96-1859. Truth in Lending

[Federal Register Volume 61, Number 21 (Wednesday, January 31, 1996)]
[Rules and Regulations]
[Page 3177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1859]



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FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-0915]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice of adjustment of dollar amount.

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SUMMARY: The Board is publishing an adjustment to the dollar amount 
that triggers certain requirements of Regulation Z (Truth in Lending) 
for mortgages bearing fees above a certain amount. The Home Ownership 
and Equity Protection Act of 1994 sets forth rules for creditors 
offering home-secured loans with total points and fees payable by the 
consumer at or before loan consummation that exceed the greater of $400 
or 8 percent of the total loan amount. The Board is required to 
annually adjust the $400 amount based on the annual percentage change 
in the Consumer Price Index as reported on June 1. The Board has 
adjusted the dollar amount from $400 to $412.

EFFECTIVE DATE: January 1, 1996.

FOR FURTHER INFORMATION CONTACT: Michael Hentrel, Staff Attorney, 
Division of Consumer and Community Affairs, Board of Governors of the 
Federal Reserve System, at [phone]. For the users of 
Telecommunications Device for the Deaf only, please contact Dorothea 
Thompson at [phone].

SUPPLEMENTARY INFORMATION:

Background

    The Truth in Lending Act (TILA; 15 U.S.C. 1601--1666j) requires 
creditors to disclose credit terms and the cost of consumer credit as 
an annual percentage rate. The act requires additional disclosures for 
loans secured by a consumer's home, and permits consumers to cancel 
certain transactions that involve their principal dwelling. The TILA is 
implemented by the Board's Regulation Z (12 CFR part 226).
    On March 24, 1995, the Board published amendments to Regulation Z 
implementing the Home Ownership and Equity Protection Act of 1994 
(HOEPA), contained in the Riegle Community Development and Regulatory 
Improvement Act of 1994, Public Law 103-325, 108 Stat. 2160 (60 FR 
15463). These amendments, which became effective on October 1, 1995, 
are contained in Sec. 226.32 of the regulation and impose new 
disclosure requirements and substantive limitations on certain closed-
end mortgage loans bearing rates or fees above a certain percentage or 
amount. Creditors are required to comply with the rules in Sec. 226.32 
if the total points and fees payable by the consumer at or before loan 
consummation exceed the greater of $400 or 8 percent of the total loan 
amount. The TILA and Sec. 226.32(a)(1)(ii) of Regulation Z provide that 
the $400 figure shall be adjusted annually on January 1 by the annual 
percentage change in the Consumer Price Index (CPI) that was reported 
on the preceding June 1. See 15 U.S.C. 1602(aa).
    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 each month. The CPI-U is based on all 
urban consumers and represents approximately 80 percent of the U.S. 
population; the CPI-W is based on urban wage earners and clerical 
workers and represents about 30 percent of the population. The Board 
believes the index representing the broader population of U. S. 
consumers--the CPI-U--is the appropriate index to use in any adjustment 
to the $400 dollar figure.
    The adjustment to the $400 dollar figure reflects the adjustment 
reported on May 15 (the rate ``in effect'' on June 1) which states the 
percentage increase from April 1994 to April 1995. During that period 
the CPI-U increased by 3.1 percent which would cause an adjustment of 
the $400 to $412.40. The Board is rounding that number to whole dollars 
for ease of compliance.

Adjustment

    Effective January 1, 1996, under Sec. 226.32(a), a home mortgage 
loan is covered by Sec. 226.32 if the total points and fees payable by 
the consumer at or before loan consummation exceed the greater of $412 
or 8 percent of the total loan amount. The adjustment will be codified 
in the official staff commentary to Regulation Z.

    By order of the Board of Governors of the Federal Reserve 
System, January 25, 1995.
William W. Wiles,
Secretary of the Board.
[FR Doc. 96-1859 Filed 1-30-96; 8:45 am]
BILLING CODE 6210-01-P