34.203(b)(2), paragraph 
3.v is added to read as follows:

[[Page 51975]]

Appendix C to Subpart G--OCC Interpretations

* * * * *

Section 34.203--Appraisals for Higher-Priced Mortgage Loans

* * * * *

34.203(b) Exemptions.

* * * * *

Paragraph 34.203(b)(2)

* * * * *
    3. * * *
    v. From January 1, 2018, through December 31, 2018, the 
threshold amount is $26,000.
* * * * *

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Authority and Issuance

    For the reasons set forth in the preamble, the Board amends 
Regulation Z, 12 CFR part 226, as set forth below:

PART 226--TRUTH IN LENDING (REGULATION Z)

0
3. The authority citation for part 226 continues to read as follows:

    Authority: 12 U.S.C. 3806; 15 U.S.C. 1604, 1637(c)(5), 1639(l), 
and 1639h; Pub. L. 111-24, section 2, 123 Stat. 1734; Pub. L. 111-
203, 124 Stat. 1376.


0
4. In supplement I to part 226, under Section 226.43--Appraisals for 
Higher-Risk Mortgage Loans, under Paragraph 43(b)(2), paragraph 3.v is 
added to read as follows:

Supplement I to Part 226--Official Staff Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 226.43--Appraisals for Higher-Risk Mortgage Loans

* * * * *

43(b) Exemptions.

* * * * *

Paragraph 43(b)(2)

* * * * *
    3. * * *
    v. From January 1, 2018, through December 31, 2018, the 
threshold amount is $26,000.
* * * * *

BUREAU OF CONSUMER FINANCIAL PROTECTION

Authority and Issuance

    For the reasons set forth in the preamble, the Bureau amends 
Regulation Z, 12 CFR part 1026, as set forth below:

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
5. The authority citation for part 1026 continues to read as follows:

    Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.


0
6. In supplement I to part 1026, under Section 1026.35--Requirements 
for Higher-Priced Mortgage Loans, under Paragraph 35(c)(2)(ii), 
paragraph 3.v is added to read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 1026.35--Requirements for Higher-Priced Mortgage Loans

* * * * *

35(c)--Appraisals

* * * * *

35(c)(2) Exemptions

* * * * *

Paragraph 35(c)(2)(ii)

* * * * *
    3. * * *
    v. From January 1, 2018, through December 31, 2018, the 
threshold amount is $26,000.
* * * * *

    Dated: September 26, 2017.
Keith A. Noreika,
Acting Comptroller of the Currency.
     By order of the Board of Governors of the Federal Reserve 
System, acting through the Secretary of the Board under delegated 
authority, November 2, 2017.
Ann E. Misback,
Secretary of the Board.
    Dated: September 7, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-24443 Filed 11-8-17; 8:45 am]
BILLING CODE 4810-33-P 6210-01-P 4810-AM-P