Appraisals for Higher-Priced Mortgage Loans

   Similarly, a consumer advocate group, two affordable housing groups, a national association of owners of manufactured homes, and a policy and research organization, while generally supporting conditions, suggested that the Agencies convene a working group of stakeholders to review and develop valuation standards. These commenters observed that this approach would help to integrate the manufactured housing sector into the larger housing market. In their view, valuation rules would create demand, which would improve capacity for providing valuations and also generate more financing options for manufactured home consumers.

Comments on Loans Secured by a New Manufactured Home (but not Land)

   The Agencies solicited comment on whether it would be appropriate and beneficial to consumers to condition the exemption from the HPML appraisal requirements on the creditor providing the consumer with various types of third-party information about the manufactured home's cost, which third-party estimates should be used for these estimates, and when creditors should be required to provide the information. The Agencies received several comments on these questions. Representatives of appraisal providers, a credit union, a community bank, a consumer advocacy group, three affordable housing groups, a national association of owners of manufactured homes, and one policy and research organization generally suggested that consumers would benefit. On the other hand, a manufactured home lender, two manufactured housing trade associations, a State credit union association, a mortgage company, a national community bank trade association, and a national mortgage banking trade association generally suggested that consumers would not benefit and a condition should not be adopted.

   Manufacturer's invoice. Regarding the utility of providing the consumer with a copy of the manufacturer's invoice, a consumer advocacy group, two affordable housing groups, a national manufactured homeowner association, and a policy and research organization stated that in the near term consumers would benefit from receiving the manufacturer's invoice because this is what manufactured home lenders rely on in transactions involving new manufactured homes. They asserted that a consumer who is given the invoice is better able to evaluate the accuracy of the description of the home's features. Given concerns about truth and accuracy in invoices in capturing all dealer payments, though, these commenters suggested that these transactions ultimately should be subject to the HPML appraisal rules on the same basis as site-built homes. In their view, higher valuation standards would improve appraiser capacity and, they argued, decrease incentives to steer consumers to loans with weaker standards.

   Regarding the credibility of manufacturer's invoices, the Agencies received conflicting information. One affordable housing organization differentiated between a dealer's invoice and a manufacturer's invoice, indicating that incentives and rebates might be omitted from the dealer's invoice but not from the manufacturer's invoice so the manufacturer's invoice would be more reliable for the consumer. A consumer advocacy group, two affordable housing organizations, a national association of owners of manufactured homes, and a policy and research organization, however, commented that the manufacturer's invoice may not have accurate information about the actual cost paid by the dealer because it might not reflect incentives, rebates, and in-kind services agreed upon by the dealer and manufacturer. However, as noted, they believed that the representation of home features on the invoice would be useful to consumers.

   A national manufactured housing trade association stated that the manufacturer certifies to the retailer the authenticity and accuracy of the wholesale cost of the manufactured home at the point of manufacture. A manufactured housing lender further suggested that the manufacturer's invoice is the only realistic option upon which to base a home's value because it takes into account the upgrades and other features pertinent to the home. This commenter suggested that the invoice amount also offers a "conservative" figure in terms of valuation and loan-to-value considerations. However, the commenter noted that a consumer's total sales price will include certain other third-party charges related to the move and set-up of the manufactured home, dealer mark-ups and occasionally local government fees required to be paid by the dealer.

   Third-party cost service estimates. Regarding the utility of providing a third-party unit estimate from an independent cost service, a credit union commenter stated that a third-party unit estimate would give consumers a valuable guideline to prevent predatory practices. Similarly, a community bank commenter stated that this information could help alleviate the potential for dealer price markups over manufacturer's suggested retail price. A national provider of a manufactured home cost service stated in its comment letter that its cost guide information could "absolutely" be useful to consumers, but cautioned that providing consumers with multiple different indications of value could make the process more confusing to consumers. The provider further stated that its cost guide can be used to provide a "guideline" that is a "reasonable approximation" for a new manufactured home value using the "new or like new" condition for the current-year model. The cost guide provider indicated that its value estimates consider the home's manufacturer, model, size, year, and region. In its cost guide, adjustments are also possible for State location, the general condition of the home, as well as for value added by additional features.

   An affordable housing organization stated that creditors should be required to obtain cost estimates from an independent appraiser based upon nationally-published cost information. This commenter stated that consumers will be better informed with more information.

   On the other hand, several industry and industry trade association commenters suggested that providing copies of third-party estimates would be of no benefit to consumers or would cause consumer confusion. One manufactured home lender asserted that cost guides consider pieces of property in the abstract and fail to account for the cost of permits, site preparation, and delivering the home to the purchaser's site. Moreover, this commenter suggested cost guides are typically used by lenders only to determine a value for pre-owned manufactured homes. A State manufactured housing association also noted that the third-party cost guides are not used in practice for new manufactured home transactions, a view confirmed by a manufactured home lender during informal outreach.

   Independent valuations. Regarding third-party valuations for new home-only transactions generally, a number of industry, consumer group, and other commenters stated that in their view there does not exist today a reliable national third party database for comparable sales for new manufactured homes. However, two national appraiser association commenters stated that they strongly support requiring an independent third-party valuation by a credentialed third party appraiser with education, training, and experience, or a valuation through the National Appraisal System (NAS), which would be consistent with the requirements of government programs. /110/

   FOOTNOTE 110 See HUD TI-481, Appendices 8-9, C, and 10-5. The Agencies understand that the NAS is an appraisal method involving both the comparable sales and the cost approach. END FOOTNOTE

   Information for the consumer. The Agencies also solicited comment on whether the consumer in an HPML transaction to be secured by a new manufactured home and not land typically receives unit cost information, and what cost information from a reliable independent third-party source might be reasonably available to creditors and useful to a consumer. Several commenters responded to this and a related question; all generally suggested that, other than the retail purchase and sale agreement between the manufactured home purchaser and the retailer, no third-party information is currently provided to consumers about the value of their new manufactured home. One manufactured home lender noted that the retail purchase agreement will list the retail price of the manufactured home and itemize and include in the total cost all other costs and charges associated with the transactions and installation of the home and extras. Another manufactured home lender added that it is not the industry custom to disclose the wholesale amount to a consumer. Rather, the commenter suggested, the Agencies should not require disclosures of cost information for consumers and deviate from widely accepted practice in other areas of retail sales, including automobiles or site-built homes.

   Most of the commenters who responded on the information availability issue suggested that there was currently no readily-accessible, publicly-available information that consumers could use to determine whether their loan amount exceeds the collateral value in a new manufactured home chattel transaction. Two national appraiser associations asserted that, under the statute, consumers have a fundamental right to know the value of the home that collateralizes debt they incur. However, a provider of a manufactured home cost guide suggested that consumers could access manufactured home value information on its Web site representing the depreciated replacement cost of a home.

   Regarding the best timing for a creditor to provide a unit value estimate to a consumer, two national appraiser associations suggested that the information should be delivered to the prospective borrower as early in the loan underwriting process as possible. A consumer advocacy group, two affordable housing organizations, a national association of owners of manufactured homes, and a policy and research organization suggested that a copy of the manufacturer's invoice should be provided to consumers after the execution of the buyer's order but prior to the consummation of the transaction. Finally, one community bank suggested that third-party cost guide information should be provided to the consumer at least three days prior to consummation because the data is readily available through the database.

Comments on Loans Secured by an Existing Manufactured Home (but not Land)

   Commenters generally supported an exemption from the HPML appraisal rules under SEC 1026.35(c)(3) through (6) for transactions secured by an existing manufactured home and not land. However, a number of commenters favored conditioning the exemption on the creditor obtaining and providing valuation information to the consumer. Several commenters also stated that any exemption should be temporary. The most common reasons cited by commenters for supporting the exemption were a lack of qualified and available appraisers; a lack of data on comparable sales; and concerns over the cost of appraisals.

   Regarding the availability of appraisers, a State manufactured housing trade association cited a scarcity of state-certified and -licensed appraisers to support chattel lending in general, which this commenter stated is particularly pronounced in rural areas where the homes are predominantly located. This commenter also believed valuation professionals lacked sufficient experience with USPAP personal property appraisal standards to comply with them in existing manufactured home-only transactions. Similarly, a manufactured home lender stated that most state-certified or -licensed appraisers are not trained or experienced in manufactured home appraisals and that in many rural areas, no qualified appraisers are available. /111/

   FOOTNOTE 111 This commenter's observations were also endorsed by another manufactured home lender and a national manufactured housing trade association. END FOOTNOTE

   In addition, a national community bank trade association indicated that, while some community banks can readily engage appraisers for manufactured home transactions, other banks do find it difficult to identify appraisers. A consumer advocate group, two affordable housing organizations, a national association of owners of manufactured homes, and a policy and research organization stated, however, that any appraiser capacity issues are driven by a lack of valuation standards for the manufactured housing segment. As a result, allowing the rule to take effect after a temporary period would lead to demand for appraisers, creating an incentive for appraisers to obtain the requisite skills.

   A number of commenters expressed concern that the limited availability of data on comparable sales for transactions secured by an existing manufactured home and not land posed a significant barrier to obtaining reliable third-party appraisals for these transactions. A manufactured home lender stated that sales of existing manufactured homes on leased land are not reported to MLS and that data on comparable sales outside of California is generally lacking. The commenter noted, though, that one private company does aggregate comparable sales data from different sources around the country, which is usually used for transactions in land-lease communities. The national manufactured housing trade association added that state-certified or -licensed appraisers do not capture data on sales of existing manufactured homes, whether from retail dealers or communities. In addition, this commenter suggested that data may be distorted by foreclosures in rural areas leading to relocation of homes to dealer inventory. The State manufactured housing trade association commenter stated that the lack of a reliable nationwide database of comparable sales should be remedied and indicated that the one statewide database (in California) only receives data on a voluntary basis. /112/

   FOOTNOTE 112 This commenter suggested that a national mandatory-reporting database would need to be sponsored by the government, as cost and possible anti-trust issues make it unlikely the private sector would create such a database. END FOOTNOTE

   Further, several industry commenters cited concerns over the cost of appraisals. A national community bank trade association and a State credit union association generally believed that that a USPAP-complaint appraisal with an interior inspection would be costly for low-income borrowers purchasing existing manufactured homes. Another State credit union association and a national credit union association supported the exemption because manufactured home values are generally lower than the values of other types of home. A state-level bank trade association also stated that appraisals would be costly for these transactions.

   Third-party cost service estimates. A number of commenters also believed that existing market incentives and valuation methods were sufficient for this type of transaction. For example, national and State manufactured housing trade associations noted that lenders frequently use the value indicated by a national manufactured home cost guide to determine the maximum amount of credit they would extend for transactions secured by existing homes and not land. One manufactured home lender stated that it uses the guide to calculate a "theoretical" value, which is imperfect given the lack of reliable information about the condition of the home. Another nonbank lender stated that while it uses this guide to determine approximate wholesale value on trade-ins and as a general guide to the potential sale price for repossessions, it does not use the guide in transactions to finance the purchase or refinance of an existing manufactured home and not land. /113/ A consumer advocate group, two affordable housing organizations, a national association of owners of manufactured homes, and a policy and research organization further confirmed the widespread use of third-party cost service depreciation schedules in this segment of the market.

   FOOTNOTE 113 This nonbank lender also stated that industry lenders do not typically obtain a "valuation" in manufactured home transactions. END FOOTNOTE

   Regarding the accuracy of third-party cost service estimates for existing manufactured homes, a national provider of a manufactured home cost guide stated that its values are derived by applying depreciation factors to the cost estimate of the home, and are designed to represent "retail worth" assuming average condition and certain components. Adjustments can be made for actual condition, inventoried components, and local site value (for homes located in land-lease communities). /114/ The commenter stated that the local site value adjustment is representative of a national average of the contributing value for land-lease communities with certain attributes. After accounting for this adjustment, the value can be up to 33 percent higher or 11 percent lower than the value of the structure only (on average, the location adjustment adds 13 percent). While acknowledging that only appraisers are qualified to analyze a property's sited location, this commenter claimed that its location adjustment was more cost effective than an appraisal based upon a physical inspection, without sacrificing accuracy. When it compared its location-adjusted values with estimates from a sample of over 1,000 personal property appraisals of manufactured homes over a wide range of ages, it found that the median difference between its estimates and the appraised value was less than five percent.

   FOOTNOTE 114 According to the association, the association develops its guide by collecting data from industry manufacturers to create a guideline based on actual original costs, current regional market activity (which are used to make regional adjustments), and depreciation factors. The association stated that the depreciation cost approach used by its guide is a component of the cost approach used by certified or licensed appraisers, and is approved for use with Fannie Mae Form 1004C, Freddie Mac Form 70B, and the VA. END FOOTNOTE

   Views of other commenters on the accuracy of third-party cost guide estimate were more mixed. A manufactured home lender stated that cost guides are used as a guideline by lenders rather than as an estimate of resale value. Another manufactured home lender stated that the cost guide does not include transaction costs, including setup fees, which can lead to unreliable estimates for consumers.

   A consumer advocate group, two affordable housing organizations, a national association of owners of manufactured homes, and a policy and research organization believed that estimates based upon these cost guides fail to value correctly important factors related to the location of the home, such as the security of land tenure, risk of rent increases, and community attributes, among others. These commenters also noted that the cost guide assumes the property value has depreciated and that available adjustments based upon the property condition are not required; as a result, maintenance, repairs, and upgrades could be left out of the value and the property could be under-valued. Further, these commenters expressed concern that widespread use of a depreciated value could drive rather than reflect manufactured home values. However, another affordable housing organization believed that, despite concerns expressed by some about the utility of a third-party estimate based upon a nationally-published cost service, consumers will be better informed with this information.

   A State manufactured housing trade association expressed concerns that depreciated values available through a cost service can be understated. While this commenter noted that adjustments can be made, the commenter asserted that questions remain as to who should make the adjustments and whether they will be made in a uniform, valid, and reliable manner.

   One manufactured home lender believed that the use of physical inspections to provide a basis for making adjustments to depreciated unit cost estimates was not widespread. This commenter also pointed out that some transactions are consummated before the existing manufactured home is placed on the new site making it infeasible for the lender to arrange for pre-closing inspections of the home at its new site in these situations.

   Independent valuations. Some commenters also indicated that valuation methods based upon sales comparison approaches are sometimes used in transactions secured by an existing manufactured home and not land. A consumer advocate group, two affordable housing organizations, a national association of owners of manufactured homes, and a policy and research organization stated that comparable sales typically are selected based upon characteristics such as type of sale, size, style, and location of the home.

   A State manufactured housing trade association noted that a private company can provide comparable sales reports for some transactions. A manufactured home lender indicated that this service also included a physical inspection, and is used for transactions secured by homes in land-lease communities in particular when a cost guide estimate does not match the sales price.

   A national manufactured housing trade association stated that, for FHA Title I program loans, a physical inspection is conducted to adjust for site additions and the physical condition of the home. A State manufactured housing association asserted that the NAS is rarely used because only a small number of originations are currently done under the Title I FHA program for which NAS appraisals are specifically approved. /115/ This commenter and a manufactured home lender stated suggested that the small number of FHA Title I program loans is due in part to eligibility requirements, including appraisal requirements.

   FOOTNOTE 115 FHA reported providing insurance under its Title I program for 655 manufactured home loans in Fiscal Year (FY) 2012, 986 in FY 2011, and 1,776 in FY 2010. See HUD, FHA Annual Management Report, Fiscal Year 2012 (Nov. 15, 2013) at 17. FHA also reported providing insurance under its Title II program for 20,479 manufactured home loans in FY 2012, 21,378 in FY 2011, and 30,751 in FY 2010. See id. According to 2012 HMDA data, 19,614 FHA-insured manufactured home loans were reported out of a total of 123,628 reported manufactured home loans, for a FHA-insured share of 15.9 percent. See www.ffiec.gov/hmda. END FOOTNOTE

   The consumer advocate group, two affordable housing organizations, a national association of owners of manufactured homes, and a policy and research group stated that the FHA Title I appraisal system is overly focused on one characteristic of the home (that it is a manufactured home) and excludes use of other types of comparables that may be more suitable. A manufactured home lender noted that HUD-approved valuation methods based upon comparable sales tend to yield values below the sales price, which this commenter attributed to an over-emphasis on use of manufactured homes as comparables. /116/ Another manufactured home lender claimed that this occurrence in HUD-approved appraisals is evidence that they undervalue manufactured homes. A manufactured home lender expressed concerns about the cost of NAS appraisals under the FHA Title I program. This lender stated that, if a condition is imposed, lenders should have more than one option for the type of valuation that would satisfy the condition.

   FOOTNOTE 116 These commenters did not identify, however, what other types of comparables, apart from manufactured homes that are not sited on land owned by the consumers, could be used as comparables in these transactions. END FOOTNOTE

   A national association for community banking also referred to all of the above types of valuations as options for valuating these transactions, in addition to an evaluation by a bank employee. This commenter stated that some bank employees conduct interior or exterior inspections.

   An affordable housing organization believed that creditors should be required to obtain a replacement cost estimate from a trained, independent appraiser using a nationally-published cost service. Two national appraiser trade associations stated that, in light of the importance of the location to the value of the home, the Agencies should require an independent third-party valuation by a credentialed appraiser with education, training, and experience, /117/ or a valuation that complies with the appraisal system specified under the FHA Title I program for insuring loans secured by existing manufactured homes and not land. A community bank stated that interior and exterior inspections should be conducted, due to higher depreciation of manufactured homes compared to site-built homes.

   FOOTNOTE 117 This commenter suggested the individual would not necessarily have to be a state-certified or -licensed real estate appraiser. Nonetheless, a national manufactured home cost service provider also noted that the number of individuals certified to use the FHA Title I personal property appraisal system is down, from over 1,000 in previous decades to less than 100 today. HUD also allows creditors to rely on real estate appraisers from its Title II roster to complete these appraisals. See HUD TI-481, Appendices 8-9, C, and 10-5. END FOOTNOTE

The Final Rule

   Under SEC 1026.35(c)(2)(viii)(B), which goes into effect on July 18, 2015, the Agencies are adopting a conditional exemption for transactions secured by existing manufactured homes and not land. The Agencies believe that exempting transactions secured by existing manufactured homes and not land is in the public interest and promotes the safety and soundness of creditors, provided that such exemption is conditioned on the consumer receiving certain information as provided in detail below. The Agencies also are adopting a condition on the exemption for transactions secured by new manufactured homes and not land adopted in the January 2013 Final Rule. Under the condition, for applications received by the creditor on or after July 18, 2015, an HPML that is not a qualified mortgage and is secured by either a new or existing manufactured home without land will be exempt from the general HPML appraisal rules in SEC 1026.35(c)(3) through (c)(6) if the creditor provides the consumer with a copy of any one of three specified types of information no later than three days prior to consummation of the transaction. The three types of information that can satisfy the condition are: (1) The manufacturer's invoice for the manufactured home, where the date of manufacture is within 18 months of the creditor's receipt of the consumer's application; (2) a cost estimate of the value of the manufactured home from an independent cost service; or (3) a valuation, as defined in SEC 1026.42(b)(3), of the manufactured home by a person who has no direct or indirect interest, financial or otherwise, in the property or transaction for which the valuation is performed and has training in valuing manufactured homes.

   The Agencies also are adopting and re-numbering proposed comment 35(c)(2)(ii)(B)-1, which clarifies that the exemption does not depend on whether the home is titled as realty by operation of State law. The heading for the comment is revised to remove the word "solely," to reflect that this provision applies to transactions that are secured by a manufactured home and other collateral that is not land, such as a leasehold interest. The comment is re-numbered as comment 35(c)(2)(viii)(B)-1. See also section-by-section analysis of SEC 1026.35(c)(2)(viii)(A) (further discussing transactions secured by a manufactured home and a leasehold interest).

   The Agencies are not adopting proposed comment 35(c)(2)(ii)(A)-1, which would have provided that an HPML secured by a new manufactured home is not subject to the appraisal requirements of SEC 1026.35(c), regardless of whether the transactions is also secured by the land on which it is sited. The unconditional exemption for transactions secured by a new manufactured home, with or without land, will go into effect on January 18, 2014, but will end starting with applications received by the creditor on or after July 18, 2015. At that time, the exempt status of transactions secured by new manufactured homes will depend on whether the transaction also is secured by land. Other comments adopted in the final rule relate to the information that a creditor can provide to satisfy the condition and are discussed in the section-by-section analysis below.

Discussion

   The Agencies believe that the exemption in SEC 1026.35(c)(2)(viii)(B) for loans secured by manufactured homes and not land promotes the safety and soundness of creditors in part because the exemption makes it possible for creditors to continue making these loans, which may be an important part of a given creditor's operations; the Agencies understand that for chattel transactions, compliance with all of the general HPML appraisal requirements of SEC 1026.35(c)(3) through (6) may be infeasible. The condition on the exemption in SEC 1026.35(c)(2)(viii)(B) is necessary to ensure that the exemption is also in the public interest, because the condition will ensure that consumers receive information pertaining to the value of their manufactured home. The Agencies further believe that by allowing creditors a menu of options for compliance, the condition will provide appropriate flexibility to the creditor to select which materials it deems most cost-effective. The Agencies also believe that having this information before consummation of the loan can be useful to the consumer, and is consistent with the timing of the general HPML appraisal requirement that the creditor must give the consumer a copy of the appraisal three days before consummation. /118/ See SEC 1026.35(c)(6)(ii).

   FOOTNOTE 118 Having this information three days before consummation also will allow borrowers the opportunity to discuss it with a HUD-certified housing counselor whose participation in the transaction prior to consummation is mandated for loans under the Bureau's 2013 HOEPA Final Rule, to be codified at 12 CFR 1026.34(a)(5). The role of the HUD-certified housing counselor specifically includes helping borrowers "avoid inflated appraisals." See HUD Housing Counseling Program Handbook 7610.1 (May 2010), Ch. 1-2. END FOOTNOTE

   TILA Section 129H ensures that, before consummation of a "higher-risk mortgage," creditors obtain a valuation of the home and provide a copy to the consumer. 15 U.S.C. 1639h. The statute focuses on transactions with a higher risk profile (i.e., those with higher interest rates and which are not qualified mortgages). For these riskier transactions, the statute sets standards that are intended to reduce the risk of inflated valuations of the "dwelling," and grants consumers a right to know the appraised value of the "dwelling" before entering into these transactions. /119/ A manufactured home is a "dwelling" under regulations implementing TILA. /120/ Indeed, transactions secured by manufactured homes and not land comprise a substantial proportion of the overall annual housing transactions that are HPMLs and not qualified mortgages. /121/ The Agencies therefore believe that Congress intended for TILA Section 129H to provide protection against inflated valuations and transparency to borrowers in this housing segment.

   FOOTNOTE 119 U.S. House of Reps., Comm. on Fin. Servs., Report on H.R. 1728, Mortgage Reform and Anti-Predatory Lending Act, No. 111-94 (May 4, 2009) (House Report), at p. 56 (noting that when faulty valuation methods lead to overvaluation, individuals "may later encounter difficulty in refinancing or selling a home because the true value of the property used as collateral is less than the original mortgage."). END FOOTNOTE

   FOOTNOTE 120 12 CFR 1026.2(19). END FOOTNOTE

   FOOTNOTE 121 The Bureau's Section 1022 analysis estimates that around 20,000 but potentially more of these transactions occur annually. Potential for a higher number of affected loans results from variables that determine whether a loan is a qualified mortgage that require access to information that is not available for these loans, such as the debt-to-income ratio. END FOOTNOTE

   Nonetheless, based upon outreach and comments on the 2012 Proposed Rule and further outreach and comments on the 2013 Supplemental Proposed Rule, the Agencies believe that the precise form of valuation specified in the statute--an appraisal by a state-certified or -licensed appraiser in conformity with USPAP and FIRREA, based upon a physical inspection of the interior of the home--is infeasible for this housing segment at this time. A steady supply of state-certified or -licensed appraisers to service thousands of these transactions annually starting on January 18, 2014, does not yet exist.

   Even if more state-certified or -licensed appraisers were able to perform appraisals for transactions secured by a manufactured home and not land in the future, the Agencies recognize that sources of data on comparable sales for transactions secured by a manufactured home and not land may not be as robust as sources of data on sales of transactions secured by a home and land. /122/ As a result, the Agencies believe that, absent an exemption, creditors could be unable to comply with the HPML appraisal requirements in a substantial number of transactions secured by a manufactured home and not land. Thus, the Agencies have concluded that an exemption from a requirement to perform appraisals in conformity with USPAP and FIRREA for these transactions would promote the safety and soundness of creditors and be in the public interest by allowing the transactions to occur without requiring use of a valuation method that is infeasible in a large number of cases.

   FOOTNOTE 122 Whereas appraisals of a land/home transaction are not always limited to the use of manufactured housing transactions as comparables, in transactions secured only by the home, the universe of comparables is generally limited to manufactured homes. END FOOTNOTE

   At the same time, the risk of inflated valuations in these transactions can contribute to increased default risk, /123/ which runs counter to both the safety and soundness of creditors and the public interest. The Agencies are concerned, based on research, outreach, and comments received, that these transactions can be prone to inflated valuations and associated risks of under-collateralization, leading to loans where the consumer has little, no, or even negative equity in the home. /124/ The Agencies believe that an unconditional exemption for these transactions at a minimum would not adequately account for the risks of under-collateralization.

   FOOTNOTE 123 See Enterprise Duty to Serve Underserved Markets, Proposed Rule, 75 FR 32099, 32014 (June 7, 2010) (FHFA finding that "[i]nterest rates charged for chattel loans are typically higher than those for real estate-secured loans" and that "[d]elinquencies and defaults on chattel loans typically exceed rates on mortgage loans."). END FOOTNOTE

   FOOTNOTE 124 See, e.g., Consumers Union Southwest Regional Office, "Manufactured Housing Appreciation: Stereotypes and Data" (Aug. 2003), p. 4 (asserting that depreciation is but one factor leading to "underwater" homes and that "many industry practices [ ] lead to very high loan-to-value ratios. Fees, points and overpriced, unneeded add-ons (such as vacations, cash rebates and single-premium credit life) raise the loan balance without adding value to the home. This can contribute to a deficiency balance by removing equity and placing the loan underwater."). See also id. at 14 ("One contributing factor to an initial drop [in the value of a manufactured home] can be inflated retailer mark-ups embedded in the price of a home."). END FOOTNOTE

   The effect of an inflated valuation on consumers and their risk of default can be even more pronounced in these transactions. Chattel lending generally carries higher interest rates, which could result in a significant number of HOEPA loans. /125/ Further, several industry commenters indicated that manufactured home loans would be less likely to be qualified mortgages than other types of mortgages because their points and fees would typically exceed thresholds set by the Bureau's 2013 ATR Final Rule. See SEC 1026.43(e)(3). At the same time, consumers borrowing these loans are disproportionately in the LMI segment. /126/ Higher loan amounts resulting from inflated valuations, combined with the comparatively high interest rates on these loans, can generate payments that pose significant burdens on LMI consumers and can put them at greater risk of default.

   FOOTNOTE 125 See, e.g., Bureau's 2013 HOEPA Final Rule, 78 FR 6856, 6876 (Jan. 31, 2013) (noting that Congress set a higher APR threshold for HOEPA coverage of loans secured by manufactured homes titled as personal property--8.5 percentage points--and that under this test, industry commenters estimated that between 32 and 48 percent of recent originations would be covered). END FOOTNOTE

   FOOTNOTE 126 See, e.g., Howard Baker and Robin LeBaron, Fair Mortgage Collaborative, Toward a Sustainable and Responsible Expansion of Affordable Mortgages for Manufactured Homes (March 2013) at 9 ("In 2009, the median household income of households in manufactured homes was under $30,000--well below the national average of $49,777. More than one-fifth (22 percent) of manufactured housing residents have incomes at or below the Federal poverty level."). This report is available at http://cfed.org/assets/pdfs/IM_HOME_Loan_Data_Collection_Project_Report.pdf. END FOOTNOTE

   Outreach and comments from the 2012 Proposed Rule and 2013 Supplemental Proposed Rule have not shown that existing industry practices or standards necessarily would be sufficient to control the risk of inflated valuations in these transactions, or ensure that consumers are informed of the home value in these transactions. To compound the concern, most of these transactions are not subject to valuation standards imposed by Federal law or regulation or Federal agency or GSE programs. The FHA Title I Manufactured Housing Loan Insurance Program is the only program at the Federal level that covers these transactions; no other Federal agency or GSE has programs for loans secured by a manufactured home and not land. The FHA Title I program includes valuation requirements and loan amount caps to mitigate against the risk of inflated valuations, but currently most transactions secured by a manufactured home and not land are not insured by that program. Some of these transactions are originated by Federally regulated financial institutions subject to FIRREA's appraisal and evaluation requirements, but the FIRREA regulations and related Interagency Appraisal and Evaluation Guidelines apply only to real estate transactions. /127/ Under current State laws, the collateral in transactions secured by a manufactured home and not land is not typically classified as real property.

   FOOTNOTE 127 75 CFR 77450, 77456 n.12 (Dec. 10, 2010) (noting that scope is for Federally-related transactions, which are real-estate related under 12 U.S.C. 3339 and 12 U.S.C. 3350(4)). END FOOTNOTE

   In addition, all creditors are subject to Regulation Z's interim final valuation independence rule (Valuation Independence Rule) for consumer credit secured by chattel, but the valuation service providers are not, due to a limitation in the current rule. /128/ The Valuation Independence Rule applies to creditors and "settlement service" providers of covered transactions. /129/ Under the rule, "settlement service" is defined under RESPA and implementing regulations (Regulation X). /130/ Under RESPA and Regulation X, a "settlement service" is limited to services for "Federally related mortgage loans," which include only loans secured by real property. /131/ Thus, valuation service providers for transactions secured by personal property, such as many transactions secured by a manufactured home and not land, are not covered under Regulation Z's Valuation Independence Rule.

   FOOTNOTE 128 Bureau: 12 CFR 1026.42; Board 12 CFR 226.42. END FOOTNOTE

   FOOTNOTE 129 Bureau: 12 CFR 1026.42(b)(1) and (2); Board 12 CFR 226.42(b)(1) and (2). END FOOTNOTE

   FOOTNOTE 130 See id.; see also 12 U.S.C. 2602(3) and 24 CFR 1024.2. END FOOTNOTE

   FOOTNOTE 131 12 CFR 1024.2. END FOOTNOTE

   Further, commenters indicated that consumers in transactions secured by manufactured homes and not land do not currently receive information about the value of their homes. Participants in informal outreach and research conducted by the Agencies similarly indicated that consumers for these loans are not familiar with independent information about home values and may be subject to high-pressure sales tactics that tend to limit consumer's consideration of their choices and pursuit of independent information.

   Finally, while consumers might receive valuations in some of these transactions under the Bureau's 2013 ECOA Valuations Final Rule, /132/ creditors might not always obtain a valuation subject to disclosure to the consumer under that rule. For example, in new manufactured home transactions without land, outreach and comments indicated that creditors often rely primarily upon the manufacturer's invoice when determining the maximum loan amount. The manufacturer's invoice is not subject to disclosure under the 2013 ECOA Valuations Final Rule. /133/ In addition, the maximum loan amount is not necessarily a valuation subject to disclosure under ECOA, and could well exceed caps defined under HUD regulations that serve to prevent over-financing, under-collateralization, and underwater loans. /134/ Accordingly, even if that amount were disclosed to consumers under the 2013 ECOA Valuations Rule, it would not necessarily impart meaningful, independent information to the consumer about the value of the home.

   FOOTNOTE 132 See 12 CFR 1002.14. END FOOTNOTE

   FOOTNOTE 133 See 12 CFR 1002.14, comment 14(b)(3)-3.iv. END FOOTNOTE

   FOOTNOTE 134 See 24 CFR 201.10(b)(1). END FOOTNOTE

   The Agencies therefore are adopting a condition on the exemption to ensure that valuation information from an independent source is obtained and is transparent to the consumer. The condition requires the creditor to obtain and provide to the consumer, no later than three days before consummation, certain information related to the value of the manufactured home securing the covered HPML. /135/

   FOOTNOTE 135 "Consummation" would have the same meaning as in SEC 1026.35(c)(6)(ii), requiring that a copy of any appraisal obtained under SEC 1026.35(c)(6)(i) be given to the consumer no later than three business days prior to consummation of the covered HPML--namely, as defined elsewhere in Regulation Z at 12 CFR 1026.2(a)(13) and accompanying Official Staff Commentary. Under those provisions, "consummation" means "the time that a consumer becomes contractually obligated on a credit transaction," which is determined by state law. SEC 1026.2(a)(13) and comment 2(a)(13)-1. END FOOTNOTE

   The Agencies have identified three types of materials, any one of which can be provided, as further discussed below.

   Providing a copy of a manufacturer's invoice used by a creditor for a transaction secured by a new manufactured home. Under SEC 1026.35(c)(2)(ii)(B)( 1), a creditor on a loan secured by a new manufactured home and not land may be exempt from the HPML appraisal rules if the creditor gives the consumer a copy of the manufacturer's invoice, which is defined consistent with HUD manufactured home program regulations. See SEC 1026.35(c)(1)(iv) and accompanying section-by-section analysis.

   Outreach and comments consistently indicated that in these transactions, creditors use the invoice as the primary source for calculating a maximum loan amount. For that reason, several commenters generally supported providing a copy of the invoice to consumers as a means of informing them of pertinent valuation information. A national manufactured housing trade association also asserted that it is standard practice for manufacturers to certify the authenticity and accuracy of the wholesale cost of the home at the point of manufacture.

   The Agencies are adopting a limitation on the option to provide the manufacturer's invoice: the invoice may be provided to satisfy the condition only if the date of manufacture of the home was within 18 months of the creditor's receipt of the consumer's application for credit. This limitation is generally consistent with FHA Title I regulations, which incorporate the practice of using manufacturers' invoices as a reference point for determining safe and sound loan amounts for insuring transactions secured by new manufactured homes. Specifically, FHA Title I rules limit the use of this practice to homes manufactured within 18 months of purchase by the consumer. /136/ The Agencies believe that this limitation will help prevent the use of invoices that are too dated to reflect reliably the current value of the manufactured home.

   FOOTNOTE 136 24 CFR 201.21(b)(2)(i) (defining a "new manufactured home" for which a manufacturer's invoice may be used as "one that is purchased by the borrower within 18 months after the date of manufacture and has not been previously occupied." See also HUD TI-481, Appendix 2. END FOOTNOTE

   Creditors commonly obtain and rely on the manufacturer's invoice and consumer advocates, affordable housing organizations, and others, however, have asserted that consumers should have access to information that creditors use. If creditors have the invoice, providing a consumer with a copy imposes little burden.

   The Agencies note that some commenters were concerned that the manufacturer's invoice contains sensitive wholesale pricing information and that the wholesale invoice from the manufacturer will not match the retail price paid by the consumer. The Agencies recognize that the retail price will include a markup for various costs. Commenters and industry participants in outreach indicated that in transactions secured by new manufactured homes, the maximum loan amount typically is determined by applying a percentage markup to the manufacturer's invoice. Outreach indicated that this markup can vary among creditors, in some cases significantly. The Agencies are not aware of any regulatory standards governing the extent of this markup other than limitations in the FHA Title I program, which only covers a small subset of these loans currently. The FHA Title I limitations do not permit a markup on the manufacturer's invoice of more than 130 percent when calculating the maximum insurable loan amount, and HUD has other detailed standards for determining what other charges can be factored into the maximum loan amount. /137/ Most manufactured housing transactions are not subject to these restrictions, leaving the markup to be determined by the creditor's tolerance for risk, and thus subject to risk of inflated valuation.

   FOOTNOTE 137 See 24 CFR 201.10((b)(1). END FOOTNOTE

   The Agencies believe that providing the manufacturer's invoice to consumers will give them an opportunity to have a better understanding of the factors contributing to the loan amount and its relationship to the value of the home. /138/ In transactions secured by a home and land under GSE and Federal agency programs, the appraiser is required to receive a copy of this invoice and must disclose in the appraisal report how it was considered. /139/

   FOOTNOTE 138 See, e.g., Consumers Union Southwest Regional Office, "Manufactured Housing Appreciation: Stereotypes and Data" (Apr. 2003) at 14, available at http://consumersunion.org/pdf/mh/Appreciation.pdf ("One contributing factor to an initial drop can be inflated retailer mark-ups embedded in the price of a home. Consumers who pay too much for any home will find it harder to sell it later for a higher price. Retailer markups can be a quarter of the base price of the home. Consumers should question what value they get from this middleman, and take steps to minimize costs that don't add value to the home. Buying direct from the last owner in a used transaction may reduce this overhead, as can buying direct from manufacturers when possible."). END FOOTNOTE

   FOOTNOTE 139 Fannie Mae Single-Family Selling Guide, B5-2.2-04 (4/1/09); Freddie Mac Single-Family Seller/Servicer Guide, H33.6 (2/10/12). See also 24 CFR 201.10(b)(1) (HUD regulations requiring that the loan amount be determined with reference to the invoice). END FOOTNOTE

   Under the final rule, creditors also may choose to communicate the nature or extent of this markup to consumers when providing the manufacturer's invoice. In this case, the manufacturer's invoice will provide an opportunity for questions from consumers to assess whether the markup leads the collateral to be over-valued. As noted above, HUD-certified counselors, required for HOEPA transactions and available for others, also can assist consumers in answering any questions. The Agencies have sought to accommodate remaining concerns over providing the manufacturer's invoice by providing other compliance options that could be used in new manufactured home transactions (including that the loan might qualify for another exemption under SEC 1026.35(c)(2)). /140/

   FOOTNOTE 140 See, e.g., SEC 1026.35(c)(2)(i); see also 78 FR 59890, 59901 (Sept. 30, 2013) (HUD proposing that manufactured home loans insured under Title I would be qualified mortgages under HUD regulations, even if their points and fees exceed the cap under the Bureau's qualified mortgage definition, SEC 1026.43(c)(3)). END FOOTNOTE

   Providing a cost estimate from an independent cost service provider. Section 1026.35(c)(2)(ii)(B)( 2) gives the creditor the option of providing a cost estimate from an independent third-party cost service provider. Comment 35(c)(2)(ii)(B)( 2)-1 clarifies that a cost service provider from which the creditor obtains a manufactured home unit cost estimate under SEC 1026.35(c)(2)(ii)(B)( 2) is independent if that party is not affiliated with the creditor in the transaction, such as by common corporate ownership, and receives no direct or indirect financial benefits based on whether the transaction is consummated.

   As noted above, the Agencies recognize that creditors may choose not to provide a copy of the manufacturer's invoice for new manufactured home transactions. In addition, appraisers or valuation providers may be unavailable for some transactions. Thus, including this additional option is important to ensure that the consumer can receive a unit cost estimate of the value of the home from an independent source. Commenters and outreach indicated that this type of estimate is the predominant method used for transactions secured by an existing manufactured home and not land. Based upon comments from a national cost service provider confirming that its cost guide reports values for the current model year, the Agencies also believe this type of cost service also could be used for many new manufactured home transactions. The Agencies learned from one cost service that an adjustment for "new or like new" is available through its cost guide, and that this guide is updated multiple times per year.

   The information provided by an independent cost service provider can provide a useful outside check against inflated valuations. At the same time, the check will not prohibit transactions above the value reflected in the cost service. Rather, the check will make sure that if transactions occur above those values, creditors and consumers have the opportunity to know that fact and evaluate the transaction accordingly.

   Interior inspections and adjustments. The Agencies are not requiring physical inspections of the interior or condition or location adjustments to the cost service values. In this way, the condition ensures that the creditor can readily identify the information to be provided to the consumer (based upon the make and model and year of the manufactured home unit) from an independent source, without being asked to interject subjective or discretionary considerations.

   Interior inspections by an appraiser for new manufactured homes may often be of limited value, given the associated expense. For transactions secured by new manufactured homes, as indicated by industry commenters, HUD and State inspectors conduct inspections to ensure the proper construction and installation of the home. /141/ Some commenters asserted that an interior inspection could confirm the existence of extras or options that were promised. The Agencies believe, however, that consumers themselves can confirm that they received extras or options ordered. Regarding adjustments, the Agencies understand that cost services may offer adjustments of standard estimates to reflect that the unit is in "new or like new" condition.

   FOOTNOTE 141 See generally, 24 CFR parts 3280, 3282, and 3286. END FOOTNOTE

   For existing manufactured homes, information about the condition of the interior can be an important factor affecting the valuation. Due to concerns with burden, complexity, and reliability of such adjustments, though, the Agencies are not mandating that adjustments be made. At the same time, the rule does not prohibit creditors from making this adjustment to the unit-cost estimate of an existing manufactured home.

   Accordingly, comment 35(c)(2)(viii)(B)( 2)-2 clarifies that the requirement that the cost estimate be from an independent cost service provider does not prohibit a creditor from providing a cost estimate that reflects adjustments to factors such as special features, condition or location. The comment explains, however, that the requirement that the estimate be obtained from an independent cost service provider means that any adjustments to the estimate must be based on adjustment factors available as part of the independent cost service used, with associated values that are determined by the independent cost service.

   For both new and existing manufactured homes, the location can enhance or, in some cases, reduce the value of the home. A consumer advocate group, affordable housing organizations, and others emphasized that cost service data does not adequately account for the contribution of location to the value of the home. The manufactured home can be resold as a trade-in or repossessed, however, in which case its value-in-place is not what is relevant to the consumer. Further, as noted above, location adjustments can introduce greater subjectivity into the information provided. Therefore, the rule does not mandate that a location adjustment be made. Providing the unit value will enable consumers to compare the cost estimate from the published cost service to the line item charge in the sales contract for the base unit.

   Finally, some commenters expressed concerns over accuracy or undervaluation in the unit cost estimates published by third-party cost services. These commenters did not provide data to support their views, however. In addition, while some comments noted that the unit cost estimate is not the same as an estimate of the retail market value, the Agencies recognize that this type of estimate nonetheless is widely used by creditors currently as a guideline for the value of an existing manufactured home. In some cases, it therefore may represent the best available, most cost-effective estimate of the value of the home. Further, the Agencies are structuring the exemption condition so that the creditor has the discretion to choose which of the specified types of valuation materials it finds most suitable for informing the consumer of the estimated value of the home. Thus, if a creditor believes an independent cost service generally undervalues manufactured homes, the creditor can provide other forms of valuation information as described below, as well as its own accompanying explanatory information.

   Providing a valuation by a trained manufactured home valuation provider. Section 1026.35(c)(2)(ii)(B)( 3) allows a creditor to provide an appraisal conducted by a person who has no direct or indirect interest, financial or otherwise, in the property for which the valuation is performed and has training or experience in valuing manufactured homes. "Valuation" is defined as in SEC 1026.42(b)(3) of the Bureau's Valuation Independence Rule, which defines "valuation" to mean "an estimate of the value of the consumer's principal dwelling in written or electronic form, other than one produced solely by an automated model or system." /142/

   FOOTNOTE 142 See 12 CFR 226.42(b)(3) for the definition of "valuation" in the Board's substantially similar version of the valuation independence rule. END FOOTNOTE

   Comment 35(c)(2)(ii)(B)( 3)-1 provides that the manufactured home valuation provider would have a direct or indirect interest in the property if, for example, the person had any ownership or reasonably foreseeable ownership interest in the manufactured home. To illustrate, the comment states that a person who seeks a loan to purchase the manufactured home to be valued has a reasonably foreseeable ownership interest in the property.

   Comment 35(c)(2)(ii)(B)( 3)-2 clarifies that the valuation provider would have a direct or indirect interest in the transaction if, for example, the manufactured home valuation provider or an affiliate of that person also served as a loan officer of the creditor or otherwise arranges the credit transaction, or is the retail dealer of the manufactured home. The comment further states that a person also has a prohibited interest in the transaction if the person is compensated or otherwise receives financial or other benefits based on whether the transaction is consummated.

   Comments 35(c)(2)(ii)(B)( 3)-1 and -2 are generally based on comments 42(d)(1)(i)-1 and -2 of Regulation Z's Valuation Independence Rule. /143/ As discussed previously, the Valuation Independence Rule applies to all creditors of transactions secured by a consumer's principal dwelling, but applies to "settlement service" providers only for transactions secured by real property. /144/ However, the Agencies believe it prudent to apply the principles of Regulation Z's Valuation Independence Rule to valuations that may be used in lieu of complying with the general HPML appraisal requirements for transactions secured by manufactured homes and not land, which might not be titled as real property.

   FOOTNOTE 143 Bureau: 12 CFR 1026.42; Board: 12 CFR 226.42. END FOOTNOTE

   FOOTNOTE 144 Bureau: SEC 1026.42(b)(1) and (2); Board SEC 226.42(b)(1) and (2). END FOOTNOTE

   Comment 35(c)(2)(viii)(B)( 3)-3 clarifies that "training" referenced in SEC 1026.35(c)(2)(viii)(B)( 3) includes, for example, successfully completing a course in valuing manufactured homes offered by a State or national appraiser association or receiving job training from an employer in the business of valuing manufactured homes.

   Comment 35(c)(2)(viii)(B)( 3)-4 provides an example of a manufactured home valuation that would satisfy the requirements of the condition in SEC 1026.35(c)(2)(viii)(B)( 3). Specifically, the comment states that a valuation in compliance with SEC 1026.35(c)(2)(viii)(B)( 3) would include, for example, an appraisal of the manufactured home in accordance with the appraisal requirements for a manufactured home classified as personal property under the Title I Manufactured Home Loan Insurance Program of HUD (administered by FHA), pursuant to section 2(b)(10) of the National Housing Act, 12 U.S.C. 1703(b)(10).

   The Agencies included this comment in recognition that one of the more well-developed standards for the valuation of manufactured homes and not land is found in the FHA Title I program. /145/ When an existing manufactured home is classified as personal property, FHA Title I requires creditors to, among other things: (1) Use an appraiser certified to use the NAS or, if the lender is unable to locate an NAS-certified appraiser, an appraiser from the FHA Title II mortgage program who certifies having experience appraising manufactured homes; /146/ (2) obtain an appraisal performed on the home site where possible and that reflects the retail value of comparable manufactured homes in similar condition and in the same geographic area; and (3) review the appraisal to verify, among other things, that the correct cost service unit value was used and proper condition adjustment was made. /147/

   FOOTNOTE 145 See HUD TI-481, Appendix 2-1, D (General Program Requirements--Eligible Homes). END FOOTNOTE

   FOOTNOTE 146 When the home is classified as real property, the appraisal must be completed by a real estate appraiser on the FHA Title II roster who can certify prior experience appraising manufactured homes as real property. The Agencies believe it is useful to incorporate the general standard, in case states adopt model laws treating manufactured homes as real property even when they are not affixed to land and the land does not provide security for a loan. See HUD TI-481, Appendices 8-9, C, and 10-5. END FOOTNOTE

   FOOTNOTE 147 See HUD TI-481, Appendices 8-9, C, and 10-5. END FOOTNOTE

   As noted in the 2013 Supplemental Proposed Rule, the Agencies are aware that fewer than 100 individuals are currently certified to use this system, although many more have been certified in the past and may have incentives to obtain the certification in the future. This factor provides further support for the Agencies' decision to allow creditors multiple options to comply with the condition.

   Consumer and affordable housing advocate commenters supported the long-term goal of applying an appraisal standard to transactions secured by a manufactured home and not land. At the same time, manufacturer housing industry commenters generally supported a long-term effort to further refine and develop valuation methods for manufactured homes. The Agencies believe that adopting a condition that furthers these goals is in the public interest. To allow flexibility for these and other valuation methods to evolve, the Agencies seek to avoid prescriptive, detailed requirements on the valuation method. Rather, the Agencies seek generally to define who is eligible to perform the valuation, and leave the method to that person's judgment and expertise as appropriate for the scope of work required. As noted above, two national appraisal trade associations noted that state-certified or -licensed appraisers are not the only persons who could value manufactured homes. For example, some commenters identified an existing product prepared by a company who hires individuals trained in the valuation of manufactured homes. The company generates a report that estimates the value of a given manufactured home using local data on comparable sales.

   Accordingly, under this alternative, the creditor must provide the consumer with a valuation prepared by one or more individuals who do not have a direct or indirect financial interest in the property or the transaction, and who have training in the valuation of manufactured homes. The Agencies are adopting comments to provide further guidance on how creditors can satisfy these criteria. Finally, it may follow from the exercise of independent judgment and application of this training that the individual will conduct a physical inspection of the interior, or assess the condition or value of the location of the home. But as noted, at this time, the Agencies are not specifying these steps as necessary elements of a valuation that satisfies the condition.

   Several industry commenters indicated that HUD appraisal requirements in transactions secured by manufactured homes have led to higher frequency of appraisals where the value of the home is below the purchase price. At least one commenter indicated this occurred in Title I transactions secured by existing manufactured homes. Some commenters and outreach participants attributed high numbers of appraised values that are lower than the purchase price to an over-emphasis on the use of manufactured homes as comparables in FHA and other manufactured home credit programs. They suggested, for example, that manufactured homes comparables in the geographic area might be much older than the home being appraised. The Agencies are concerned, however, that other factors can contribute to higher rates of appraised values lower than the purchase price, such as inflated purchase prices and corresponding loan amounts.

   The Agencies believe that, on balance, appraising manufactured homes in transactions that are not also secured by land can be an effective way to account for the many factors that contribute to the value of the home, including home condition, location, re-sale conditions, and lease terms, among others.

Other Issues

   Delay in issuing rules on manufactured home loans. As discussed under "Public Comments," commenters on behalf of consumers and industry generally expressed support in principle for ensuring that consumers receive valuation information in exempt transactions. Industry commenters raised a number of concerns over the utility to consumers of information generated through current valuation practices, however. Several consumer and affordable housing groups expressed a similar concern over the quality of current valuation methods (citing, for example, concerns over the reliability of a cost estimate of the unit from a third-party source). They nonetheless stated that creditors should still be required to provide a copy of the collateral valuation information that is used by the creditor (i.e., manufacturer's invoice in new manufactured home transactions). These commenters also suggested that the Agencies engage in further study of manufactured housing valuation issues before adopting further conditions.

   The Agencies note, however, that manufactured housing valuation practices and issues have been the subject of significant requests for comment and outreach in two separate proposals, and have generated detailed comment from representatives of industry, consumer advocates, and appraisers alike. The Agencies believe that the current public record sufficiently supports adopting conditions in this final rule. While the Agencies are allowing additional 18 months for conditions to be implemented, deferring their adoption pending further study would not promote safety and soundness and be in the public interest. Thousands of consumers would be without the protections during any further study. It also is unclear that further study, beyond the two years of study already undertaken, would generate material improvements to the approach taken here.

   Steering. Some consumer group and affordable housing commenters also expressed concern that consumers might be steered into higher-rate chattel transactions with fewer consumer protections if the final rule provided an unconditional exemption for transactions secured by a manufactured home and not land. For example, consumers could be steered away from an HPML transaction secured by both the home and land to avoid the HPML appraisal requirements (See SEC 1026.35(c)(2)(viii), effective July 18, 2015). Creditors might also structure what otherwise would be a packaged land/home transactions into two transactions--one secured solely by the home and one by land. The Agencies believe that some of these concerns are mitigated by other laws and regulations. Such practices might be subject to scrutiny under consumer protection laws at the State and Federal level. For example, regulations may apply that generally prohibit a loan originator from steering a consumer to a transaction based on the fact that the originator will receive greater compensation (which could result from an over-valuation of the home, leading to a higher loan amount). /148/ The Agencies believe that some of the concerns about steering may be mitigated by conditioning the exemption for manufactured home-only transactions on the creditor having to provide alternative valuation information to the consumer.

   FOOTNOTE 148 See, e.g., SEC 1026.36(e)(1) (prohibiting steering consumers to earn greater compensation). The Agencies will monitor application of the rule in this regard. END FOOTNOTE

   Effective date. The Agencies recognize creditors will need time to make necessary adjustments to their compliance systems to be able to comply with the condition. For example, creditors will need to adjust their systems to identify transactions that would need to rely on the exemption (e.g., HPMLs that are not eligible for exemptions for loans that satisfy the criteria of a qualified mortgage, transactions in an amount of $25,000 or less, or other exemption types (See SEC 1026.35(c)(2)), /149/ to determine which types of valuation materials to obtain for these transactions, and to develop a mechanism for providing these to the consumer no later than three days prior to consummation. Creditors also will need to ensure that they have access to the valuation materials they choose to use. To ensure adequate time to implement these and any other necessary steps, and that these transactions remain available to consumers in the interim period, the Agencies are delaying implementation of the condition for 18 months after the effective date of the HPML Appraisals Rules, until July 18, 2015.

   FOOTNOTE 149 Transactions secured by a manufactured home would not typically be eligible for the exemption for initial construction loans, 12 CFR 1026.35(c)(2)(iv), because that exemption is designed for temporary initial financing that is replaced with permanent financing when the construction phase is complete. See comment 35(c)(2)(iv)-1. END FOOTNOTE

   Sunset. Finally, the Agencies are not adopting an expiration date for the conditional exemption for transactions secured by a manufactured home and not land. Some commenters suggested that a "sunset" date would provide an incentive for the appraiser and manufactured home lending industries to improve capacity and methods for conducting appraisals that would comply with USPAP and FIRREA. However, it is unclear that a sunset date would promote this outcome. At the same time, a sunset date would create risk for this important source of affordable housing if capacity and methods are not developed by that date. The Agencies believe that a better way to promote improved capacity and methods is to allow the condition to be satisfied through the use of existing methods. This is therefore another reason why the Agencies are allowing the third option for satisfying the condition--appraisals performed by independent and trained individuals.

35(c)(6) Copy of Appraisals

35(c)(6)(ii) Timing

   In the January 2013 Final Rule, SEC 1026.35(c)(6)(ii) requires that a creditor provide a copy of any appraisal obtained in compliance with the HPML appraisal rules to the consumer "no later than three business days prior to consummation of the loan." Comment 35(c)(6)(ii)-2 provides that, for appraisals prepared by the creditor's internal appraisal staff, the date that a consumer receives a copy of an appraisal as required under SEC 1026.35(c)(6) is the date on which the appraisal is completed. In the 2013 Supplemental Proposed Rule, the Agencies proposed to delete this comment as unnecessary, because the relevant timing requirement is based on when the creditor provides the appraisal, not when the consumer receives it. See SEC 1026.35(c)(6)(i).

Public Comments

   A State credit union association commenter requested that the Agencies allow flexibility in providing a copy of the appraisal three days before closing because it is difficult to obtain an appraisal in time to do so, requiring closing to be rescheduled, which can be difficult. The commenter requested that consumers be permitted to waive the requirement if it is in their best interest to do so.

The Final Rule

   The Agencies are adopting the proposal to delete comment 35(c)(6)(ii)-2 without change, and re-numbering comment 35(c)(6)(ii)-3 as 35(c)(6)(ii)-2. The Agencies are not adding a waiver option to the timing requirement for providing a copy of the appraisal to the consumer. Re-numbered comment 35(c)(6)(ii)-2 clarifies that the ECOA provision allowing a consumer to waive the requirement that the appraisal copy be provided three business days before consummation, does not apply to HPMLs subject to SEC 1026.35(c). /150/ The comment further clarifies that a consumer of an HPML subject to SEC 1026.35(c) may not waive the timing requirement to receive a copy of the appraisal under SEC 1026.35(c)(6)(i).

   FOOTNOTE 150 ECOA section 701(e)(2), 15 U.S.C. 1691(e)(2), implemented in the 2013 ECOA Valuations Final Rule, Regulation B SEC 1002.14(a)(1), effective January 18, 2014. END FOOTNOTE

   The Agencies believe that allowing the consumer to waive the timing requirement for providing a copy of the appraisal would be inconsistent with the statute. ECOA expressly provides that the consumer may waive the three day timing requirement for the creditor to provide a copy of the appraisal to the consumer under ECOA. /151/ By contrast, Congress did not amend TILA to include a parallel waiver provision regarding the same requirement in the context of appraisals for HPMLs. See TILA section 129H(c), 15 U.S.C. 1639h(c). The Agencies interpret TILA's lack of a waiver provision to indicate that Congress did not intend to allow consumers of loans covered by the HPML appraisal rules to waive the timing requirement.

   FOOTNOTE 151 ECOA section 701(e)(2), 15 U.S.C. 1691(e)(2), implemented in 12 CFR 1002.14(a)(1), effective January 18, 2014. END FOOTNOTE

VI. Bureau's Dodd-Frank Act Section 1022(b)(2) Analysis /152/

   FOOTNOTE 152 The analysis and views in this Part VI reflect those of the Bureau only, and not necessarily those of all of the Agencies. END FOOTNOTE

   In developing this supplemental rule, the Bureau has considered potential benefits, costs, and impacts to consumers and covered persons. /153/ In addition, the Bureau has consulted, or offered to consult with HUD and the Federal Trade Commission, including regarding consistency with any prudential, market, or systemic objectives administered by those agencies. The Bureau also held discussions with or solicited feedback from the USDA, RHS, and VA regarding the potential impacts of this supplemental rule on their loan programs.

   FOOTNOTE 153 Specifically, Section 1022(b)(2)(A) calls for the Bureau to consider the potential benefits and costs of a regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the Act; and the impact on consumers in rural areas. END FOOTNOTE

   In this supplemental final rule, the Agencies are exempting the following three additional classes of higher-priced mortgage loans (HPMLs) from the January 2013 Final Rule: (1) HPMLs whose proceeds are used exclusively to satisfy (i.e., refinance) an existing first lien loan and to pay for closing costs, provided that the credit risk holder is the same on both loans (or that the same government agency insures or guarantees both loans) and the new loan does not have negative amortization, interest-only, or balloon features; (2) HPMLs that have a principal amount of $25,000 or less (indexed to inflation); and (3) certain HPMLs secured by manufactured homes.

   As revised in this final rule, the manufactured home exemption covers all HPMLs secured by manufactured homes for which an application is received before July 18, 2015. Thereafter, (1) for transactions secured by a new manufactured home and land, creditors will only be exempt only from the requirement that the appraiser conduct a physical visit of the interior; and (2) for transactions secured by a manufactured home and not land, the exemption applies only if certain alternative valuation information is provided to the consumer no later than three days before consummation.

   The Agencies are also broadening the exemption for qualified mortgages adopted in the January 2013 Final Rule beyond the Bureau's qualified mortgage definition in 12 CFR 1026.43(e) to include any transaction that meets the criteria of a qualified mortgage established by agencies with authority to do so under TILA section 129c--the Bureau, HUD, VA, USDA, and RHS. See 15 U.S.C. 1693c. As revised, this exemption will include transactions that are qualified mortgages as defined under any final rule that the Bureau, HUD, VA, USDA, or RHS has adopted or will adopt under authority at TILA section 129c. See 15 U.S.C. 1693c. In addition, transactions that meet criteria for a qualified mortgage established under rules prescribed by the Bureau, HUD, VA, USDA, or RHS are eligible for the exemption even if they are not "covered transactions" under the Bureau's ability-to-repay rules (and thus not technically defined as "qualified mortgages" under each of the respective rules). /154/ For further discussion, see the section-by-section analysis of SEC 1026.35(c)(2)(i).

   FOOTNOTE 154 Only transactions that are actually insured, guaranteed, or administered under programs of HUD, VA, USDA, or RHS could be eligible for the exemption under SEC 1026.35(c)(2)(i) by being defined as or meeting the criteria of a qualified mortgage under rules of those agencies; the authority of those agencies to determine the features of a qualified mortgage does not extend to loans that they do not insure, guarantee, or administer. See TILA section 129c(b)(3)(B)(ii), 15 U.S.C. 1639c(b)(3)(B)(ii). END FOOTNOTE

A. Potential Benefits and Costs to Consumers and Covered Persons

   This analysis considers the benefits, costs, and impacts of the key provisions of the supplemental rule relative to the baseline provided by existing law, including the January 2013 Final Rule and the Bureau's previously issued ATR Rules. /155/ The Bureau considered comments received on issues related to this analysis. These comments are addressed below and in the section-by-section analyses.

   FOOTNOTE 155 The Bureau has discretion in future rulemakings to choose the most appropriate baseline for that particular rulemaking. END FOOTNOTE

1. Economic Overview

   This rulemaking consists of the adoption of an expanded qualified mortgage exemption and five separate provisions regarding HPMLs that do not qualify for the qualified mortgage status (non-QM). The January 2013 Final Rule demarcated which of those non-QM loans are subject to requirement for an appraisal in conformity with USPAP and FIRREA with an interior property visit (the full appraisal) and related notice and additional appraisal requirements for loans used to purchase certain flipped properties. The overall impact of these five provisions is limited to specific segments of the mortgage market, with arguably the largest impact on transactions secured by a used manufactured home and not land (provision (3) below). The five provisions for non-QM HPMLs are:

   1. Certain refinances, commonly referred to as "streamlined," are now exempt from the January 2013 Final Rule;

   2. Smaller dollar loans (up to $25,000, indexed to inflation) are now exempt from the January 2013 Final Rule;

   3. Used manufactured housing transactions that are not secured by land (chattel) are now exempt from the January 2013 Final Rule and, for applications received on or after July 18, 2015, subject to a condition that the creditor must give the consumer alternative valuation information; /156/

   FOOTNOTE 156 Used manufactured housing transactions that are secured by land remain covered by the January 2013 Final Rule, starting with applications received on or after July 18, 2015. All loans secured in whole or in part by manufactured home are exempt if the application is received before July 18, 2015. END FOOTNOTE

   4. New manufactured housing transactions that are not secured by land (chattel) remain exempt from the January 2013 Final Rule; however, for applications received on or after July 18, 2015, this exemption will be subject to a condition that the creditor must give the consumer alternative valuation information; and

   5. New manufactured housing transactions secured by land (new land/home) remain exempt until July 18, 2015; for applications received on or after July 18, 2015, these transactions will be exempted only from the physical interior visit part of the January 2013 Final Rule.

   In adopting each of these provisions, the Agencies considered mandating that consumers receive information about the value of their house at the time of the loan. The Bureau discusses the general benefits and costs of this type of mandatory information provision, and then applies this discussion to each of the provisions.

   Consumers benefit from knowing the value of the home on which they are planning to take out a loan. Consumers are able to make decisions that will better fit their situation if they have a more precise estimate of what their home is worth. For example, a consumer might decide, given a home's value, that he or she should not take out the loan or should consider purchasing a different home whose value in relation to the loan amount is lower; that they should sell instead of refinancing; that they should postpone a particular home improvement and not overinvest in a home that might be worth less than they thought. Affording consumers a better opportunity to get this decision right is particularly valuable in home loans because these transaction sizes are significant relative to income; the large size of the transaction relative to income may be especially significant in non-QM HPMLs, which are more costly and may pose greater repayment risk than other mortgage loans.

   No valuation method will give the consumer perfect information about the home's value. Thus, a consumer might receive a valuation that overestimates the value and leads to a purchase that should not have been made; similarly, a valuation that underestimates the value might lead to no purchase when one should have been made. However, the Bureau believes that imparting unbiased valuation information to the consumer is better than the consumer receiving no information, and that consumer benefits increase with more precise information, whether it's moving from no information to a manufacturer's invoice, an AVM or similar estimate, a full appraisal, or some other type of valuation prepared by an independent trained person.

   The cost of providing any additional information on the home value is directly imposed on the creditor--the creditor has to perform what is necessary to obtain the home valuation information and provide it to the consumer. However, since this is mostly a marginal cost and most of the mortgage markets are relatively competitive, this cost is likely to be almost fully passed through to the consumer. /157/ The fixed costs, which are unlikely to be passed through to the consumer in a relatively competitive market, include developing training materials and providing training. However, the Bureau believes that the marginal training and training development costs for the provisions of this supplemental final rule are non-significant. Creditors will have already developed and provided training in preparation for complying with the various requirements of the January 2013 Final Rule, which goes into effect on January 18, 2014; this supplemental final rule is considerably less complex, establishing exemptions from those requirements.

   FOOTNOTE 157 See, for example, E. Glen Weyl and Michael Fabinger, "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, Vol. 121, No. 3 (Feb. 24, 2013). END FOOTNOTE

   In the world of informed consumers exhibiting fully rational economic behavior, mandatory information provisions might be unnecessary--consumers would have decided for themselves whether they need this information enough to pay for it. However, the Bureau believes that this is not the best assumption, especially for a market with many product characteristics, intertemporal investment decisions, and projections into the distant future. Moreover, even under that assumption, creditors might have some specialized knowledge making them able to obtain better information than the consumer could access on their own. /158/

   FOOTNOTE 158 For example, consumers generally cannot access the manufacturer's invoice for a manufactured house. END FOOTNOTE

   A range of possibilities for a home value information requirement exists in the non-QM HPML mortgage market. This range has, at one end of the spectrum, no information provision requirement, and a full appraisal on the other. Generally, the more precise the information is, the more expensive the method is. In particular, the Bureau believes that a full appraisal costs $350 on average as discussed in the Section 1022 analysis in the January 2013 Final Rule. /159/ Not providing any information is, of course, free to the creditor. An intermediate solution like an automated valuation estimate (an AVM estimate) would result in a cost of under $20, as estimated in the 2013 Supplemental Proposed Rule; /160/ however, an AVM estimate is arguably less precise than a USPAP appraisal, especially in rural areas. Providing a consumer with a copy of a manufacturer's invoice (one of the few conditions that a creditor might satisfy for a non-QM HPML to be exempted from a full appraisal on chattel manufactured housing) is estimated to cost less than $5. Moreover, the Bureau's January 2013 ECOA Valuations Rule already requires the creditor to give the consumer a copy of valuations performed for the transaction; the Bureau estimates that full appraisals that are performed 95% of the time for purchases, 90% for refinances, and 5% for other loans generally in the mortgage market based upon outreach. /161/

   FOOTNOTE 159 78 FR 10368, 10420 (Feb. 13, 2013). END FOOTNOTE

   FOOTNOTE 160 78 FR 48548, 48568 n.91 (Aug. 13, 2013). END FOOTNOTE

   FOOTNOTE 161 78 FR 10368, 10419 (Feb. 13, 2013). END FOOTNOTE

2. Data Used

   For all the estimates, both above and below, the data sources used are described in the 2013 Supplemental Proposed Rule (described in the next paragraph below). Several commenters stated that for the completeness of analysis, the Bureau should also examine the impact of the points and fees criterion for a qualified mortgage under the Bureau's 2013 ATR Final Rule on the number of HPMLs that are non-QMs. /162/ The Bureau does not possess any data and is not aware of any existing data to address this point directly. However, the effect of points and fees is described further below. The Bureau did not receive comments raising additional issues regarding the data and the methodology by which projections were originated.

   FOOTNOTE 162 See generally 12 CFR 1026.43(e)-(f) (provisions identifying types of mortgages that are qualified mortgages under Bureau rules). END FOOTNOTE

   The Bureau has relied on a variety of data sources to analyze the potential benefits, costs and impacts of the rule. /163/ However, in some instances, the requisite data are not available or are quite limited. Data with which to quantify the benefits of the rule are particularly limited. As a result, portions of this analysis rely in part on general economic principles to provide a qualitative discussion of the benefits, costs, and impacts of the rule.

   FOOTNOTE 163 The estimates in this analysis are based upon data and statistical analyses performed by the Bureau. To estimate counts and properties of mortgages for entities that do not report under the Home Mortgage Disclosure Act (HMDA), the Bureau has matched HMDA data to Call Report data and National Mortgage Licensing System (NMLS) and has statistically projected estimated loan counts for those depository institutions that do not report these data either under HMDA or on the NCUA call report. The Bureau has projected originations of HPMLs in a similar fashion for depositories that do not report HMDA. These projections use Poisson regressions that estimate loan volumes as a function of an institution's total assets, employment, mortgage holdings, and geographic presence. Neither HMDA nor the Call Report data have loan level estimates of debt-to-income (DTI) ratios that, in some cases, determine whether a loan is a qualified mortgage. To estimate these figures, the Bureau has matched the HMDA data to data on the historic-loan-performance (HLP) dataset provided by the FHFA.

   This allows estimation of coefficients in a probit model to predict DTI using loan amount, income, and other variables. This model is then used to estimate DTI for loans in HMDA. END FOOTNOTE

   The primary source of data used in this analysis is data collected under HMDA. The empirical analysis generally uses 2011 data, including from the 4th quarter 2011 bank and thrift Call Reports /164/ and 4th quarter 2011 credit union call reports from the NCUA. De-identified data from the National Mortgage Licensing System (NMLS) Mortgage Call Reports (MCR) /165/ for the 4th quarter of 2011 also were used to identify financial institutions and their characteristics.

   FOOTNOTE 164 Every national bank, State member bank, and insured nonmember bank is required by its primary Federal regulator to file consolidated Reports of Condition and Income, also known as Call Report data, for each quarter as of the close of business on the last day of each calendar quarter (the report date). The specific reporting requirements depend upon the size of the bank and whether it has any foreign offices. For more information, see http://www2.fdic.gov/call_tfr_rpts/. END FOOTNOTE

   FOOTNOTE 165 The NMLS is a national registry of non-depository financial institutions including mortgage loan originators. Portions of the registration information are public. The Mortgage Call Report data are reported at the institution level and include information on the number and dollar amount of loans originated, and the number and dollar amount of loans brokered. The Bureau noted in its summer 2012 mortgage proposals that it sought to obtain additional data to supplement its consideration of the rulemakings, including additional data from the NMLS and the NMLS Mortgage Call Report, loan file extracts from various lenders, and data from the pilot phases of the National Mortgage Database. Each of these data sources was not necessarily relevant to each of the rulemakings. The Bureau used the additional data from NMLS and NMLS Mortgage Call Report data to better corroborate its estimate the contours of the non-depository segment of the mortgage market. The Bureau has received loan file extracts from three lenders, but at this point, the data from one lender is not usable and the data from the other two is not sufficiently standardized nor representative to inform consideration of the Final Rule or this supplemental proposal. Additionally, the Bureau has thus far not yet received data from the National Mortgage Database pilot phases. END FOOTNOTE

   In addition, in analyzing alternatives for the exemption for certain refinances, the Bureau did consider data provided by FHFA and FHA regarding valuation practices under their streamlined refinance programs (and in particular regarding the frequency with which appraisals or automated valuations are conducted).

3. Smaller Dollar Loans

Estimate of the Number of Covered Loans

   The Bureau estimates the number of transactions potentially eligible for the smaller dollar exemption as follows: HMDA data for 2011 indicates there were approximately 25,000 HPMLs at or below $25,000 that were not insured or guaranteed by government agencies or purchased by the GSEs (so, not qualified mortgages on that basis). Of these, the Bureau estimates that 4,800 were HPMLs with DTI ratios above 43 percent (so they would not meet the more general definition of a qualified mortgage at 12 CFR 1026.43(e)(2)). Accordingly, the Bureau estimates that approximately 4,800 covered loans are originated annually in an amount up to $25,000. /166/ Of these estimated 4,800 covered loans, the Bureau estimates that the types most affected by this exemption, in that they would be unlikely to include appraisals if the exemption applies, would be home improvement loans, subordinate lien transactions not for home improvement purposes, and transactions secured by manufactured homes. Absent an exemption, the HPML appraisal rules could lead to significant changes in valuation methods used for these types of loans. For example, current practice includes appraisals for only an estimated five percent of subordinate lien transactions as explained in the January 2013 Final Rule. /167/

   FOOTNOTE 166 As discussed above, the Bureau does not believe that a significant number of smaller dollar HPMLs would exceed the points and fees threshold in the 2013 ATR Final Rule. The Bureau requested data on this issue in the supplemental proposal. None of the commenters on the smaller dollar exemption provided this data. If a significant number of smaller dollar HPMLs did exceed that threshold, then the number of loans eligible for the exemption would increase. END FOOTNOTE

   FOOTNOTE 167 See 78 FR 10368, 10419 (Feb. 13, 2013). END FOOTNOTE

Covered Persons

   Creditors originating smaller dollar HPMLs that are non-QMs would experience some reduced burden as a result of the exemption for HPMLs of $25,000 or less. As a result of the exemption, these loans will not be subject to the estimated per-loan costs described in the January 2013 Final Rule. /168/ For these transactions, creditors do not need to spend time or resources on complying with the requirements in the HPML appraisal rules: Checking for applicability of the second appraisal requirement on a flipped property (in a purchase transaction) and paying for that appraisal when the requirement applies, obtaining and reviewing the appraisals conducted for conformity to this rule, providing a copy of the required disclosure, and providing copies of these appraisals to applicants. Creditors therefore may find it relatively easier to originate HPMLs that are eligible for this exemption. As noted above, the overall impact of this exemption on creditors is likely minimal for most creditors given that in 2011 only 4,800 loans were potentially eligible for the exemption.

   FOOTNOTE 168 See Section 1022(b) analysis, 78 FR at 10418-21. END FOOTNOTE

Consumers

   For consumers who seek to borrow smaller dollar loans, such as home improvement loans and other subordinate lien transactions, and who are not able to obtain a qualified mortgage, the exemption for smaller dollar HPMLs (at or less than $25,000) would provide some benefits. Industry practice prior to implementation of the January 2013 Final Rule suggests that appraisals are not otherwise frequently done for home improvement and subordinate lien transactions. /169/ Thus, by not requiring an appraisal, the cost of which typically would be passed on to consumers, the exemption could facilitate access to smaller dollar HPMLs that are not otherwise exempt from the HPML appraisal rules. Otherwise, requiring an appraisal for these loans could create incentives that may not benefit consumers. These incentives can be more significant for smaller dollar loans, given that the cost of the appraisal relative to the amount of the loan is higher for smaller dollar loans. For example, some consumers could try to avoid the cost of an appraisal by either not entering into a smaller dollar HPML (unless it is otherwise exempt from the rules, such as a QM) or pursuing an alternative source of credit that is not subject to the rules, such as an open-end home equity line of credit or using other forms of credit that are not dwelling-secured such as a credit card. Finally, as a result of the exemption, consumers are likely to save around $350 per loan; if the appraisal requirement applied to these loans, the Bureau would have expected creditors to pass the cost of the appraisal on to consumers.

   FOOTNOTE 169 78 FR at 10419. END FOOTNOTE

   Regarding costs to consumers, under the exemption, consumers entering into smaller dollar HPMLs (that are not otherwise exempt) would lose the benefits of the Final Rule. As discussed in the Bureau's analysis under Section 1022 in the January 2013 Final Rule, in general, consumers who are borrowing HPMLs could benefit from an appraisal. For smaller dollar HPMLs that are not purchase transactions, the general benefits elsewhere may be relatively less valuable to the consumer in some cases, given the lower size of the loan and also the likelihood that the consumer already would have had an appraisal in the original purchase transaction.

   Nonetheless, having an appraisal could provide a particularly significant benefit to those consumers who are informed by the appraisal that they have significantly less equity in their home than they realize. A smaller dollar mortgage could push these consumers even further toward or into negative equity, without the consumer realizing it. This effect is even more pronounced for consumers whose homes have lower value. All else equal, a $25,000 loan will pose greater risk to a consumer whose home is worth $20,000, than to a consumer whose house is worth $200,000. According to a periodic government survey, as of 2011 more than 2.75 million homes were worth less than $20,000, including a greater proportion of homes whose owners were below the poverty level or elderly. /170/ In addition, according to a recent study, as of the end of 2012, 10.4 million properties with a residential mortgage were in "negative equity" and an additional 11.3 million had less than 20 percent equity. /171/ In addition, some recent studies suggest that subordinate liens can increase the risk of default, as they reduce the amount of equity in the home. /172/ Moreover, based upon HMDA data, more than half of subordinate liens originated in 2011 were at or below $25,000. Therefore, smaller dollar loans of $25,000 or less could still pose significant risks to consumers who own these lower-value homes or other homes that are highly leveraged, consuming most or all of any remaining equity.

   FOOTNOTE 170 See 2011 American Housing Survey, "Value, Purchase Price, and Source of Down Payment--Owner Occupied Units (NATIONAL)," C-13-OO, available at http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=AHS_2011_C13OO&prodType=table. In addition, in seven metropolitan statistical areas, as of the end 2012 the median home value was less than $100,000. See National Association of Realtors(R) Median Sales Price of Existing Single-Family Homes for Metropolitan Statistical Areas Q4 2012, available at http://www.realtor.org/sites/default/files/reports/2013/embargoes/hai-metro-2-11-asdlp/metro-home-prices-q4-2012-single-family-2013-02-11.pdf. END FOOTNOTE

   FOOTNOTE 171 Core Logic Press Release and Negative Equity Report Q4 2012 (Mar. 19, 2013), available at http://www.corelogic.com. END FOOTNOTE

   FOOTNOTE 172 See Steven Laufer, "Equity Extraction and Mortgage Default," Financial and Economics Discussion Series Federal Reserve Board Division of Research & Statistics and Monetary Affairs (2013-30), available at http://www.federalreserve.gov/pubs/feds/2013/201330/201330pap.pdf. The study concludes, at 2, that "through cash-out refinances, second mortgages and home equity lines of credit, . . . homeowners [in the sample studied] had extracted much of the equity created by the rising value of their homes. As a result, their loan-to-value (LTV) ratios were on average more than 50 percentage points higher than they would have been without this additional borrowing and the majority had mortgage balances that exceeded the value of their homes."). See also Michael LaCour-Little, California State University-Fullerton, Eric Rosenblatt and Vincent Yao, Fannie Mae, "A Close Look at Recent Southern California Foreclosures," (May 23, 2009) at 17 (finding that, based upon a sample of homes, the existence of a subordinate lien is correlated more strongly with default than whether the home was purchased in 2005-06 period), available at http://www.areuea.org/conferences/papers/download.phtml?id=2133. END FOOTNOTE

4. Transactions Secured by Used Manufactured Homes and Not Land

Estimate of the Number of Covered Loans

   To assess the impact of the rule's provisions concerning manufactured housing, it is necessary to estimate the volume of transactions potentially affected, by collateral type. The Bureau's analysis of 2011 HMDA data, matched with the historic loan performance (HLP) data from the FHFA, indicates that roughly eight percent of all manufactured home purchases were covered loans: HPMLs that were non-QMs because the DTI ratio exceeded 43 percent and the loan was not insured, guaranteed, or purchased by a federal government agency or GSE.173 Because HMDA data does not differentiate between transactions with each of the relevant collateral types, including new versus used, the Bureau is applying this ratio to each of the transaction types to derive the estimated number of covered loans below. Manufactured home loans of $25,000 or less also would be exempt under the smaller dollar exemption discussed above. However, the estimates of affected manufactured home transactions discussed in this Section 1022 analysis do not exclude smaller dollar loans and therefore may be slightly overstated.

   Census data also reports an estimated 369,000 move-ins to owner-occupied manufactured homes in 2011. /174/ Census data reports shipment of approximately 51,000 new manufactured homes in 2011, with approximately 17 percent titled as real estate. /175/ Therefore, the Bureau estimates that approximately 318,000 existing manufactured homes were purchased in 2011. The Bureau conservatively assumes that all of these purchases were financed. Further, based upon a review of nearly two decades of Census data on shipments of new manufactured homes, the Bureau estimates that approximately one third of the existing manufactured homes are titled as real property. Therefore, the Bureau, for the purposes of this 1022 analysis, conservatively estimates that approximately 105,000 purchases of existing manufactured homes also involved the acquisition of land which provided security for the purchase loan, /176/ while approximately 213,000 purchases were secured only by the existing manufactured home (chattel loans). Applying the same eight percent factor for other purchases discussed above, of these, approximately 17,000 were chattel HPMLs that were non-QMs, and approximately 8,400 were land- and home-secured HPMLs that were non-QMs. /177/

   FOOTNOTE 174 The Census report refers to these homes as "manufactured/mobile homes", but the Census definitions note that all of these homes are "HUD Code homes", which is the fundamental characteristic of what are currently referred to as manufactured homes. END FOOTNOTE

   FOOTNOTE 175 See Cost & Size Comparisons: New Manufactured Homes, available at http://www.census.gov/construction/mhs/pdf/sitebuiltvsmh.pdf. END FOOTNOTE

   FOOTNOTE 176 According to data provided by HUD for the fiscal year 2011, approximately 5,900 existing manufactured homes were purchased together with land under the FHA Title II program. END FOOTNOTE

   FOOTNOTE 177 As with new homes, this estimate would increase to the extent that any other manufactured home purchase HPMLs would not be qualified mortgages solely because they exceed caps on points and fees in the Bureau's 2013 ATR Rules. END FOOTNOTE

   The Bureau's analysis of 2011 HMDA data, matched with the HLP data from the FHFA, indicates that, approximately, for every four covered purchase manufactured housing loans, there is one manufactured housing refinance or home improvement loan (that is, out of every five manufactured housing loans, four are purchases). The Bureau believes that both refinance and home improvement loans in manufactured housing are exempt due to other exemptions in this rule. Therefore, the Bureau believes that there are approximately 13,600 covered used chattel manufactured housing loans. /178/

   FOOTNOTE 178 For further analysis of these assumptions, see the Bureau's RFA analysis at part VII. END FOOTNOTE

   Several commenters noted that the proportion of non-QM loans will be higher in manufactured housing than what was estimated by the Bureau, particularly due to points and fees exceeding the qualified mortgage limit. These commenters did not provide supporting data or address non-QM proportions by collateral type. Nonetheless, if the proportion of non-QM loans secured by existing manufactured homes and not land is indeed higher, then the estimates of costs and benefits of this final rule might increase somewhat (while remaining constant on a per-loan basis). Moreover, while the commenters identified the points and fees cap for qualified mortgages in the Bureau's ATR Rules as the main reason for these loans not to qualify for qualified mortgage status, the Bureau believes that creditors will adjust many transactions, for example by shifting points and fees into the interest rate, so that these transactions are QMs.

   Moreover, HUD recently issued a proposed rulemaking to effectively exempt Title I manufactured housing from the qualified mortgage points and fees requirement. If this provision of HUD's proposal is finalized substantially as proposed, the Bureau believes that some creditors will start originating more Title I mortgage loans that will also have the qualified mortgage status. Furthermore, the Bureau conservatively assumes that every manufactured home move-in reported in the Census (or in the American Housing Survey) had a mortgage loan associated with the move-in. Finally, given the analysis of HMDA data, the Bureau believes that the two creditors specialized in manufactured home lending that commented on the supplemental proposal are outliers on several dimensions relevant to the proportion of covered loans, and thus are not necessarily representative of the whole manufactured home market and that their claims regarding non-QM loan volume might overestimate the proportion of manufactured housing loans that are non-QMs for the overall market.

Covered Persons

   Creditors originating covered transactions secured by existing manufactured homes but not land will experience some reduced burden as a result of the exemption. In particular, these loans are not subject to the estimated per-loan costs for an appraisal in conformity with USPAP described in the January 2013 Final Rule. /179/ For these transactions, creditors also would not need to spend time or resources on complying with the requirements in the HPML appraisal rules: checking for applicability of the second appraisal requirement on a flipped property (in a purchase transaction) and paying for that appraisal when the requirement applies, obtaining and reviewing the appraisals conducted for conformity to this rule, and providing disclosures and appraisal report copies to applicants.

   FOOTNOTE 179 See Section 1022(b) analysis, 78 FR at 10418-21. END FOOTNOTE

   Appraisals in conformity with USPAP may currently be conducted for transactions secured by existing manufactured homes but not land much less frequently than in connection with HPMLs overall. For example, the Bureau believes that USPAP is a set of standards typically followed by appraisers who are state-certified or licensed, and that state laws generally do not require certifications or licenses to appraise personal property. Therefore, even though USPAP includes standards for the appraisal of personal property, it is unclear that these standards are applied when individuals who are not state-licensed or state-certified value manufactured homes. Indeed, the Bureau believes that currently, in some transactions, lenders may simply prepare their own estimates of the value of the home without engaging a licensed or certified appraiser. Thus, most, of the covered transactions might have been impossible to make. The impact of the hypothetical case in which creditors are not able to comply with a provision of this rule that has not yet taken effect is impossible to estimate with any reasonable degree of confidence. As a result, for purposes of analyzing the benefits of the exemption, the Bureau cannot evaluate the burden reduced as a result of the exemption.

   The Bureau believes that whatever method of satisfying conditions for the exemption the creditors choose, the cost is likely to be relatively low, and all the manufactured housing creditors would incur it, likely resulting in the majority of this cost passed on to the consumers. The Bureau believes that many creditors will opt to use an independent cost service to qualify for the exemption. The prevalent option currently on the market is the NADAguides. This guide contains an estimate of a manufactured home's cost of replacement value based on the exact make, model, and the year that the manufactured home was built. Since many creditors use this guide or a competitor's guide already in these transactions, and that estimate is a valuation under the ECOA Valuations Rule and would have had to be provided to the consumer in either case, this additional requirement is not an extra cost on either the creditors or the consumers. /180/

   FOOTNOTE 180 The Agencies received a comment that implementing a process to ensure compliance with the new provisions regarding chattel manufactured homes will take at least 1,600 hours of labor time. The Bureau disagrees. As discussed above, the requirements can be satisfied not only by obtaining an independent valuation, but also by copying a manufacturer's invoice for new chattel, or following a guide, like the one provided by NADA, for new or used chattel. Following the guide involves looking up the model, make, and the year that the home was built in, akin to Yellow Pages or, more appropriately, Kelley's Bluebook. The Bureau believes that most loan officers should be able to perform that task in, at most, minutes given either a hardcopy of the guide or an electronic version. If a creditor chooses to invest additional labor to tailor its output to consumers to go beyond the limited conditions in this rule, that is not a cost of this rule. END FOOTNOTE

Consumers

   The exemption likely results in creditors being able to consummate these transactions while staying in compliance, and thus the benefit of the exemption to consumers is primarily that they will continue to have access to these loans.

   Consumers will now receive one of the available options including, and most likely (since it is likely the most cost-effective option for used homes), a third-party cost estimate. As noted above, most creditors use an existing cost service to produce an estimate that already would be provided to the consumer under the ECOA Valuations Rule. This will provide consumers with some information about the value of their manufactured home, and will allow them to decide whether they should indeed purchase this home. If the consumers deem the value too low, they might decide to look at other models of manufactured homes, choose a non-manufactured home instead, or decide to exit the housing market, most likely by renting. The Bureau believes that creditors will pass through most of their costs onto consumers. The Bureau is unaware of any estimates of the cost of a third-party cost evaluation for a used chattel manufactured home, but believes that it is significantly less than $350 required for a full appraisal for a non-manufactured home. For example, the cost of using the third-party cost service may be more akin to the cost of using an automated valuation model, which, as discussed in this Section 1022 analysis, may be approximately $20. /181/

   FOOTNOTE 181 See also 78 CFR 48548, 48573, n.123 (Aug. 13, 2013) ("The Bureau has received information in outreach indicating that annual subscriptions to the NADA Guide may cost between $100 and $200 for an unlimited number of value reports . . . The average cost per-loan would therefore depending on the covered person's total level of lending activity."). END FOOTNOTE

5. Transactions Secured by New Manufactured Homes and Not Land

Estimate of the Number of Covered Loans

   As noted above, approximately 51,000 new manufactured homes were shipped according to recent annual Census data. For this analysis, the Bureau conservatively assumes that all of these homes were used as principal dwellings for consumers and that all of these purchases were financed. In addition, the Bureau believes that the proportion of homes titled as real estate is a reasonable estimate of the number of new manufactured home purchase transactions that are secured in part by land. /182/ The Bureau therefore, for this 1022 analysis, conservatively estimates that based upon 2011 data approximately 42,400 new manufactured home sales were financed by chattel loans (which can include homes located on leased land such as in trailer parks and other land-lease communities) and 8,600 transactions were secured by new manufactured homes and land. Applying a factor of approximately eight percent, the Bureau estimates that, of these, almost 3,400 were chattel HPMLs that were non-QMs, and almost 700 were land and home-secured HPMLs that were non-QMs. /183/

   FOOTNOTE 182 Only a few states provide for treating manufactured homes sited on leased land as real property. END FOOTNOTE

   FOOTNOTE 183 See the discussion in the beginning of this section on data used and comments received. If the Bureau's estimate is off, for example by a factor as great as three, the estimate would increase from 4,100 to slightly more than 12,000 loans per year (indicating that close to a quarter of the transactions would be non-QM HPMLs after the rule is implemented and that a significant proportion of the manufactured home transactions are not reported to HMDA despite these transactions covered by HMDA). END FOOTNOTE

Covered Persons

   The Bureau believes that the vast majority of creditors receive a copy of the manufacturer's invoice as a matter of standard business practice, and thus they could simply provide consumers a copy. Consistent with the January 2013 ECOA Valuations Rule, /184/ the Bureau estimates that this will cost creditors around $5 per loan, including training costs. A few commenters have suggested that releasing invoices would upset industry's pricing model. The Bureau does not possess any data and is not aware of any studies to help it evaluate this claim. Moreover, in some industries, such as the car market, a high volume of transactions occur and firms profit even though some consumers are able to discover the invoice value of the product. Moreover, the rule allows the creditor to choose to avoid disclosing the invoice and thereby avoid any issues a creditor believes disclosure of the invoice could entail; in lieu of the invoice, the rule allows covered persons to provide a valuation from an independent person or based on an independent cost service, as described above.

   FOOTNOTE 184 78 FR 7216, 7244 (Jan. 31, 2013). END FOOTNOTE

Consumers

   Consumers will benefit from this rule by receiving at least some kind of valuation information. The Bureau believes that while consumers getting a mortgage loan on a non-manufactured home would generally receive a valuation based on the ECOA Valuations Rule, this is not the case for new manufactured homes since the manufacturer's invoice is exempt from the ECOA requirements. Thus, this provision arguably has a particularly large effect per transaction affected: consumers go from not knowing anything about the value of their home to at least having some information. This is particularly valuable considering that these are likely to be LMI consumers who would be particularly vulnerable and adversely affected by entering into a transaction that might leave them underwater from the very first day, as discussed in more detail in the section-by-section analysis. The Agencies further discuss this provision in the section-by-section analysis.

6. Transactions Secured by New Manufactured Homes and Land

   The Bureau believes that there were approximately 700 new land/home HPML non-QM transactions. One commenter noted that few if any of the transactions outside of those programs include appraisals currently. While the Bureau does not have data on this point, even if few transactions outside of these programs did have appraisals currently, the number of new appraisals that would result from the modified exemption still is quite low.

Covered Persons

   This rule will result in approximately a $350 dollar cost increase (the average price of a full appraisal) per transaction, which is likely to be passed through to the consumer. While the rule exempts these appraisals from the requirement of the interior inspections, various commenters suggested that full appraisals (including interior inspections) of manufactured houses cost more than $350. Thus, it is possible that the actual cost per appraisal is slightly higher or slightly lower. /185/

   FOOTNOTE 185 Some commenters claimed that requiring appraisals for manufactured housing, in particular in land/home transactions, is problematic, in part because they asserted that the appraised value comes in lower than the sale price in a high proportion of FHA manufactured home program transactions. Some comments suggested that the appraisals were not valid in part because they relied upon too many manufactured homes as comparables or the opposite--they relied too heavily on site-built homes as comparables with adjustments which are too subjective. The commenters' views, however, were presented only in theoretical form and did not include data to support the contents. In the context of an individual transaction, if the lender views the appraisal to be inaccurate and can demonstrate that fact, appraisal review and dispute processes exist, and lenders can get a second appraisal or opinion as well. On the other hand, if a portfolio lender accepts an appraisal that indicates insufficient collateral value and does not proceed with the transactions, the fact that the creditor voluntarily decided not to originate the loan based on the appraisal is a benefit to the creditor, and likely to the consumer as well. In addition, FHA appraisal requirements indicate that this agency considers these appraisals sufficiently valid to use, and thus not everyone views these appraisals as problematic. END FOOTNOTE

Consumers

   Consumers will receive the benefits of the appraisal discussed elsewhere, and will not be vulnerable to weaker valuation practices when their transactions are occurring outside of GSE or federal agency programs. However, consumers will pay any cost of the required appraisal to the extent that creditors pass it through. The Bureau believes that many of the consumers using non-QM HPMLs to purchase a new manufactured home and land currently do not receive any valuation before buying it, magnifying the potential benefit for consumers.

   Finally, the Agencies do not believe that a requirement of a full appraisal (i.e., with a physical inspection of the interior) on new manufactured housing secured by land is appropriate given the fact that many of these houses are not physically on land when the loan is consummated and other inspections occur under HUD and other safety standards. Aside from that, these transactions are not systematically different from construction of site-built homes, and thus should be treated the same to the extent possible.

   Again, the Bureau believes that there were approximately 700 new land/home HPML non-QM transactions. This will result in approximately a $350 dollar cost increase (the average price of a full appraisal) that is likely to be passed through to the consumer. This cost might be lower because the rule exempts these appraisals from the requirement of the interior exemptions; however, some commenters suggested that full manufactured home appraisals (which would typically include an interior inspection) might sometimes cost more than appraisals of site-built homes. Thus, it is possible that the actual cost per appraisal is slightly higher or slightly lower.

7. Streamlined Refinances

Estimate of the Number of Covered Loans

   The Bureau anticipates that the refinance provision overwhelmingly affects private streamline refinances until 2021 because qualified mortgages are separately exempt from this rule and, under the Bureau's 2013 ATR Final Rule, GSE and federal government agency refinances are generally deemed qualified mortgages until 2021. /186/ In addition, as discussed in the section-by-section analysis above, only refinances in which the holder of the credit risk on the existing obligation and the refinancing remain the same would be eligible, and the loan cannot have interest-only, negative amortization, or balloon features.

   FOOTNOTE 186 See 12 CFR 1026.43(e)(4). END FOOTNOTE

   The Bureau estimates that at most 12,000 private no cash-out refinance transactions were originated in 2011. The Bureau believes that some of these were refinances of existing loans where the credit risk holder changed and thus would not be eligible for the exemption, and that a small number of these refinances had interest-only, negative amortization, or balloon features and also would not be eligible for the exemption. The Bureau believes that for about 90% of refinance transactions, the creditor would have provided an appraisal to the consumer; starting in January 2014, the ECOA Valuations Rule will require creditors to do so. Thus, this exemption is likely to affect under 1,000 loans a year (10% of 12,000).

Covered Persons

   Any creditors originating covered refinances that meet the criteria of the exemption can choose to make use of the exemption, which reduces burden. In particular, these loans will not be subject to the estimated per-loan costs described in the January 2013 Final Rule. /187/ For these transactions, the creditor is not required to spend time providing a notice, obtaining an appraisal, reviewing the appraisals conducted for conformity to this rule, and providing copies of those appraisals to applicants.

   FOOTNOTE 187 See Section 1022(b) analysis, 78 FR at 10418-21. END FOOTNOTE

Consumers

   Regarding benefits, consumers whose HPML streamlined refinance are newly exempt will save an average of $350 per loan. In addition, streamlined refinance transactions may close more quickly without an appraisal, reducing the time in which a consumer may be in a worse loan, which can result in further cost savings to the consumer. For example, if the consumer can close a refinance transaction two weeks earlier because a full appraisal is not performed, and the refinance loan has a lower interest rate, that will provide the consumer with an additional two weeks of payments at the reduced interest rate of the refinance loan.

   As discussed above and in the Bureau's analysis under Section 1022 in the January 2013 Final Rule, in general, consumers who are borrowing HPMLs that are covered loans benefit from having an appraisal. The cost to consumers of the proposed exemption therefore is the loss of these potential benefits for the number of covered loans that would be newly-exempted by the proposed exemption and which would not have otherwise included an appraisal. As noted above, the Bureau estimates this would be very few transactions.

8. Significant Alternatives

   The Agencies discussed various conditions on exemptions for smaller dollar loans and streamline refinances. Placing conditions on these exemptions--for example, requiring that an automated valuation be obtained and provided to the consumer--would provide many of the same benefits to consumer as a full appraisal. However, the Bureau believes that the benefits of an appraisal would likely be lower for these two particular types of transactions than for other types of transactions that will not be exempt from the January 2013 Final Rule.

   The cost of these conditions would be directly levied on the creditors; however, the Bureau believes that it would be almost fully passed on to consumers. The Bureau did not view the cost of these alternatives to be significant. The Agencies determined, however, not to adopt this alternative. A significant factor was that streamline refinances and smaller dollar loans were viewed as classes of transactions that were significantly lower risk and therefore not necessitating alternative valuation conditions in this rule.

   The Agencies also discussed a provision mandating the creditors to provide chattel manufactured home valuations with adjustments for condition (used chattel) and location (used or new chattel). The Agencies decided that this provision would introduce additional implementation burden and subjectivity with respect to the compliance processes, and that practices with regard to these adjustments had not sufficiently evolved to codify a uniform set of standards in regulations. From the perspective of potential benefits of this provision, creditors can still provide whatever adjustments are specified in the cost service guide.

   The Agencies discussed raising the loan amount requirement for the smaller dollar exemption to $50,000. However, the Agencies decided that the range of $25,000 to $50,000 captures too great a proportion of the remaining non-QM subordinate lien HPMLs. The Bureau also noted that such an increase would wholly exempt many manufactured home purchases that deserve the protection provided by the new provisions in this rule. The Agencies also believe that at these higher loan amounts the cost of the appraisal provides less of an incentive to switch to another kind of financing, for example an open-credit loan.

B. Potential Specific Impacts of the Supplemental Final Rule

1. Potential Reduction in Access of Consumers to Consumer Financial Products or Services

   The rule includes only exemptions and provisions that have limited impact on a small amount of loans. Thus, the Bureau does not believe that any reduction in access to credit will result. If anything, the Bureau believes that the exemption for used chattel manufactured housing will make many loans possible to originate while complying with the January 2013 Final Rule, thus improving access to credit.

   Manufactured housing industry commenters suggested that access to credit in chattel loans, including new chattel loans, would be reduced if valuation information must be provided to the consumer. These comments may be read as potentially suggesting that: (1) Consumers, if informed of the estimated value of the home by currently available means, might elect not to proceed with the transaction, or (2) creditors, if required to provide such information to the consumers, also might not proceed with the transaction, particularly where the loan amount exceeds the estimated value of the home.

   If these comments are based upon the assumption that valuation information provided will be inaccurate or misleading, commenters did not provide data in support of this point with respect to any of the three valuation information options specified in the condition to the exemption for chattel manufactured home loans. In this regard, the Bureau notes that a leading independent cost service provided data in its comments indicating the accuracy of its method compared to personal property appraisals. Otherwise, the Bureau does not consider access to credit to be reduced where consumers voluntarily choose not to continue with a transaction after receiving valuation information; in this case, the information has benefited the consumer by enabling the consumer to make better informed credit choices. Similarly, access to credit is not necessarily compromised if the creditor chooses not to continue with the transaction, particularly if the loan amount exceeds the estimated value of the home. In purchase transactions, the Bureau believes that consumers typically have the option of purchasing other manufactured and non-manufactured homes that would not have the consumer starting off in their mortgage by effectively being underwater.

2. Impact of the Rule on Depository Institutions and Credit Unions With $10 Billion or Less in Total Assets

   Small depository banks and credit unions may originate loans of $25,000 or less more often, relative to their overall origination business, than other depository institutions (DIs) and credit unions. Therefore, relative to their overall origination business, these small depository banks and credit unions may experience relatively more benefits from the exemption for smaller dollar loans. These benefits would not be high in absolute dollar terms, however, because the number of covered transactions across all creditors that would be exempted by the smaller dollar loan exemption is still relatively low--less than 5,000, as discussed above.

   Otherwise, the Bureau does not believe that the impact of the supplemental rule would be substantially different for the DIs and credit unions with total assets below $10 billion than for larger DIs and credit unions. The Bureau has not identified data indicating that small depository institutions or small credit unions disproportionately engage in lending secured by manufactured homes. Finally, the Bureau has not identified data indicating that these institutions engage in covered streamlined refinances that would be exempted by the exemption for certain refinances at a greater rate than would other financial institutions.

3. Impact of the Rule on Consumers in Rural Areas

   The Bureau understands that a significantly greater proportion of homes in rural areas are existing manufactured homes than in non-rural areas. /188/ Therefore, any impacts of the exemption for transactions secured by these homes (but not land) would proportionally accrue more often to rural consumers. With respect to streamlined refinances, the Bureau does not believe that streamlined refinances are more or less common in rural areas. Accordingly, the Bureau currently believes that the exemption for streamlined refinances would generate a similar benefit for consumers in rural areas as for consumers in non-rural areas. Finally, setting aside the increased incidence of manufactured housing loans in rural areas, the Bureau does not believe that the difference in the number of smaller dollar loans originated for consumers in rural areas and non-rural areas is significant.

   FOOTNOTE 188 Census data from 2011 indicates that approximately 45 percent of owner-occupied manufactured homes are located outside of metropolitan statistical areas, compared with 21 percent of owner-occupied single-family homes. See U.S. Census Bureau, 2011 American Housing Survey, General Housing Data--Owner-Occupied Units (National), available at http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=AHS_2011_C01OO&prodType=table. See also Housing Assistance Council Rural Housing Research Note, "Improving HMDA: A Need to Better Understand Rural Mortgage Markets," (Oct. 2010), available at http://www.ruralhome.org/storage/documents/notehmdasm.pdf. Industry comments on the 2012 Interagency Appraisals Proposed Rule noted that manufactured homes sited on land owned by the buyer are predominantly located in rural areas; one commenter estimated that 60 percent of manufactured homes are located in rural areas. END FOOTNOTE

VII. Regulatory Flexibility Act

OCC

   Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(b) (RFA), the regulatory flexibility analysis otherwise required under section 603 of the RFA is not required if the agency certifies that the final rule will not have a significant economic impact on a substantial number of small entities (defined for purposes of the RFA to include banks, savings institutions and other depository credit intermediaries with assets less than or equal to $500 million /189/ and trust companies with total assets of $35.5 million or less) and publishes its certification and a short, explanatory statement in the Federal Register along with its final rule.

   FOOTNOTE 189 "A financial institution's assets are determined by averaging assets reported on its four quarterly financial statements for the preceding year." See footnote 8 of the U.S. Small Business Administration's Table of Size Standards. END FOOTNOTE

   As described previously in this preamble, section 1471 of the Dodd-Frank Act establishes a new TILA section 129H, which sets forth appraisal requirements applicable to HPMLs. The statute expressly excludes from these appraisal requirements coverage of "qualified mortgages as defined by section 129C." In addition, the Agencies may jointly exempt a class of loans from the requirements of the statute if the Agencies determine that the exemption is in the public interest and promotes the safety and soundness of creditors.

   The Agencies issued the January 2013 Final Rule on January 18, 2013, which will be effective on January 18, 2014. Pursuant to the general exemption authority in the statute, the January 2013 Final Rule excluded the following consumer credit transactions from the definition of HPML: Transactions secured by new manufactured homes; transactions secured by a mobile homes, boats, or trailers; transactions to finance the initial construction of a dwelling; temporary or "bridge" loans with a term of twelve months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within twelve months; and reverse mortgage loans. The Agencies are issuing this supplemental final rule to include additional exemptions from the higher risk mortgage loan appraisal requirements of section 129H of TILA: Certain "streamlined" refinancings and extensions of credit of $25,000 or less, indexed every year for inflation. In addition, this supplemental final rule amends and adds exemptions for transactions secured by manufactured homes.

   The OCC currently supervises 1,797 banks (1,179 commercial banks, 61 trust companies, 509 federal savings associations, and 48 branches or agencies of foreign banks). We estimate that less than 1,309 of the banks supervised by the OCC are currently originating one- to four-family residential mortgage loans that could be HPMLs. Approximately 1,291 of OCC-supervised banks are small entities based on the Small Business Administration's (SBA's) definition of small entities for RFA purposes. Of these, the OCC estimates that 867 banks originate mortgages and therefore may be impacted by this final rule.

   The OCC classifies the economic impact of total costs on a bank as significant if the total costs in a single year are greater than 5 percent of total salaries and benefits, or greater than 2.5 percent of total non-interest expense. The OCC estimates that the average cost per small bank will be zero. The supplemental final rule does not impose new requirements on banks or include new mandates. The OCC assumes any costs (e.g., alternative valuations) or requirements that may be associated with the exemptions in the supplemental final rule will be less than the cost of compliance for a comparable loan under the final rule.

   Therefore, the OCC believes the supplemental final rule will not have a significant economic impact on a substantial number of small entities. The OCC certifies that the supplemental final rule will not have a significant economic impact on a substantial number of small entities.

OCC Unfunded Mandates Reform Act of 1995 Determination

   Section 202 of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532), requires the OCC to prepare a budgetary impact statement before promulgating a rule that includes a Federal mandate that may result in the expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year (adjusted annually for inflation). The OCC has determined that this supplemental final rule will not result in expenditures by state, local, and tribal governments, or the private sector, of $100 million or more in any one year. Accordingly, the OCC has not prepared a budgetary impact statement.

Board

   The RFA (5 U.S.C. 601 et seq.) requires an agency either to provide a final regulatory flexibility analysis (FRFA) with a final rule or certify that the final rule will not have a significant economic impact on a substantial number of small entities. This supplemental final rule applies to certain banks, other depository institutions, and non-bank entities that extend HPMLs to consumers. /190/ The SBA establishes size standards that define which entities are small businesses for purposes of the RFA. /191/ The size standard to be considered a small business is: $500 million or less in assets for banks and other depository institutions; and $35.5 million or less in annual revenues for the majority of nonbank entities that are likely to be subject to the regulations. Based on its analysis, and for the reasons stated below, the Board believes that the supplemental final rule will not have a significant economic impact on a substantial number of small entities. Nevertheless, the Board is publishing a FRFA.

   FOOTNOTE 190 The Board notes that for purposes of its analysis, the Board considered all creditors to which the supplemental final rule applies. The Board's Regulation Z at 12 CFR 226.43 applies to a subset of these creditors. See 12 CFR 226.43(g). END FOOTNOTE

   FOOTNOTE 191 U.S. SBA, Table of Small Business Size Standards Matched to North American Industry Classification System Codes, available at http://www.sba.gov/sites/default/files/files/size_table_07222013.pdf. END FOOTNOTE

A. Reasons for the Final Rule

   This supplemental final rule relates to the January 2013 Final Rule issued by the Agencies on January 18, 2013, which goes into effect on January 18, 2014. See 78 FR 10368 (Feb. 13, 2013). The January 2013 Final Rule implements a provision added to TILA by the Dodd-Frank Act requiring appraisals for "higher-risk mortgages." For certain mortgages with an annual percentage rate that exceeds the average prime offer rate by a specified percentage, the January 2013 Final Rule requires creditors to obtain an appraisal or appraisals meeting certain specified standards, provide applicants with a notification regarding the use of the appraisals, and give applicants a copy of the written appraisals used. The definition of higher-risk mortgage in new TILA section 129H expressly excludes qualified mortgages, as defined in TILA section 129C, as well as reverse mortgage loans that are qualified mortgages as defined in TILA section 129C.

   The Agencies are now finalizing two additional exemptions to the 2013 Final Rule appraisal requirements and adopting certain provisions for manufactured homes. As described in the SUPPLEMENTARY INFORMATION, the supplemental final rule exempts "streamlined" refinancings and transactions of $25,000 or less. The supplemental final rule also exempts loans secured by manufactured homes from the January 2013 Final Rule's appraisal requirements for 18 months, until July 18, 2015. Subsequent to that date:

    * A loan secured by a new manufactured home and land must comply with the January 2013 Final Rule's appraisal requirements except for the requirement to conduct a physical visit to the interior of the property;

    * A loan secured by an existing (used) manufactured home and land will be subject to all of the January 2013 Final Rule's appraisal requirements; and

    * A loan secured by manufactured homes (new or used) and not land will be exempt from the January 2013 Final Rule's appraisal requirements if the consumer is provided with a specified alternative cost estimate or valuation.

B. Statement of Objectives and Legal Basis

   The Board believes that the additional exemptions and amendments established by the supplemental final rule are appropriate to carry out the purposes of the statute, as discussed above in the SUPPLEMENTARY INFORMATION. The legal basis for the proposed rule is TILA section 129H(b)(4). 15 U.S.C. 1639h(b)(4). TILA section 129H(b)(4)(A), added by the Dodd-Frank Act, authorizes the Agencies jointly to prescribe regulations implementing section 129H. 15 U.S.C. 1639h(b)(4)(A). In addition, TILA section 129H(b)(4)(B) grants the Agencies the authority jointly to exempt, by rule, a class of loans from the requirements of TILA section 129H(a) or section 129H(b) if the Agencies determine that the exemption is in the public interest and promotes the safety and soundness of creditors. 15 U.S.C. 1639h(b)(4)(B).

C. Description of Small Entities to Which the Regulation Applies

   The January 2013 Final Rule applies to creditors that make HPMLs subject to 12 CFR 1026.35(c). In the Board's regulatory flexibility analysis for the January 2013 Final Rule, the Board relied primarily on data provided by the Bureau to estimate the number of small entities that would be subject to the requirements of the rule. /192/ According to the data provided by the Bureau in connection with promulgation of the supplemental final rule, approximately 5,913 commercial banks and savings institutions, 3,784 credit unions, and 2,672 non-depository institutions are considered small entities and extend mortgages, and therefore are potentially subject to the January 2013 Final Rule and the supplemental final rule.

   FOOTNOTE 192 See the Bureau's regulatory flexibility analysis in the 2013 Final Rule (78 FR 10368, 10424 (Feb. 13, 2013)). END FOOTNOTE

   Data currently available to the Board are not sufficient to estimate how many small entities that extend mortgages will be subject to 12 CFR 226.43, given the range of exemptions provided in the January 2013 Final Rule and the supplemental final rule, including the exemption for loans that satisfy the criteria of a qualified mortgage. Further, the number of these small entities that will make HPMLs subject to the supplemental final rule's exemptions is unknown.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

   The supplemental final rule does not impose any significant new recordkeeping, reporting, or compliance requirements on small entities. The supplemental final rule reduces the number of transactions that are subject to the requirements of the January 2013 Final Rule. As noted above, the January 2013 Final Rule generally applies to creditors that make HPMLs subject to 12 CFR 1026.35(c), which are generally mortgages with an APR that exceeds the APOR by a specified percentage, subject to certain exemptions. The supplemental final rule exempts two additional classes of HPMLs from the January 2013 Final Rule: Certain streamlined refinance HPMLs whose proceeds are used exclusively to satisfy an existing first lien loan and to pay for closing costs, and new HPMLs that have a principal amount of $25,000 or less (indexed to inflation). In addition, the supplemental final rule exempts until July 2015 HPMLs secured by manufactured homes. Accordingly, the supplemental final rule decreases the burden on creditors by reducing the number of loan transactions that are subject to the January 2013 Final Rule. For applications submitted on or after July 18, 2015, burden increases slightly for transactions secured by new manufactured homes and land because such transactions will be required to comply with the January 2013 Final Rule's appraisal requirements except for the requirement to conduct a physical visit to the interior of the property. In addition, burden also increases with respect to transactions secured by a new manufactured home and not land. These transactions will be exempt from the January 2013 Final Rule's appraisal requirements only if the borrower is provided with a specified alternative cost estimate or valuation to the borrower.

F. Identification of Duplicative, Overlapping, or Conflicting Federal Regulations

   The Board has not identified any Federal statutes or regulations that duplicate, overlap, or conflict with the proposed revisions.

G. Discussion of Significant Alternatives

   The Board is not aware of any significant alternatives that would further minimize the economic impact of the supplemental final rule on small entities. With respect to transactions secured by "streamlined" refinances or smaller-dollar HPMLs, the supplemental final rule exempts these transactions from the January 2013 Final Rule and therefore reduces economic burden for small entities. With respect to loans secured by new manufactured homes and land, the Board recognizes that the supplemental final rule imposes new burden by requiring such transactions to comply with the January 2013 Final Rule's appraisal requirements except for the requirement to conduct a physical visit to the interior of the property. With respect to loans secured by new manufactured homes and not land, the Board also recognizes that the supplemental final rule imposes new burden by requiring that such transactions are exempt from the January 2013 Final Rule only if the borrower is provided with a specified alternative cost estimate or valuation. Although maintaining the January 2013 Final Rule exemption for new manufactured homes would lower the economic impact on small entities, the Board does not believe doing so is appropriate in carrying out the purposes of the statute.

FDIC

   The RFA generally requires that, in connection with a rulemaking, an agency prepare and make available for public comment a regulatory flexibility analysis that describes the impact of the rule on small entities. /193/ A regulatory flexibility analysis is not required, however, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities (defined in regulations promulgated by the SBA to include banking organizations with total assets of $500 million or less) and publishes its certification and a short, explanatory statement in the Federal Register together with the rule.

   FOOTNOTE 193 See 5 U.S.C. 601 et seq. END FOOTNOTE

   As of June 30, 2013, there were about 3,673 small FDIC-supervised institutions, which include 3,363 state nonmember banks and 310 state-chartered savings banks. The FDIC analyzed the 2011 HMDA /194/ dataset to determine how many loans by all FDIC-supervised institutions might qualify as HPMLs under section 129H of the TILA as added by section 1471 of the Dodd-Frank Act. This analysis reflects that only 70 FDIC-supervised institutions originated at least 100 HPMLs, with only four institutions originating more than 500 HPMLs. Further, the FDIC-supervised institutions that met the definition of a small entity originated on average less than 11 HPMLs of $250,000 /195/ or less each in 2011.

   FOOTNOTE 194 The FDIC based its analysis on the HMDA data, as it provided a proxy for the characteristics of HPMLs. While the FDIC recognizes that fewer higher-price loans were generated in 2011, a more historical review is not possible because the average offer price (a key data element for this review) was not added until the fourth quarter of 2009. The FDIC also recognizes that the HMDA data provides information relative to mortgage lending in metropolitan statistical areas, but not in rural areas. END FOOTNOTE

   FOOTNOTE 195 HPML transactions over $250,000 were excluded from this analysis as 12 CFR Part 323 of the FDIC Rules and Regulations requires an appraisal for real estate loans over $250,000 unless another exemption applies. END FOOTNOTE

   The supplemental final rule relates to the January 2013 Final Rule issued by the Agencies on January 18, 2013, which goes into effect on January 18, 2014. The January 2013 Final Rule requires that creditors satisfy the following requirements for each HPML they originate that is not exempt from the rule:

    * The creditor must obtain a written appraisal; the appraisal must be performed by a certified or licensed appraiser; and the appraiser must conduct a physical property visit of the interior of the property.

    * At application, the consumer must be provided with a statement regarding the purpose of the appraisal, that the creditor will provide the applicant a copy of any written appraisal, and that the applicant may choose to have a separate appraisal conducted for the applicant's own use at his or her own expense.

    * The consumer must be provided with a free copy of any written appraisals obtained for the transaction at least three business days before consummation.

    * The creditor of an HPML must obtain an additional written appraisal, at no cost to the borrower, when the loan will finance the purchase of a consumer's principal dwelling and there has been an increase in the purchase price from a prior acquisition that took place within 180 days of the current purchase.

   The supplemental final rule amends one existing exemption and establishes additional exemptions to the appraisal requirements in the January 2013 Final Rule. The supplemental final rule exempts:

    * "Streamlined" refinancings. A "streamlined" refinancing results if the holder of the successor credit risk also held the risk of the original credit obligation. The supplemental final rule does not exempt refinancing transactions involving cash out, negative amortization, interest only payments or balloon payments.

    * "Smaller Dollar" Residential Loans. A "smaller dollar" residential loan is an extension of credit of $25,000 or less, with the amount indexed annually for inflation, secured by the borrower's principal dwelling.

    * Manufactured Home Loans. Loans secured by manufactured homes are exempt from the appraisal requirements for 18 months, until July 18, 2015. Subsequent to that date:

    * A loan secured by a new manufactured home and land must comply with the appraisal requirements except for the requirement to conduct a physical visit to the interior of the property;

    * A loan secured by an existing (used) manufactured home and land will be subject to all appraisal requirements; and

    * A loan secured by a manufactured home (new or used) and not land will be exempt from the appraisal requirements if the buyer is provided with a specified alternative cost estimate or valuation.

   The supplemental final rule amends the exemption for a loan secured by a new manufactured home in the January 2013 Final Rule by requiring an appraisal without a physical visit to the interior of the property for loans secured by a new manufactured home and land after July 18, 2015. This amendment will increase burden as such loans will no longer be exempt from all of the appraisal requirements. While data is not available to estimate the number of such transactions, the previously cited HMDA data reflects that FDIC-supervised institutions that met the definition of a small entity each engaged in a relatively small number of HPML transactions in 2011. In addition, the supplemental final rule exempts additional transactions, including certain "streamlined" refinancings, "smaller dollar" residential loans, and some manufactured home loans, from the appraisal requirements of the January 2013 Final Rule, resulting in reduced regulatory burden to FDIC-supervised institutions that would have otherwise been required to obtain an appraisal and comply with the requirements for such HPML transactions.

   It is the opinion of the FDIC that the supplemental final rule will not have a significant economic impact on a substantial number of small entities that it regulates in light of the following facts: (1) The supplemental final rule reduces regulatory burden on small institutions by exempting certain transactions from the appraisal requirements of the January 2013 Final Rule; and (2) the FDIC previously certified that the January 2013 Final Rule would not have a significant economic impact on a substantial number of small entities. Accordingly, the FDIC certifies that the supplemental final rule would not have a significant economic impact on a substantial number of small entities. Therefore, a regulatory flexibility analysis is not required.

NCUA

   The RFA generally requires that, in connection with a final rule, an agency prepare and make available for public comment a FRFA that describes the impact of the final rule on small entities. /196/ A regulatory flexibility analysis is not required, however, if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities and publishes its certification and a short, explanatory statement in the Federal Register together with the rule. NCUA defines small entities as small federally insured credit unions (FICU) having less than 50 million dollars in assets. /197/

   FOOTNOTE 196 See 5 U.S.C. 601 et seq. END FOOTNOTE

   FOOTNOTE 197 NCUA Interpretative Ruling and Policy Statement (IRPS) 87-2, 52 FR 35231 (Sept. 18, 1987); as amended by IRPS 03-2, 68 FR 31951 (May 29, 2003); and IRPS 13-1, 78 FR 4032, 4037 (Jan. 18, 2013). END FOOTNOTE

   In 2012, there were approximately 4,600 small FICUs. The NCUA analyzed the 2012 HMDA /198/ dataset to determine how many loans by all FICUs might qualify as HPMLs under section 129H of the TILA as added by section 1471 of the Dodd-Frank Act. This analysis reflects that 918 FICUs originated HPMLs, with only 24 institutions originating more than 100 HPMLs. Further, the FICUs that met the definition of a small entity originated on average less than 2 HPMLs in 2012.

   FOOTNOTE 198 The NCUA based its analysis on the HMDA data, as it provided a proxy for the characteristics of HPMLs. While the NCUA recognizes that fewer higher-price loans were generated in 2011, a more historical review is not possible because the average offer price (a key data element for this review) was not added until the fourth quarter of 2009. The NCUA also recognizes that the HMDA data provides information relative to mortgage lending in metropolitan statistical areas, but not in rural areas. END FOOTNOTE

   The supplemental final rule relates to the January 2013 Final Rule issued by the Agencies on January 18, 2013, which goes into effect on January 18, 2014. The January 2013 Final Rule requires that creditors satisfy the following requirements for each HPML they originate that is not exempt from the rule:

    * The creditor must obtain a written appraisal; the appraisal must be performed by a certified or licensed appraiser; and the appraiser must conduct a physical property visit of the interior of the property.

    * At application, the consumer must be provided with a statement regarding the purpose of the appraisal, that the creditor will provide the applicant a copy of any written appraisal, and that the applicant may choose to have a separate appraisal conducted for the applicant's own use at his or her own expense.

    * The consumer must be provided with a free copy of any written appraisals obtained for the transaction at least three business days before consummation.

    * The creditor of an HPML must obtain an additional written appraisal, at no cost to the borrower, when the loan will finance the purchase of a consumer's principal dwelling and there has been an increase in the purchase price from a prior acquisition that took place within 180 days of the current purchase.

   The supplemental final rule amends one existing exemption and establishes additional exemptions to the appraisal requirements in the January 2013 Final Rule. The supplemental final rule exempts:

    * "Streamlined" refinancings. A "streamlined" refinancing if the holder of the successor credit risk also held the risk of the original credit obligation. The supplemental final rule does not exempt refinancing transactions involving cash out, negative amortization, interest only payments or balloon payments.

    * Extensions of credit of $25,000 or less. Extension of credit of $25,000 or less, with the amount indexed annually for inflation, secured by the borrower's principal dwelling.

    * Manufactured Home Loans. Loans secured by a manufactured home are exempt from the appraisal requirements for 18 months, until July 18, 2015. Subsequent to that date:

    * A loan secured by a new manufactured home and land must comply with the appraisal requirements except for the requirement to conduct a physical visit to the interior of the property;

    * A loan secured by an existing (used) manufactured home and land will be subject to all appraisal requirements; and

    * A loan secured by a manufactured home (new or used) and not land will be exempt from the appraisal requirements if the consumer is provided with a specified alternative cost estimate or valuation.

   The supplemental final rule amends the exemption for loans secured by a new manufactured home in the January 2013 Final Rule by requiring an appraisal without a physical visit to the interior of the property for loans secured by a new manufactured home and land after July 18, 2015. This amendment will increase burden as such loans will no longer be exempt from all of the appraisal requirements. While data is not available to estimate the number of such transactions, the previously cited HMDA data reflects that FICUs that met the definition of a small entity each engaged in a relatively small number of HPML transactions in 2011. In addition, the supplemental final rule exempts additional transactions, including certain "streamlined" refinancings, "smaller dollar" residential loans, and some manufactured home loans, from the appraisal requirements of the January 2013 Final Rule, resulting in reduced regulatory burden to FICUs that would have otherwise been required to obtain an appraisal and comply with the requirements for such HPML transactions.

   It is the opinion of the NCUA that the supplemental final rule will not have a significant economic impact on a substantial number of small entities that it regulates in light of the following facts: (1) The supplemental final rule reduces regulatory burden on small institutions by exempting certain transactions from the appraisal requirements of the January 2013 Final Rule; and (2) the NCUA previously certified that the January 2013 Final Rule would not have a significant economic impact on a substantial number of small entities. Accordingly, the NCUA certifies that the supplemental final rule will not have a significant economic impact on a substantial number of small entities. Therefore, a regulatory flexibility analysis is not required.

Executive Order 13132

   Executive Order 13132 encourages independent regulatory agencies to consider the impact of their actions on state and local interests. NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies with the executive order to adhere to fundamental federalism principles. This supplemental final rule applies to FICUs and will not have a substantial direct effect on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. NCUA has determined that this supplemental final rule does not constitute a policy that has federalism implications for purposes of the Executive Order.

The Treasury and General Government Appropriations Act, 1999--Assessment of Federal Regulations and Policies on Families

   NCUA has determined this final rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 (1998).

Small Business Regulatory Enforcement Fairness Act

   The Small Business Regulatory Enforcement Fairness Act of 1996 /199/ (SBREFA) provides generally for congressional review of agency rules. A reporting requirement is triggered in instances where NCUA issues a final rule as defined by Section 551 of the Administrative Procedure Act. /200/ NCUA does not believe this final rule is a "major rule" within the meaning of the relevant sections of SBREFA. NCUA has submitted the rule to the Office of Management and Budget (OMB) for its determination.

   FOOTNOTE 199 Public Law 104-121, 110 Stat. 857 (1996). END FOOTNOTE

   FOOTNOTE 200 5 U.S.C. 551. END FOOTNOTE

Bureau

   The RFA generally requires an agency to conduct an initial regulatory flexibility analysis (IRFA) and a FRFA of any rule subject to notice-and-comment rulemaking requirements. /201/ These analyses must "describe the impact of the proposed rule on small entities." /202/ An IRFA or FRFA is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. /203/ The Bureau also is subject to certain additional procedures under the RFA involving the convening of a panel to consult with small business representatives prior to proposing a rule for which an IRFA is required. /204/

   FOOTNOTE 201 5 U.S.C. 601 et. seq. END FOOTNOTE

   FOOTNOTE 202 Id. at 603(a). For purposes of assessing the impacts of the proposed rule on small entities, "small entities" is defined in the RFA to include small businesses, small not-for-profit organizations, and small government jurisdictions. Id. at 601(6). A "small business" is determined by application of SBA regulations and reference to the North American Industry Classification System (NAICS) classifications and size standards. Id. at 601(3). A "small organization" is any "not-for-profit enterprise which is independently owned and operated and is not dominant in its field." Id. at 601(4). A "small governmental jurisdiction" is the government of a city, county, town, township, village, school district, or special district with a population of less than 50,000. Id. at 601(5). END FOOTNOTE

   FOOTNOTE 203 Id. at 605(b). END FOOTNOTE

   FOOTNOTE 204 Id. at 609. END FOOTNOTE

   An IRFA was not required for the proposal, and a FRFA is not required for the supplemental final rule, because it will not have a significant economic impact on a substantial number of small entities.

   The analysis below evaluates the potential economic impact of the supplemental final rule on small entities as defined by the RFA. The analysis generally examines the regulatory impact of the provisions of the supplemental final rule against the baseline of the January 2013 Final Rule the Agencies issued on January 18, 2013.

   No comments received were relevant specifically to smaller entities. The Agencies discuss more general comments in the section-by-section analyses and the Bureau discusses some of the more specific comments relating to benefits and costs of these provisions in its Section 1022(b) analysis.

A. Number and Classes of Affected Entities

   The supplemental final rule applies to all creditors that extend closed-end credit secured by a consumer's principal dwelling. All small entities that extend these loans are potentially subject to at least some aspects of the supplemental final rule. This supplemental final rule may impact small businesses, small nonprofit organizations, and small government jurisdictions. A "small business" is determined by application of SBA regulations and reference to the North American Industry Classification System (NAICS) classifications and size standards. /205/ Under such standards, depository institutions with $500 million or less in assets are considered small; other financial businesses are considered small if such entities have average annual receipts (i.e., annual revenues) that do not exceed $35.5 million. Thus, commercial banks, savings institutions, and credit unions with $500 million or less in assets are small businesses, while other creditors extending credit secured by real property or a dwelling are small businesses if average annual receipts do not exceed $35.5 million.

   FOOTNOTE 205 5 U.S.C. 601(3). The current SBA size standards are located on the SBA's Web site at http://www.sba.gov/content/table-small-business-size-standards. END FOOTNOTE

   The Bureau can identify through data under the HMDA, Reports of Condition and Income (Call Reports), and data from the National Mortgage Licensing System (NMLS) the approximate numbers of small depository institutions that would be subject to the final rule. Origination data is available for entities that report in HMDA, NMLS or the credit union call reports; for other entities, the Bureau has estimated their origination activities using statistical projection methods.

   The following table provides the Bureau's estimate of the number and types of entities to which the supplemental final rule would apply: /206/

   FOOTNOTE 206 The Bureau assumes that creditors who originate chattel manufactured home loans are included in the sources described above, but to the extent commenters believe this is not the case, the Bureau seeks data from commenters on this point. END FOOTNOTE

       Table 1--Counts of Creditors by Type      [Estimated number of affected entities and small entities by NAICS code and      engagement in closed-end mortgage transactions]  Category       NAICS          Small entity   Entities       Small entities                               threshold      engaged in     engaged in                                              closed-end     closed-end                                              mortgage       mortgage                                              transactions   transactions                                               *b  Commercial     522110, 522120  $500,000,000   *a 7230        *a 5913 banks &                       assets savings institutions Credit unions  522130          $500,000,000   *a 4178        *a 3784  *c                           assets Real Estate    522310, 522292  $35,500,000   2787            *a 2672 credit  *d e                  revenues Total                                        14,195         12,369     Source: 2011 HMDA, Dec. 31, 2011 Bank and Thrift Call Reports, Dec. 31, 2011 NCUA Call Reports, Dec. 31, 2011 NMLSR Mortgage Call Reports.      *a For HMDA reporters, loan counts from HMDA 2011. For institutions that are not HMDA reporters, loan counts projected based on Call Report data fields and counts for HMDA reporters.      *b Entities are characterized as originating loans if they make one or more loans.      *c Does not include cooperatives operating in Puerto Rico. The Bureau has limited data about these institutions or their mortgage activity.      *d NMLSR Mortgage Call Report for 2011. All MCR reporters that originate at least one loan or that have positive loan amounts are considered to be engaged in real estate credit (instead of purely mortgage brokers). For institutions with missing revenue values, the probability that the institution was a small entity is estimated based on the count and amount of originations and the count and amount of brokered loans.      *a Data do not distinguish nonprofit from for-profit organizations, but Real Estate Credit presumptively includes nonprofit organizations.  

B. Impact of Exemptions

   The provisions of the supplemental final rule all provide or modify exemptions from the HPML appraisal requirements. Measured against the baseline of the burdens imposed by the January 2013 Final Rule the Agencies issued on January 18, 2013, the Bureau believes that these provisions impose either no or insignificant additional burdens on small entities. The Bureau believes that most of these provisions would reduce the burdens associated with implementation costs, additional valuation costs, and compliance costs stemming from the HPML appraisal requirements. The Bureau also notes that creditors voluntarily choose whether to avail themselves of the exemptions.

   As discussed in the Bureau's Section 1022(b) analysis, the five provisions /207/ for non-QM HPMLs are in this rule are:

   FOOTNOTE 207 The Bureau believes that other provisions would have a de minimis impact on small entities. END FOOTNOTE

   1. Certain refinances, commonly referred to as "streamlined" are now exempt from the January 2013 Final Rule;

   2. Smaller dollar loans (under $25,000) are now exempt from the January 2013 Final Rule;

   3. Used manufactured housing transactions that are not secured by land (chattel) are now exempt from the January 2013 Final Rule and, for applications received on or after July 18, 2015, subject to some conditions to provide an alternative valuation; /208/

   FOOTNOTE 208 Used manufactured housing transactions that are secured by land remain covered by the January 2013 Final Rule. However, all loans are exempt if the application is received before July 18, 2015. END FOOTNOTE

   4. New manufactured housing transactions that are not secured by land (chattel) remain exempt from the January 2013 Final Rule; however, for applications received on or after July 18, 2015, these transactions are now subject to conditions; and

   5. New manufactured housing transactions secured by land (new land/home) for which an application is received on or after July 18, 2015, now are subject to the January 2013 Final Rule; however, these transactions remain exempted from the physical interior visit part of the requirement.

1. Exemption for "Streamlined" Refinancing Programs

   The supplemental final rule provides an exemption for any transaction that is a refinancing satisfying certain conditions.

   This provision removes the burden to small entities extending any HPMLs covered by the final rule under "streamlined" refinance programs of providing a consumer notice and obtaining, reviewing, and disclosing to consumers USPAP- and FIRREA-compliant appraisals.

   The regulatory burden reduction might be lower since a creditor would have to determine whether the refinancing loan is of the type that meets the exemption requirements. However, the Bureau believes that little if any additional time would be needed to make these determinations, as they depend upon basic information relating to the transaction that is typically already known to the creditor. Small entities will be able to choose whether to avail themselves of this exemption.

2. Exemption for Smaller Dollar Loans

   The supplemental final rule exempts from the final rule loans equal to or less than $25,000, adjusted annually for inflation. This provision removes burden imposed by the final rule on small entities extending any HPMLs covered by the final rule up to $25,000. In any event, small entities will be able to choose whether to avail themselves of this exemption.

3. Exemption Subject to Alternative Valuation for Used Manufactured Housing Transactions Not Secured by Land (Used Chattel)

   The supplemental final rule exempts from the HPML appraisal requirements a transaction secured by an existing manufactured home and not land. This provision removes certain burdens imposed by the January 2013 Final Rule on small entities extending HPMLs covered by the January 2013 Final Rule when they are secured solely by existing manufactured homes. The burdens removed would be those of providing a consumer notice, determining the applicability of the second appraisal requirement in purchase transactions, and obtaining, reviewing, and disclosing to consumers USPAP- and FIRREA-compliant appraisals. To be eligible for this burden-reducing exemption, the creditor is required to obtain an estimate of the value of the home, with the types of estimates allowed described in detail in the section-by-section analysis. For example, creditors can use an independent cost service to qualify for the exemption.

   Taking the January 2013 Final Rule as the baseline, as discussed in the section-by-section and the Bureau's Section 1022(b) analyses, this exemption might provide significant burden relief since, the Bureau believes that USPAP is a set of standards typically followed by appraisers who are state-certified or licensed, and that state laws generally do not require certifications or licenses to appraise personal property. Thus, many of these transactions might not have been made, but for this exemption. Finally, taking advantage of this exemption is voluntary for creditors, thus it imposes no additional burden.

4. Narrowed Exemption for Transactions Secured by New Chattel Manufactured Homes

   As discussed in the Bureau's Section 1022(b) analysis and in the section-by-section analysis, the final rule requires the creditor to provide the consumer with one of several types of an alternative valuation of the new manufactured home in transactions that are secured by a new manufactured home but not land. This condition does not significantly increase the burden of the rule relative to the January 2013 Final Rule. The Bureau believes that the cost of obtaining an estimate of the value of the new manufactured home using a third-party cost source, for example, would be significantly less than the cost of obtaining a USPAP-complaint appraisal.

   As noted in the Bureau's Section 1022(b) analysis, the Bureau believes that there might be as many as 3,400 such transactions. As shown in the table above, the Bureau believes that there were 12,369 small creditors in 2011. Thus, over 85 percent of small creditors face at most one such transaction per year. As noted in the 2013 January Final Rule, the Bureau believes that a USPAP appraisal costs on average $350. Even if we suppose that an alternative valuation would cost as must as a USPAP appraisal, that results in a burden of $350 for that creditor, an insignificant burden. Note that the Bureau believes that the cost imposed per transaction is considerably lower, arguably under $5 for some third-party cost sources. Moreover, HMDA data implies that over 85 percent of small creditors will not be subject to any transactions like that. Even if the Bureau misestimated the number of affected transactions by a factor of 10, the costs imposed on 85 percent of small creditors are still like to be well under $100 per creditor. /209/

   FOOTNOTE 209 All mortgage lenders can participate in the manufactured housing market segment (which includes chattel transactions and transactions secured by a manufactured home and land; the handful of manufactured housing specialty lenders engaged in chattel lending are still not significant in number by themselves. Further, even if the chattel exemption conditions were significant to their revenue, that is not a substantial number for RFA purposes. END FOOTNOTE

5. Narrowed Exemption for Transactions Secured by New Manufactured Homes and Land

   The Agencies finalized a provision that requires an appraisal for transactions secured by new manufactured homes and land, while exempting these appraisals from interior inspection. As noted in the Bureau's Section 1022(b) analysis, the Bureau believes that approximately 700 transactions are going to be affected. Thus, over 90 percent of small creditors are not going to be affected by this provision. Even if the Bureau misestimated the number of transactions affected by a factor of 10, over 85 percent of small creditors would be subject to at most one such transaction per year, resulting in a burden of around $350 per creditor, a negligible fraction of a creditor's revenue. This impact could be even lower, given that, as noted in the section-by-section analysis, these transactions already are subject to a full appraisal requirement when carried out under GSE or federal agency programs.

C. Conclusion

   Each element of this supplemental final rule would reduce economic burden for small entities or impose a minor burden on a small amount of creditors (well less than $500 per creditor for 85 percent of small creditors even if the Bureau misestimated the number of covered manufactured home transactions by a factor of 10). The exemption for HPMLs secured by existing manufactured homes and not land would lessen any economic impact resulting from the HPML appraisal requirements. The exemption for "streamlined" refinance HPMLs also would lessen any economic impact on small entities extending credit pursuant to those programs, particularly those relating to the refinancing of existing loans held on portfolio. The exemption for smaller-dollar HPMLs similarly would lessen burden on small entities extending credit in the form of HPMLs up to the threshold amount. The narrowed exemptions for transactions secured by new manufactured homes, both land and chattel, would barely affect over 85 percent of creditors (at most one such transaction per year).

   These impacts that would have been generated by the January 2013 Final Rule are reduced to the extent the transactions are not already exempt from the January 2013 Final Rule as qualified mortgages. While all of these exemptions may entail additional recordkeeping costs, the Bureau believes that these costs are minimal and outweighed by the cost reductions resulting from the proposal. Small entities for which such cost reductions are outweighed by additional record keeping costs may choose not to utilize the proposed exemptions.

Certification

   Accordingly, the undersigned certifies that the supplemental final rule will not have a significant economic impact on a substantial number of small entities.

FHFA

   The supplemental final rule applies only to institutions in the primary mortgage market that originate mortgage loans. FHFA's regulated entities--Fannie Mae, Freddie Mac, and the Federal Home Loan Banks--operate in the secondary mortgage markets. In addition, these entities do not come within the meaning of small entities as defined in the RFA. See 5 U.S.C. 601(6)).

VIII. Paperwork Reduction Act

OCC, Board, FDIC, NCUA, and Bureau

   Certain provisions of the January 2013 Final Rule contain "collection of information" requirements within the meaning of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501 et seq.). See 78 FR 10368, 10429 (Feb. 13, 2013). Under the PRA, and notwithstanding any other provision of law, the Agencies may not conduct or sponsor, and a person is not required to respond to, an information collection unless the information collection displays a valid OMB control number. The information collection requirements contained in this final rule to amend the January 2013 Final Rule have been submitted to OMB for review and approval by the Bureau, FDIC, NCUA, and OCC under section 3506 of the PRA and section 1320.11 of the OMB's implementing regulations (5 CFR part 1320). The Bureau, FDIC, NCUA, and OCC submitted these information collection requirements to OMB at the proposed rule stage, as well. OMB filed comments instructing the agencies to examine public comment in response to the NPRM and describe in the supporting statement of its collection any public comments received regarding the collection, as well as why it did or did not incorporate the commenter's recommendation. No comments were received concerning the proposed information collection requirements. The Board reviewed these final rules under the authority delegated to the Board by OMB.

   Title of Information Collection: HPML Appraisals.

   Frequency of Response: Event generated.

   Affected Public: Businesses or other for-profit and not-for-profit organizations. /210/

   FOOTNOTE 210 The burdens on the affected public generally are divided in accordance with the Agencies' respective administrative enforcement authority under TILA section 108, 15 U.S.C. 1607. END FOOTNOTE

   Bureau: Insured depository institutions with more than $10 billion in assets, their depository institution affiliates, and certain non-depository mortgage institutions. /211/

   FOOTNOTE 211 The Bureau and the Federal Trade Commission (FTC) generally both have enforcement authority over non-depository institutions for Regulation Z. Accordingly, for purposes of this PRA analysis, the Bureau has allocated to itself half of the Bureau's estimated burden for non-depository mortgage institutions. The FTC is responsible for estimating and reporting to OMB its share of burden under this final rule. END FOOTNOTE

   FDIC: Insured state non-member banks, insured state branches of foreign banks, state savings associations, and certain subsidiaries of these entities.

   OCC: National banks, Federal savings associations, Federal branches or agencies of foreign banks, or any operating subsidiary thereof.

   Board: State member banks, uninsured state branches and agencies of foreign banks.

   NCUA: Federally-insured credit unions.

   Abstract:

   The collection of information requirements in the January 2013 Final Rule are found in paragraphs (c)(3)(i), (c)(3)(ii), (c)(4), (c)(5), and (c)(6) of 12 CFR 1026.35. /212/ This information is required to protect consumers and promote the safety and soundness of creditors making HPMLs subject to 12 CFR 1026.35(c). This information is used by creditors to evaluate real estate collateral securing HPMLs subject to 12 CFR 1026.35(c) and by consumers entering these transactions. The collections of information are mandatory for creditors making HPMLs subject to 12 CFR 1026.35(c).

   FOOTNOTE 212 As explained in the section-by-section analysis, these requirements are also published in regulations of the OCC (12 CFR 34.203(c)(1), (c)(2), (d), (e) and (f)) and the Board (12 CFR 226.43(c)(1), (c)(2), (d), (e), and (f)). For ease of reference, this PRA analysis refers to the section numbers of the requirements as published in the Bureau's Regulation Z at 12 CFR 1026.35(c). END FOOTNOTE

   The January 2013 Final Rule requires that, within three business days of application, a creditor provide a disclosure that informs consumers of the purpose of the appraisal, that the creditor will provide the consumer a copy of any appraisal, and that the consumer may choose to have a separate appraisal conducted at the expense of the consumer (Initial Appraisal Disclosure). See 12 CFR 1026.35(c)(5). If a loan is a HPML subject to 12 CFR 1026.35(c), then the creditor is required to obtain a written appraisal prepared by a certified or licensed appraiser who conducts a physical visit of the interior of the property that will secure the transaction (Written Appraisal), and provide a copy of the Written Appraisal to the consumer. See 12 CFR 1026.35(c)(3)(i) and (c)(6). To qualify for the safe harbor provided under the January 2013 Final Rule, a creditor is required to review the Written Appraisal as specified in the text of the rule and Appendix N. See 12 CFR 1026.35(c)(3)(ii).

   A creditor is required to obtain an additional appraisal (Additional Written Appraisal) for a HPML that is subject to 12 CFR 1026.35(c) if (1) the seller acquired the property securing the loan 90 or fewer days prior to the date of the consumer's agreement to acquire the property and the resale price exceeds the seller's acquisition price by more than 10 percent; or (2) the seller acquired the property securing the loan 91 to 180 days prior to the date of the consumer's agreement to acquire the property and the resale price exceeds the seller's acquisition price by more than 20 percent. See 12 CFR 1026.35(c)(4). The Additional Written Appraisal must meet the requirements described above and also analyze: (1) The difference between the price at which the seller acquired the property and the price the consumer agreed to pay; (2) changes in market conditions between the date the seller acquired the property and the date the consumer agreed to acquire the property; and (3) any improvements made to the property between the date the seller acquired the property and the date on which the consumer agreed to acquire the property. See 12 CFR 1026.35(c)(4)(iv). A creditor is also required to provide a copy of the Additional Written Appraisal to the consumer. 12 CFR 1026.35(c)(6).

   The requirements provided in the January 2013 Final Rule were described in the PRA section of that rule. See 78 FR 10368, 10429 (February 13, 2013). As described in the Bureau's section 1022 analysis in the January 2013 Final Rule and in Table 3 to that rule, the estimated burdens allocated to the Bureau reflected an institution count based upon data that had been updated from the proposed rule stage and reduced to reflect those exemptions in the January 2013 Final Rule for which the Bureau had identified data. As discussed in the January 2013 Final Rule, the other Agencies did not adjust the calculations to account for the exempted transactions provided in the January 2013 Final Rule. Accordingly, the estimated burden calculations in Table 3 in the January 2013 Final Rule were overstated.

Calculation of Estimated Burden

January 2013 Final Rule

   As explained in the January 2013 Final Rule, for the Initial Appraisal Disclosure, the creditor is required to provide a short, written disclosure within three business days of application. Because this disclosure is supplied by the federal government for purposes of disclosure to the public, this is not classified as an information collection pursuant to 5 CFR 1320(c)(2), and the Agencies have assigned it no burden for purposes of this PRA analysis.

   The estimated burden for the Written Appraisal requirements includes the creditor's burden of reviewing the Written Appraisal in order to satisfy the safe harbor criteria set forth in the rule and providing a copy of the Written Appraisal to the consumer. Additionally, as discussed above, an Additional Written Appraisal containing additional analyses is required in certain circumstances. The Additional Written Appraisal must meet the standards of the Written Appraisal. The Additional Written Appraisal is also required to be prepared by a certified or licensed appraiser different from the appraiser performing the Written Appraisal, and a copy of the Additional Written Appraisal must be provided to the consumer. The creditor must separately review the Additional Written Appraisal in order to qualify for the safe harbor provided in the January 2013 Final Rule.

   The Agencies continue to estimate that respondents will take, on average, 15 minutes for each HPML that is subject to 12 CFR 1026.35(c) to review the Written Appraisal and to provide a copy of the Written Appraisal. The Agencies further continue to estimate that respondents will take, on average, 15 minutes for each HPML that is subject to 12 CFR 1026.35(c) to investigate and verify the need for an Additional Written Appraisal and, where necessary, an additional 15 minutes to review the Additional Written Appraisal and to provide a copy of the Additional Written Appraisal. For the small fraction of loans requiring an Additional Written Appraisal, the burden is similar to that of the Written Appraisal.

Final Rule

   The Agencies use the estimated burden from the PRA section of the January 2013 Final Rule as the baseline for analyzing the impact the three exemptions in the final rule. The estimated number of appraisals per respondent for the FDIC, Board, OCC, and NCUA respondents has been updated to account for the exemption for qualified mortgages adopted in the January 2013 Final Rule, which had not been accounted for in the table published at that time, as discussed in the PRA section of the Final Rule. See 78 FR 10368, 10430-31 (February 13, 2013). In addition, the impact of the final rule has been considered as follows:

   First, the Agencies find that, currently, only a very small minority of refinances involve cash out beyond the levels permitted for the exemption for certain refinance loans. See SEC 1026.35(c)(2)(vii). Going forward, the Agencies believe that virtually all refinance loans will be either qualified mortgages or qualify for this exemption. The Agencies therefore assume that the exemption for certain refinances in this supplemental final rule affects all of the refinance loans analyzed under Section 1022(b)(2) of the January 2013 Final Rule. /213/ In that analysis, the Bureau estimated that a total of 3,800 new Written Appraisals would occur as a result of the January 2013 Final Rule (including home purchase, home equity, and refinance loans). In the Supplemental Proposal, the Bureau estimated that refinances would account for approximately 1,200 of these 3,800 new Written Appraisals that would occur as a result of the January 2013 Final Rule. /214/ Thus, the exemption for certain refinances in this supplemental final rule would eliminate approximately 32 percent of the new Written Appraisals that were estimated to occur as a result of the January 2013 Final Rule.

   FOOTNOTE 213 See 78 FR 10368, 10419 (Feb. 13, 2013). As discussed in the Section 1022(b)(2) analysis in this rule, the Bureau believes that there were at most private 12,000 no cash-out refinance transactions in 2011, and that some number of these were refinances of existing loans where the credit risk holder changed and thus would not be eligible for the exemption, and that a small number of these refinances had interest-only, negative amortization, or balloon features and also would not be eligible for the exemption. Moreover, the Bureau believes that about 90 percent of refinance transactions would have an appraisal provided to consumers because the creditor chose to have an appraisal and provided a copy due to the ECOA Valuations Rule. Thus, this exemption is likely to affect under 1,000 loans a year. The Agencies do not possess reliable, representative data on how many refinances will qualify for this exemption. However, to the extent refinances previously would not have been eligible for exemptions to this rule, the Agencies believe that going forward most such refinances will be restructured as qualified mortgages or otherwise to satisfy the criteria of this exemption for certain refinances. The Agencies used the same assumption for the supplemental proposal and did not receive any comments indicating otherwise. Accordingly, the Table below reflects this assumption. If this assumption did not hold and these refinances were not restructured, the Agencies believe that based on the 2011 data the final rules will cause at most a minor number of new appraisals--for approximately 1,200 loans. END FOOTNOTE

   FOOTNOTE 214 As stated in the Bureau's Section 1022 analysis in the January 2013 Final Rule 1022, there were 12,000 refinances affected by the January 2013 Final Rule, and out of those the Bureau estimated that 10 percent did not have a full appraisal performed in the absence of the January 2013 Final Rule, resulting in 10 percent*12,000=1,200 of refinances that would be estimated to obtain an appraisal as a result of the January 2013 Final Rule (and which would not be obtained as a result of this supplemental final rule). END FOOTNOTE

   Second, based on the HMDA 2011 data, the Agencies find that 12 percent of all HPMLs are under $25,000. The Agencies believe that this implies that there will be, proportionately, 12 percent fewer appraisals based on the exemption for smaller dollar loans.

   Third, the Agencies find that many of the transactions secured by manufactured homes involve either refinances (all of which are conservatively assumed to be covered by the exemption for certain refinances), or smaller dollar loans (which cover many types of manufactured housing transactions). /215/ While covered HPMLs above smaller dollar levels that are secured by existing manufactured homes and not land may be newly-exempted, these transactions will need alternative valuations under the final rule. In addition, such loans secured by new manufactured homes and not land also will need alternative valuations. Further, such loans secured by new manufactured homes and land will need an appraisal. In the January 2013 Final Rule, the Agencies did not reduce the paperwork burden estimates to account for the exemption for new manufactured homes adopted at that time. The Agencies therefore conservatively make no adjustment to the data in the first panel of Table 3 in the January 2013 Final Rule as a result of that exemption. /216/

   FOOTNOTE 215 In particular, the Bureau believes that a substantial proportion of the existing manufactured homes that are sold would be sold for less than $25,000. According to the Census Bureau 2011 American Housing Survey Table C-13-OO, the average value of existing manufactured homes is $30,000. See http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=AHS_2011_C13OO&prodType=table. The estimate includes not only the value of the home, but also appears to include the value of the lot where the lot is also owned. According to the AHS Survey, the term "value" is defined as "the respondent's estimate of how much the property (house and lot) would sell for if it were for sale. Any nonresidential portions of the property, any rental units, and land cost of mobile homes, are excluded from the value. For vacant units, value represents the sales price asked for the property at the time of the interview, and may differ from the price at which the property is sold. In the publications, medians for value are rounded to the nearest dollar." See http://www.census.gov/housing/ahs/files/Appendix%20A.pdf. END FOOTNOTE

   FOOTNOTE 216 The Bureau assumes that manufactured housing loans secured solely by a manufactured home and not land are reflected in the data provided by the institutions to the datasets that are used by the Bureau (Call Reports for Banks and Thrifts, Call Reports for Credit Unions, and NMLS's Mortgage Call Reports), and thus are reflected in the Bureau's loan projections utilized for the table below.

   The Agencies conservatively included all non-QM HPML MH loans reported in HMDA and projected based on the Call Reports data in its paperwork burden calculations for the January 2013 Final Rule. The Agencies did not possess sufficient information at the time to estimate the proportion of non-QM HPML MH affected by the January 2013 Final Rule. No new data is used in this rule, and the Agencies still do not possess sufficient information to estimate the proportion of non-QM HPML MH affected by this Supplemental final rule. Thus, the Agencies continue to conservatively assume that all non-QM HPML MH loans reported in HMDA and projected based on the Call Reports data are subject to the full appraisal requirement, resulting in no change in the Table of paperwork burden below.

   Note that, while the Agencies assume that all non-QM HPML MH loans are affected, and thus the paperwork burden reported might be an overestimate, the Agencies are possibly underestimating the burden to the extent that there exists systematic underreporting or non-reporting of MH loans to HMDA by creditors who are subject to reporting. In its Section 1022(b) and RFA analyses, the Bureau stress-tested this possibility and very conservatively, in terms of calculating the magnitude of loans affected by provisions of this Supplemental final rule, assumed that this underreporting is occurring on a massive scale. For the purposes of the PRA analysis, the Agencies assume that there is no underreporting. Also, note that if the Bureau underestimated the proportion of non-QM loans among MH lending, the paperwork burden is also underestimated. See the Bureau's Section 1022(b) analysis above for a discussion of data used and comments received. END FOOTNOTE

   The numbers above affect only the first panel in Table 3 of the PRA section of the January 2013 Final Rule. Refinances are not subject to the requirement to obtain an Additional Written Appraisal under the January 2013 Final Rule, and it is assumed that none of the smaller dollar loans or the loans secured by manufactured homes and not land were used to purchase homes being resold within 180 days with the requisite price increases to trigger that requirement (and thus the exemptions for those loans will not reduce any burden associated with that requirement). Accordingly, only the first panel in Table 3 from the January 2013 Final Rule is being updated and the estimates in the second and third panels remain the same. The updated table is reproduced below. The one-time costs are not affected.

   The following table summarizes the resulting burden estimates.

Estimated PRA Burden

       Table 2--Summary of PRA Burden Hours for Information Collections in HPML      Appraisals Final Rule Once Exemptions in the Supplemental Proposal Are Adopted      n217                       Estimated   Estimated      Estimated      Estimated                      number of   number of      burden hours   total                      respondents appraisals per per appraisal  annual burden                                  respondent                    hours                                  n218                       [a]       [b]          [c]          [d] = (a *b                                                                *c)       Review and Provide a Copy of Written Appraisal  Bureau /219/, n220, n221, n222 Depository Inst. >  $10 B in total assets+ Depository Inst.     132         3.73           0.25           123 Affiliates Non-Depository Inst. 2,853       0.23           0.25           /223/ 82 and Credit Unions FDIC                 2,571       0.14           0.25           93 Board /224/           418         0.18           0.25           19 OCC                  1,399       0.16           0.25           55 NCUA                 2,437       0.07           0.25           44 Total                9,810                                     416       Investigate and Verify Requirement for Additional Written Appraisal  Bureau Depository Inst. >  $10 B in total assets+ Depository Inst.     132         20.05          0.25           662 Affiliates Non-Depository Inst. 2,853       1.22           0.25           435 and Credit Unions FDIC                 2,571       0.78           0.25           502 Board                418         0.97           0.25           102 OCC                  1,399       0.85           0.25           299 NCUA                 2,437       0.38           0.25           232 Total                9,810                                     2,232       Review and Provide a Copy of Additional Written Appraisal  Bureau Depository Inst. >  $10 B in total assets+ Depository Inst.     132         0.64           0.25           21 Affiliates Non-Depository Inst. 2,853       0.04           0.25           14 and Credit Unions FDIC                 2,571       0.02           0.25           15 Board                418         0.03           0.25           3 OCC                  1,399       0.02           0.25           8 NCUA                 2,437       0.01           0.25           5 Total                9,810                                     66     Notes:     (1) Respondents include all institutions estimated to originate HPMLs that are subject to 12 CFR 1026.35(c).     (2) There may be an additional ongoing burden of roughly 75 hours for privately-insured credit unions estimated to originate HPMLs that are subject to 12 CFR 1026.35(c). As discussed in the second footnote in this PRA section, the Bureau will assume half of the burden for non-depository institutions and the privately-insured credit unions. 

   FOOTNOTE 217 Some of the intermediate numbers are rounded, resulting in "Estimated Total Annual Burden Hours" not precisely matching up with columns a, b, and c. END FOOTNOTE

   FOOTNOTE 218 The "Estimated Number of Appraisals Per Respondent" reflects the estimated number of Written Appraisals and Additional Written Appraisals that will be performed solely to comply with the January 2013 Final Rule. It does not include the number of appraisals that will continue to be performed under current industry practice, without regard to the Final Rule's requirements. END FOOTNOTE

   FOOTNOTE 219 The information collection requirements (ICs) contained in the Bureau's Regulation Z are generally approved by OMB under OMB No. 3170-0015. The Bureau divided certain proposals to amend the Bureau's Regulation Z into separate Information Collection Requests in OMB's system (accessible at www.reginfo.gov) to ease the public's ability to view and understand the individual proposals. The ICs in the January 2013 Final Rule (and this final rule) will be incorporated with the Bureau's existing collection associated with Truth in Lending Act (Regulation Z) 12 CFR 1026 (OMB No. 3170-0026). In the future, the Bureau plans to reintegrate the ICs in this final rule back into OMB No. 3170-0015; therefore, OMB No. 3170-0015 should continue to be used when referencing the ICs contained in this final rule. END FOOTNOTE

   FOOTNOTE 220 The burden estimates allocated to the Bureau are updated using the data described in the Bureau's section 1022 analysis in the January 2013 Final Rule and in the Bureau's section 1022 analysis above, including significant burden reductions after accounting for qualified mortgages that are exempt from the January 2013 Final Rule, and burden reductions after accounting for loans in rural areas that are exempt from the Additional Written Appraisal requirement in the Final Rule. END FOOTNOTE

   FOOTNOTE 221 There are 153 depository institutions (and their depository affiliates) that are subject to the Bureau's administrative enforcement authority. In addition, there are 146 privately-insured credit unions that are subject to the Bureau's administrative enforcement authority. For purposes of this PRA analysis, the Bureau's respondents under Regulation Z are: 135 depository institutions that originate either open or closed-end mortgages; 77 privately-insured credit unions that originate either open or closed-end mortgages; and an estimated 2,787 non-depository institutions that are subject to the Bureau's administrative enforcement authority. Unless otherwise specified, all references to burden hours and costs for the Bureau respondents for the collection under Regulation Z are based on a calculation that includes half of the burden for the estimated 2,787 non-depository institutions and 77 privately-insured credit unions. END FOOTNOTE

   FOOTNOTE 222 The Bureau calculates its burden by including both HMDA reporting creditors and the HMDA non-reporting creditors, based on the 2011 data, and allocating burden as discussed in the second footnote in this PRA section. The other Agencies only report the burden for HMDA reporting creditors, based on the 2011 counts. END FOOTNOTE

   FOOTNOTE 223 The Bureau assumes half of the burden for the non-depository mortgage institutions and the credit unions supervised by the Bureau. The FTC assumes the burden for the other half. END FOOTNOTE

   FOOTNOTE 224 The ICs in the January 2013 Final Rule will be incorporated with the Board's Reporting, Recordkeeping, and Disclosure Requirements associated with Regulation Z (Truth in Lending), 12 CFR part 226 (OMB No. 7100-0199). The burden estimates provided in this final rule pertain only to the ICs associated with the Final Rule. END FOOTNOTE

   Finally, as explained in the PRA section of the January 2013 Final Rule, respondents must also review the instructions and legal guidance associated with the Final Rule and train loan officers regarding the requirements of the Final Rule. The Agencies continue to estimate that these one-time costs are as follows: Bureau: 36,383 hours; FDIC: 10,284 hours; Board 3,344 hours; OCC: 19,586 hours; NCUA: 7,311 hours. /225/

   FOOTNOTE 225 As discussed in the PRA section of the January 2013 Final Rule, estimated one-time burden continues to be calculated assuming a fixed burden per institution to review the regulations and fixed burden per estimated loan officer in training costs. As a result of the different size and mortgage activities across institutions, the average per-institution one-time burdens vary across the Agencies. See 78 FR 10368, 10432 (Feb. 13, 2013). END FOOTNOTE

   The Agencies have a continuing interest in the public opinion of our collections of information. At any time, comments regarding the burden estimate, or any other aspect of this collection of information, including suggestions for reducing the burden, may be sent to the OMB desk officer for the Agencies by mail to U.S. Office of Management and Budget, Office of Information and Regulatory Affairs, Washington, DC 20503, or by the internet to [email protected], with copies to the Agencies at the addresses listed in the ADDRESSES section of this SUPPLEMENTARY INFORMATION.

FHFA

   The January 2013 Final Rule and this final rule do not contain any collections of information applicable to the FHFA, requiring review by OMB under the PRA. Therefore, FHFA has not submitted any materials to OMB for review.

IX. Section 302 of the Riegle Community Development and Regulatory Improvement Act

   Section 1400 of the Dodd Frank Act requires that the rule issued to implement Section 1471 take effect not later than 12 months after the date of issuance of the Final Rule. The January 2013 Final Rule was issued on January 18, 2013 and will become effective on January 18, 2014. This supplemental final rule is issued on December 10, 2013 and will be effective on January 18, 2014, except that modifications to the exemptions for loans secured by manufactured homes will be effective on July 18, 2015.

   Section 302 of the Riegle Community Development and Regulatory Improvement Act of 1994 ("RCDRIA") requires that, subject to certain exceptions, regulations issued by the federal banking agencies that impose additional reporting, disclosure, or other requirements on insured depository institutions, take effect on the first day of a calendar quarter which begins on or after the date on which the regulations are published in final form. This effective date requirement does not apply if the issuing agency finds for good cause that the regulation should become effective before such time. 12 U.S.C. 4802.

   With respect to the provisions that are effective on January 18, 2014, the OCC, Board, and FDIC find that section 302 of the RCDRIA does not apply because these provisions do not impose additional reporting, disclosure, or other requirements on insured depository institutions.

   With respect to the provisions that are effective July 18, 2015, the OCC, Board, and FDIC recognize that section 302 of the RCDRIA applies because these modifications to the exemption for loans secured by manufactured housing impose some additional disclosure requirements. The July 18, 2015 effective date will provide depository institutions engaged in manufactured housing lending the opportunity to develop appropriate policies and implement systems to ensure compliance with the new requirements. Although this date is not the first day of a calendar quarter which begins on or after the date on which the regulations are published in final form, the OCC, Board, and FDIC note that insured depository institutions wishing to comply at the beginning of a calendar quarter prior to the effective date retain the flexibility to do so.

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 amended on February 13, 2013 at 78 FR 10368, effective on January 18, 2014, as follows:

PART 34--REAL ESTATE LENDING AND APPRAISALS

   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

   2. Section 34.202 is amended by redesignating paragraphs (a) through (c) as paragraphs (b) through (d), respectively, and adding a new paragraph (a) to read as follows:

SEC 34.202 Definitions applicable to higher-priced mortgage loans.

   (a) Consummation has the same meaning as in 12 CFR 1026.2(a)(13).

* * * * *

   3a. Section 34.203 is amended by:

   a. Redesignating paragraphs (a)(2), (3), and (4) as paragraphs (a)(3), (5), and (7), respectively, and republishing them;

   b. Adding new paragraphs (a)(2) and (4) and paragraph (a)(6);

   c. Revising paragraphs (b) introductory text and (b)(1) and (2); and

   d. Adding paragraphs (b)(7) and (8).

   The additions and revisions read as follows:

SEC 34.203 Appraisals for higher priced mortgage loans.

   (a) Definitions. For purposes of this section:

* * * * *

   (2) Credit risk means the financial risk that a consumer will default on a loan.

   (3) Manufactured home has the same meaning as in 24 CFR 3280.2.

   (4) Manufacturer's invoice means a document issued by a manufacturer and provided with a manufactured home to a retail dealer that separately details the wholesale (base) prices at the factory for specific models or series of manufactured homes and itemized options (large appliances, built-in items and equipment), plus actual itemized charges for freight from the factory to the dealer's lot or the homesite (including any rental of wheels and axles) and for any sales taxes to be paid by the dealer. The invoice may recite such prices and charges on an itemized basis or by stating an aggregate price or charge, as appropriate, for each category.

   (5) National Registry means the database of information about State certified and licensed appraisers maintained by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council.

   (6) New manufactured home means a manufactured home that has not been previously occupied.

   (7) State agency means a "State appraiser certifying and licensing agency" recognized in accordance with section 1118(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3347(b)) and any implementing regulations.

   (b) Exemptions. Unless otherwise specified, the requirements in paragraph (c) through (f) of this section do not apply to the following types of transactions:

   (1) A loan that satisfies the criteria of a qualified mortgage as defined pursuant to 15 U.S.C. 1639c.

   (2) An extension of credit for which the amount of credit extended is equal to or less than the applicable threshold amount, which is adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, as applicable, and published in the OCC official interpretations to this paragraph (b)(2).

* * * * *

   (7) An extension of credit that is a refinancing secured by a first lien, with refinancing defined as in 12 CFR 1026.20(a) (except that the creditor need not be the original creditor or a holder or servicer of the original obligation), provided that the refinancing meets the following criteria:

   (i) Either--

   (A) The credit risk of the refinancing is retained by the person that held the credit risk of the existing obligation and there is no commitment, at consummation, to transfer the credit risk to another person; or

   (B) The refinancing is insured or guaranteed by the same Federal government agency that insured or guaranteed the existing obligation;

   (ii) The regular periodic payments under the refinance loan do not--

   (A) Cause the principal balance to increase;

   (B) Allow the consumer to defer repayment of principal; or

   (C) Result in a balloon payment, as defined in 12 CFR 1026.18(s)(5)(i); and

   (iii) The proceeds from the refinancing are used solely to satisfy the existing obligation and to pay amounts attributed solely to the costs of the refinancing; and

   (8) A transaction secured in whole or in part by a manufactured home.

   3b. Effective July 18, 2015, in SEC 34.203, newly added paragraph (b)(8) is revised to read as follows:

SEC 34.203 Appraisals for higher priced mortgage loans.

* * * * *

   (b) * * *

   (8) A transaction secured by:

   (i) A new manufactured home and land, but the exemption shall only apply to the requirement in paragraph (c)(1) of this section that the appraiser conduct a physical visit of the interior of the new manufactured home; or

   (ii) A manufactured home and not land, for which the creditor obtains one of the following and provides a copy to the consumer no later than three business days prior to consummation of the transaction--

   (A) For a new manufactured home, the manufacturer's invoice for the manufactured home securing the transaction, provided that the date of manufacture is no earlier than 18 months prior to the creditor's receipt of the consumer's application for credit;

   (B) A cost estimate of the value of the manufactured home securing the transaction obtained from an independent cost service provider; or

   (C) A valuation, as defined in 12 CFR 1026.42(b)(3), of the manufactured home performed by a person who has no direct or indirect interest, financial or otherwise, in the property or transaction for which the valuation is performed and has training in valuing manufactured homes.

* * * * *

   4. In Appendix A to Subpart G, republish the introductory text and revise paragraph 7 to read as follows:

Appendix A to Subpart G--Higher-Priced Mortgage Loan Appraisal Safe Harbor Review

   To qualify for the safe harbor provided in SEC 34.203(c)(2), a creditor must confirm that the written appraisal:

* * * * *

   7. Indicates that a physical property visit of the interior of the property was performed, as applicable.

* * * * *

Appendix C to Subpart G--OCC Interpretations

   5. In Appendix C to Subpart G:

   a. Under the SEC 34.203(b) entry, add paragraph 1 and add an entry for SEC 34.203(b)(1);

   c. Revise the SEC 34.203(b)(2) entry;

   d. Add paragraph 2 to the SEC 34.203(b)(4) entry;

   e. Add an entry for SEC 34.203(b)(7);

   f. Effective July 18, 2015, add an entry for SEC 34.203(b)(8); and

   g. In the SEC 34.203(f)(2) entry, remove paragraph 2, redesignate paragraph 3 as paragraph 2, and revise it.

   The additions and revisions read as follows:

Section 34.203--Appraisals for Higher-Priced Mortgage Loans

* * * * *

34.203(b) Exemptions

   1. Compliance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Section 34.203(b) provides exemptions solely from the requirements of SEC 34.203(c) through (f). Institutions subject to the requirements of FIRREA and its implementing regulations that make a loan qualifying for an exemption under SEC 34.203(b) must still comply with appraisal and evaluation requirements under FIRREA and its implementing regulations.

34.203(b)(1) Exemptions

Paragraph 34.203(b)(1)

   1. Qualified mortgage criteria. Under SEC 34.203(b)(1), a loan is exempt from the appraisal requirements of SEC 34.203 if either:

   i. The loan is--(1) subject to the ability-to-repay requirements of the Consumer Financial Protection Bureau (Bureau) in 12 CFR 1026.43 as a "covered transaction" (defined in 12 CFR 1026.43(b)(1)) and (2) a qualified mortgage pursuant to the Bureau's rules or, for loans insured, guaranteed, or administered by the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA), or Rural Housing Service (RHS), a qualified mortgage pursuant to applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's definition of a qualified mortgage applies to those loans); or

   ii. The loan is--(1) not subject to the Bureau's ability-to-repay requirements in 12 CFR 1026.43 as a "covered transaction" (defined in 12 CFR 1026.43(b)(1)), but (2) meets the criteria for a qualified mortgage in the Bureau's rules or, for loans insured, guaranteed, or administered by HUD, VA, USDA, or RHS, meets the criteria for a qualified mortgage in the applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's criteria for a qualified mortgage applies to those loans). To explain further, loans enumerated in 12 CFR 1026.43(a) are not "covered transactions" under the Bureau's ability-to-repay requirements in 12 CFR 1026.43, and thus cannot be qualified mortgages (entitled to a rebuttable presumption or safe harbor of compliance with the ability-to-repay requirements of 12 CFR 1026.43, see, e.g., 12 CFR 1026.43(e)(1)). These include an extension of credit made pursuant to a program administered by a Housing Finance Agency, as defined under 24 CFR 266.5, or pursuant to a program authorized by sections 101 and 109 of the Emergency Economic Stabilization Act of 2008. See 12 CFR 1026.43(a)(3)(iv) and (vi). They also include extensions of credit made by a creditor identified in 12 CFR 1026.43(a)(3)(v). However, these loans are eligible for the exemption in SEC 34.203(b)(1) if they meet the Bureau's qualified mortgage criteria in 12 CFR 1026.43(e)(2), (4), (5), or (6) or 12 CFR 1026.43(f) (including limits on when loans must be consummated) or, for loans that are insured, guaranteed, or administered by HUD, VA, USDA, or RHS, in applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's criteria for a qualified mortgage applies to those loans). For example, assume that HUD has prescribed rules to define loans insured under its programs that are qualified mortgages and those rules are in effect. Assume further that a creditor designated as a Community Development Financial Institution, as defined under 12 CFR 1805.104(h), originates a loan insured by the Federal Housing Administration, which is a part of HUD. The loan is not a "covered transaction" and thus is not a qualified mortgage. See 12 CFR 1026.43(a)(3)(v)(A) and (b)(1). Nonetheless, the transaction is eligible for an exemption from the appraisal requirements of SEC 34.203(b)(1) if it meets the qualified mortgage criteria in HUD's rules. Nothing in SEC 34.203(b)(1) alters the definition of a qualified mortgage under regulations of the Bureau, HUD, VA, USDA, or RHS.

Paragraph 34.203(b)(2)

   1. Threshold amount. For purposes of SEC 34.203(b)(2), the threshold amount in effect during a particular one-year period is the amount stated below for that period. The threshold amount is adjusted effective January 1 of every year by the 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. Every year, this comment will be amended to provide the threshold amount for the upcoming one-year period after the annual percentage change in the CPI-W that was in effect on June 1 becomes available. Any increase in the threshold amount will be rounded to the nearest $100 increment. For example, if the 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 percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900.

   i. From January 18, 2014, through December 31, 2014, the threshold amount is $25,000.

   2. Qualifying for exemption--in general. A transaction is exempt under SEC 34.203(b)(2) if the creditor makes an extension of credit at consummation that is equal to or below the threshold amount in effect at the time of consummation.

   3. Qualifying for exemption--subsequent changes. A transaction does not meet the condition for an exemption under SEC 34.203(b)(2) merely because it is used to satisfy and replace an existing exempt loan, unless the amount of the new extension of credit is equal to or less than the applicable threshold amount. For example, assume a closed-end loan that qualified for a SEC 34.203(b)(2) exemption at consummation in year one is refinanced in year ten and that the new loan amount is greater than the threshold amount in effect in year ten. In these circumstances, the creditor must comply with all of the applicable requirements of SEC 34.203 with respect to the year ten transaction if the original loan is satisfied and replaced by the new loan, unless another exemption from the requirements of SEC 34.203 applies. See SEC 34.203(b) and SEC 34.203(d)(7).

* * * * *

Paragraph 34.203(b)(4)

* * * * *

   . Financing initial construction. The exemption for construction loans in SEC 34.203(b)(4) applies to temporary financing of the construction of a dwelling that will be replaced by permanent financing once construction is complete. The exemption does not apply, for example, to loans to finance the purchase of manufactured homes that have not been or are in the process of being built when the financing obtained by the consumer at that time is permanent. See SEC 34.203(b)(8).

* * * * *

Paragraph 34.203(b)(7)

Paragraph 34.203(b)(7)(i)(A)

   1. Same credit risk holder. The requirement that the holder of the credit risk on the existing obligation and the refinancing be the same applies to situations in which an entity bears the financial responsibility for the default of a loan by either holding the loan in its portfolio or guaranteeing payments of principal and any interest to investors in a mortgage-backed security in which the loan is pooled. See SEC 34.203(a)(2) (defining "credit risk"). For example, a credit risk holder could be a bank that bears the credit risk on the existing obligation by holding the loan in the bank's portfolio. Another example of a credit risk holder would be a government-sponsored enterprise that bears the risk of default on a loan by guaranteeing the payment of principal and any interest on a loan to investors in a mortgage-backed security. The holder of credit risk under SEC 34.203(b)(7)(i)(A) does not mean individual investors in a mortgage-backed security or providers of private mortgage insurance.

   2. Same credit risk holder--illustrations.

   Illustrations of the credit risk holder of the existing obligation continuing to be the credit risk holder of the refinancing include, but are not limited to, the following:

   i. The existing obligation is held in the portfolio of a bank, thus the bank holds the credit risk. The bank arranges to refinance the loan and also will hold the refinancing in its portfolio. If the refinancing otherwise meets the requirements for an exemption under SEC 34.203(b)(7), the transaction will qualify for the exemption because the credit risk holder is the same for the existing obligation and the refinance transaction. In this case, the exemption would apply regardless of whether the bank arranged to refinance the loan directly or indirectly, such as through the servicer or subservicer on the existing obligation.

   ii. The existing obligation is held in the portfolio of a government-sponsored enterprise (GSE), thus the GSE holds the credit risk. The existing obligation is then refinanced by the servicer of the loan and immediately transferred to the GSE. The GSE pools the refinancing in a mortgage-backed security guaranteed by the GSE, thus the GSE holds the credit risk on the refinance loan. If the refinance transaction otherwise meets the requirements for an exemption under SEC 34.203(b)(7), the transaction will qualify for the exemption because the credit risk holder is the same for the existing obligation and the refinance transaction. In this case, the exemption would apply regardless of whether the existing obligation was refinanced by the servicer or subservicer on the existing obligation (acting as a "creditor" under 12 CFR 1026.2(a)(17)) or by a different creditor.

   3. Forward commitments. A creditor may make a mortgage loan that will be sold or otherwise transferred pursuant to an agreement that has been entered into at or before the time the transaction is consummated. Such an agreement is sometimes known as a "forward commitment." A refinance loan does not satisfy the requirement of SEC 34.203(b)(7)(i)(A) if the loan will be acquired pursuant to a forward commitment, such that the credit risk on the refinance loan will transfer to a person who did not hold the credit risk on the existing obligation.

Paragraph 34.203(b)(7)(ii)

   1. Regular periodic payments. Under SEC 34.203(b)(7)(ii), the regular periodic payments on the refinance loan must not: Result in an increase of the principal balance (negative amortization); allow the consumer to defer repayment of principal (See 12 CFR 1026.43, and the Official Staff Interpretations to the Bureau's Regulation Z, comment 43(e)(2)(i)-2); or result in a balloon payment. Thus, the terms of the legal obligation must require the consumer to make payments of principal and interest on a monthly or other periodic basis that will repay the loan amount over the loan term. Except for payments resulting from any interest rate changes after consummation in an adjustable-rate or step-rate mortgage, the periodic payments must be substantially equal. For an explanation of the term "substantially equal," See 12 CFR 1026.43, the Official Staff Interpretations to the Bureau's Regulation Z, comment 43(c)(5)(i)-4. In addition, a single-payment transaction is not a refinancing meeting the requirements of SEC 34.203(b)(7) because it does not require "regular periodic payments."

Paragraph 34.203(b)(7)(iii)

   1. Permissible use of proceeds. The exemption for a refinancing under SEC 34.203(b)(7) is available only if the proceeds from the refinancing are used exclusively for the existing obligation and amounts attributed solely to the costs of the refinancing. The existing obligation includes the unpaid principal balance of the existing first lien loan, any earned unpaid finance charges, and any other lawful charges related to the existing loan. For guidance on the meaning of refinancing costs, See 12 CFR 1026.23, the Official Staff Interpretations to the Bureau's Regulations Z, comment 23(f)-4. If the proceeds of a refinancing are used for other purposes, such as to pay off other liens or to provide additional cash to the consumer for discretionary spending, the transaction does not qualify for the exemption for a refinancing under SEC 34.203(b)(7) from the appraisal requirements in SEC 34.203.

For applications received on or after July 18, 2015

Paragraph 34.203(b)(8)

Paragraph 34.203(b)(8)(i)

   1. Secured by new manufactured home and land--physical visit of the interior. A transaction secured by a new manufactured home and land is subject to the requirements of SEC 34.203(c) through (f) except for the requirement in SEC 34.203(c)(1) that the appraiser conduct a physical inspection of the interior of the property. Thus, for example, a creditor of a loan secured by a new manufactured home and land could comply with SEC 34.203(c)(1) by obtaining an appraisal conducted by a state-certified or -licensed appraiser based on plans and specifications for the new manufactured home and an inspection of the land on which the property will be sited, as well as any other information necessary for the appraiser to complete the appraisal assignment in conformity with the Uniform Standards of Professional Appraisal Practice and the requirements of FIRREA and any implementing regulations.

Paragraph 34.203(b)(8)(ii)

   1. Secured by a manufactured home and not land. Section 34.203(b)(8)(ii) applies to a higher-priced mortgage loan secured by a manufactured home and not land, regardless of whether the home is titled as realty by operation of state law.

Paragraph 34.203(b)(8)(ii)(B)

   1. Independent. A cost service provider from which the creditor obtains a manufactured home unit cost estimate under SEC 34.203(b)(8)(ii)(B) is "independent" if that person is not affiliated with the creditor in the transaction, such as by common corporate ownership, and receives no direct or indirect financial benefits based on whether the transaction is consummated.

   2. Adjustments. The requirement that the cost estimate be from an independent cost service provider does not prohibit a creditor from providing a cost estimate that reflects adjustments to account for factors such as special features, condition or location. However, the requirement that the estimate be obtained from an independent cost service provider means that any adjustments to the estimate must be based on adjustment factors available as part of the independent cost service used, with associated values that are determined by the independent cost service.

Paragraph 34.203(b)(8)(ii)(C)

   1. Interest in the property. A person has a direct or indirect in the property if, for example, the person has any ownership or reasonably foreseeable ownership interest in the manufactured home. To illustrate, a person who seeks a loan to purchase the manufactured home to be valued has a reasonably foreseeable ownership interest in the property.

   2. Interest in the transaction. A person has a direct or indirect interest in the transaction if, for example, the person or an affiliate of that person also serves as a loan officer of the creditor or otherwise arranges the credit transaction, or is the retail dealer of the manufactured home. A person also has a prohibited interest in the transaction if the person is compensated or otherwise receives financial or other benefits based on whether the transaction is consummated.

   3. Training in valuing manufactured homes. Training in valuing manufactured homes includes, for example, successfully completing a course in valuing manufactured homes offered by a state or national appraiser association or receiving job training from an employer in the business of valuing manufactured homes.

   4. Manufactured home valuation--example. A valuation in compliance with SEC 34.203(b)(8)(ii)(C) would include, for example, an appraisal of the manufactured home in accordance with the appraisal requirements for a manufactured home classified as personal property under the Title I Manufactured Home Loan Insurance Program of the U.S. Department of Housing and Urban Development, pursuant to section 2(b)(10) of the National Housing Act, 12 U.S.C. 1703(b)(10).

* * * * *

Paragraph 34.203(f)(2) * * *

   2. No waiver. Regulation B, 12 CFR 1002.14(a)(1), allowing the consumer to waive the requirement that the appraisal copy be provided three business days before consummation, does not apply to higher-priced mortgage loans subject to SEC 34.203. A consumer of a higher-priced mortgage loan subject to SEC 34.203 may not waive the timing requirement to receive a copy of the appraisal under SEC 34.203(f)(2).

* * * * *

Board of Governors of the Federal Reserve System

Authority and Issuance

   For the reasons stated above, the Board of Governors of the Federal Reserve System further amends Regulation Z, 12 CFR part 226, as amended at 78 FR 10368 (Feb. 13, 2013), as follows:

PART 226--TRUTH IN LENDING ACT (REGULATION Z)

   6. 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.

   7a. Section 226.43 is amended by:

   a. Revising paragraphs (a)(2) through (6);

   b. Adding paragraphs (a)(7) through (10);

   c. Revising paragraphs (b) introductory text, (b)(1) and (2) and (b)(5);

   d. Adding paragraphs (b)(7) and (8).

   The revisions and additions read as follows:

SEC 226.43 Appraisals for higher-priced mortgage loans.

   (a) * * *

   (2) Consummation has the same meaning as in 12 CFR 1026.2(a)(13).

   (3) Creditor has the same meaning as in 12 CFR 1026.2(a)(17).

   (4) Credit risk means the financial risk that a consumer will default on a loan.

   (5) Higher-priced mortgage loan has the same meaning as in 12 CFR 1026.35(a)(1).

   (6) Manufactured home has the same meaning as in 24 CFR 3280.2.

   (7) Manufacturer's invoice means a document issued by a manufacturer and provided with a manufactured home to a retail dealer that separately details the wholesale (base) prices at the factory for specific models or series of manufactured homes and itemized options (large appliances, built-in items and equipment), plus actual itemized charges for freight from the factory to the dealer's lot or the homesite (including any rental of wheels and axles) and for any sales taxes to be paid by the dealer. The invoice may recite such prices and charges on an itemized basis or by stating an aggregate price or charge, as appropriate, for each category.

   (8) National Registry means the database of information about State certified and licensed appraisers maintained by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council.

   (9) New manufactured home means a manufactured home that has not been previously occupied.

   (10) State agency means a "State appraiser certifying and licensing agency" recognized in accordance with section 1118(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3347(b)) and any implementing regulations.

   (b) Exemptions. Unless otherwise specified, the requirements in paragraphs (c) through (f) of this section do not apply to the following types of transactions:

   (1) A loan that satisfies the criteria of a qualified mortgage as defined pursuant to 15 U.S.C. 1639c;

   (2) An extension of credit for which the amount of credit extended is equal to or less than the applicable threshold amount, which is adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, as applicable, and published in the official staff commentary to this paragraph (b)(2);

* * * * *

   (5) A loan with a maturity of 12 months or less, if the purpose of the loan is a "bridge" loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling.

* * * * *

   (7) An extension of credit that is a refinancing secured by a first lien, with refinancing defined as in 12 CFR 1026.20(a) (except that the creditor need not be the original creditor or a holder or servicer of the original obligation), provided that the refinancing meets the following criteria:

   (i) Either--

   (A) The credit risk of the refinancing is retained by the person that held the credit risk of the existing obligation and there is no commitment, at consummation, to transfer the credit risk to another person; or

   (B) The refinancing is insured or guaranteed by the same Federal government agency that insured or guaranteed the existing obligation;

   (ii) The regular periodic payments under the refinance loan do not--

   (A) Cause the principal balance to increase;

   (B) Allow the consumer to defer repayment of principal; or

   (C) Result in a balloon payment, as defined in 12 CFR 1026.18(s)(5)(i); and

   (iii) The proceeds from the refinancing are used only to satisfy the existing obligation and to pay amounts attributed solely to the costs of the refinancing; and

   (8) A transaction secured in whole or in part by a manufactured home.

* * * * *

   7b. Effective July 18, 2015, SEC 226.43(b)(8) is revised to read as follows:

SEC 226.43 Appraisals for higher-priced mortgage loans

* * * * *

   (b) * * *

   (8) A transaction secured by:

   (i) A new manufactured home and land, but the exemption shall only apply to the requirement in paragraph (c)(1) of this section that the appraiser conduct a physical visit of the interior of the new manufactured home; or

   (ii) A manufactured home and not land, for which the creditor obtains one of the following and provides a copy to the consumer no later than three business days prior to consummation of the transaction--

   (A) For a new manufactured home, the manufacturer's invoice for the manufactured home securing the transaction, provided that the date of manufacture is no earlier than 18 months prior to the creditor's receipt of the consumer's application for credit;

   (B) A cost estimate of the value of the manufactured home securing the transaction obtained from an independent cost service provider; or

   (C) A valuation, as defined in 12 CFR 1026.42(b)(3), of the manufactured home performed by a person who has no direct or indirect interest, financial or otherwise, in the property or transaction for which the valuation is performed and has training in valuing manufactured homes.

* * * * *

   8. In Appendix N to part 226, the introductory text is republished and paragraph 7 is revised to read as follows:

Appendix N to Part 226--Higher-Priced Mortgage Loan Appraisal Safe Harbor Review

   To qualify for the safe harbor provided in SEC 226.43(c)(2), a creditor must confirm that the written appraisal:

* * * * *

   7. Indicates that a physical property visit of the interior of the property was performed, as applicable.

* * * * *

   9. In Supplement I to part 226, under Section 226.43--Appraisals for Higher-Priced Mortgage Loans:

   a. Under the entry for 43(b), paragraph 1 is added;

   b. A 43(b)(1) entry is added.

   c. The 43(b)(2) entry is revised.

   d. Under the 43(b)(4) entry, paragraph 2 is added.

   e. A 43(b)(7) entry is added.

   f. Effective July 18, 2015, a 43(b)(8) entry is added.

   g. Under entry 43(f)(2), paragraph 2 is removed and paragraph 3 is redesignated as paragraph 2 and revised.

   The additions and revisions read as follows:

Supplement I to Part 226--Official Interpretations

* * * * *

Section 226.43--Appraisals for Higher-Priced Mortgage Loans

* * * * *

43(b) Exemptions

   1. Compliance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Section 226.43(b) provides exemptions solely from the requirements of SEC 226.43(c) through (f). Institutions subject to the requirements of FIRREA and its implementing regulations that make a loan qualifying for an exemption under SEC 226.43(b) must still comply with appraisal and evaluation requirements under FIRREA and its implementing regulations.

Paragraph 43(b)(1)

   1. Qualified mortgage criteria. Under SEC 226.43(b)(1), a loan is exempt from the appraisal requirements of SEC 226.43 if either:

   i. The loan is--(1) subject to the ability-to-repay requirements of the Bureau of Consumer Financial Protection (Bureau) in 12 CFR 1026.43 as a "covered transaction" (defined in 12 CFR 1026.43(b)(1)) and (2) a qualified mortgage pursuant to the Bureau's rules or, for loans insured, guaranteed, or administered by the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA), or Rural Housing Service (RHS), a qualified mortgage pursuant to applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's definition of a qualified mortgage applies to those loans); or

   ii. The loan is--(1) not subject to the Bureau's ability-to-repay requirements in 12 CFR 1026.43 as a "covered transaction" (defined in 12 CFR 1026.43(b)(1)), but (2) meets the criteria for a qualified mortgage in the Bureau's rules or, for loans insured, guaranteed, or administered by HUD, VA, USDA, or RHS, meets the criteria for a qualified mortgage in the applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's criteria for a qualified mortgage applies to those loans). To explain further, loans enumerated in 12 CFR 1026.43(a) are not "covered transactions" under the Bureau's ability-to-repay requirements in 12 CFR 1026.43, and thus cannot be qualified mortgages (entitled to a rebuttable presumption or safe harbor of compliance with the ability-to-repay requirements of 12 CFR 1026.43, see, e.g., 12 CFR 1026.43(e)(1)). These include an extension of credit made pursuant to a program administered by a Housing Finance Agency, as defined under 24 CFR 266.5, or pursuant to a program authorized by sections 101 and 109 of the Emergency Economic Stabilization Act of 2008. See 12 CFR 1026.43(a)(3)(iv) and (vi). They also include extensions of credit made by a creditor identified in 12 CFR 1026.43(a)(3)(v). However, these loans are eligible for the exemption in SEC 226.43(b)(1) if they meet the Bureau's qualified mortgage criteria in SEC 1026.43(e)(2), (4), (5), or (6) or SEC 1026.43(f) (including limits on when loans must be consummated) or, for loans that are insured, guaranteed, or administered by HUD, VA, USDA, or RHS, in applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's criteria for a qualified mortgage applies to those loans). For example, assume that HUD has prescribed rules to define loans insured under its programs that are qualified mortgages and those rules are in effect. Assume further that a creditor designated as a Community Development Financial Institution, as defined under 12 CFR 1805.104(h), originates a loan insured by the Federal Housing Administration, which is a part of HUD. The loan is not a "covered transaction" and thus is not a qualified mortgage. See 12 CFR 1026.43(a)(3)(v)(A) and (b)(1). Nonetheless, the transaction is eligible for an exemption from the appraisal requirements of SEC 226.43 if it meets the qualified mortgage criteria in HUD's rules. Nothing in SEC 226.43(b)(1) alters the definition of a qualified mortgage under regulations of the Bureau, HUD, VA, USDA, or RHS.

Paragraph 43(b)(2)

   1. Threshold amount. For purposes of SEC 226.43(b)(2), the threshold amount in effect during a particular one-year period is the amount stated below for that period. The threshold amount is adjusted effective January 1 of every year by the 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. Every year, this comment will be amended to provide the threshold amount for the upcoming one-year period after the annual percentage change in the CPI-W that was in effect on June 1 becomes available. Any increase in the threshold amount will be rounded to the nearest $100 increment. For example, if the 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 percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900.

   i. From January 18, 2014, through December 31, 2014, the threshold amount is $25,000.

   2. Qualifying for exemption--in general. A transaction is exempt under SEC 226.43(b)(2) if the creditor makes an extension of credit at consummation that is equal to or below the threshold amount in effect at the time of consummation.

   3. Qualifying for exemption--subsequent changes. A transaction does not meet the condition for an exemption under SEC 226.43(b)(2) merely because it is used to satisfy and replace an existing exempt loan, unless the amount of the new extension of credit is equal to or less than the applicable threshold amount. For example, assume a closed-end loan that qualified for a SEC 226.43(b)(2) exemption at consummation in year one is refinanced in year ten and that the new loan amount is greater than the threshold amount in effect in year ten. In these circumstances, the creditor must comply with all of the applicable requirements of SEC 226.43 with respect to the year ten transaction if the original loan is satisfied and replaced by the new loan, unless another exemption from the requirements of SEC 226.43 applies. See SEC 226.43(b) and (d)(7).

* * * * *

Paragraph 43(b)(4)

* * * * *

   2. Financing initial construction. The exemption for construction loans in SEC 226.43(b)(4) applies to temporary financing of the construction of a dwelling that will be replaced by permanent financing once construction is complete. The exemption does not apply, for example, to loans to finance the purchase of manufactured homes that have not been or are in the process of being built when the financing obtained by the consumer at that time is permanent. See SEC 226.43(b)(8).

Paragraph 43(b)(7)(i)(A)

   1. Same credit risk holder. The requirement that the holder of the credit risk on the existing obligation and the refinancing be the same applies to situations in which an entity bears the financial responsibility for the default of a loan by either holding the loan in its portfolio or guaranteeing payments of principal and any interest to investors in a mortgage-backed security in which the loan is pooled. See SEC 226.43(a)(4) (defining "credit risk"). For example, a credit risk holder could be a bank that bears the credit risk on the existing obligation by holding the loan in the bank's portfolio. Another example of a credit risk holder would be a government-sponsored enterprise that bears the risk of default on a loan by guaranteeing the payment of principal and any interest on a loan to investors in a mortgage-backed security. The holder of credit risk under SEC 226.43(b)(7)(i)(A) does not mean individual investors in a mortgage-backed security or providers of private mortgage insurance.

   2. Same credit risk holder--illustrations.

   Illustrations of the credit risk holder of the existing obligation continuing to be the credit risk holder of the refinancing include, but are not limited to, the following:

   i. The existing obligation is held in the portfolio of a bank, thus the bank holds the credit risk. The bank arranges to refinance the loan and also will hold the refinancing in its portfolio. If the refinancing otherwise meets the requirements for an exemption under SEC 226.43(b)(7), the transaction will qualify for the exemption because the credit risk holder is the same for the existing obligation and the refinance transaction. In this case, the exemption would apply regardless of whether the bank arranged to refinance the loan directly or indirectly, such as through the servicer or subservicer on the existing obligation.

   ii. The existing obligation is held in the portfolio of a government-sponsored enterprise (GSE), thus the GSE holds the credit risk. The existing obligation is then refinanced by the servicer of the loan and immediately transferred to the GSE. The GSE pools the refinancing in a mortgage-backed security guaranteed by the GSE, thus the GSE holds the credit risk on the refinance loan. If the refinance transaction otherwise meets the requirements for an exemption under SEC 226.43(b)(7), the transaction will qualify for the exemption because the credit risk holder is the same for the existing obligation and the refinance transaction. In this case, the exemption would apply regardless of whether the existing obligation was refinanced by the servicer or subservicer on the existing obligation (acting as a "creditor" under SEC 1026.2(a)(17)) or by a different creditor.

   3. Forward commitments. A creditor may make a mortgage loan that will be sold or otherwise transferred pursuant to an agreement that has been entered into at or before the time the transaction is consummated. Such an agreement is sometimes known as a "forward commitment." A refinance loan does not satisfy the requirement of SEC 226.43(b)(7)(i)(A) if the loan will be acquired pursuant to a forward commitment, such that the credit risk on the refinance loan will transfer to a person who did not hold the credit risk on the existing obligation.

Paragraph 43(b)(7)

Paragraph 43(b)(7)(ii)

   1. Regular periodic payments. Under SEC 226.43(b)(7)(ii), the regular periodic payments on the refinance loan must not: result in an increase of the principal balance (negative amortization); allow the consumer to defer repayment of principal (See 12 CFR 1026.43 and the Official Staff Interpretations to the Bureau's Regulation Z, comment 43(e)(2)(i)-2); or result in a balloon payment. Thus, the terms of the legal obligation must require the consumer to make payments of principal and interest on a monthly or other periodic basis that will repay the loan amount over the loan term. Except for payments resulting from any interest rate changes after consummation in an adjustable-rate or step-rate mortgage, the periodic payments must be substantially equal. For an explanation of the term "substantially equal," see 12 CFR 1026.43 and the Official Staff Interpretations to the Bureau's Regulation Z, comment 43(c)(5)(i)-4. In addition, a single-payment transaction is not a refinancing meeting the requirements of SEC 226.43(b)(7) because it does not require "regular periodic payments."

Paragraph 43(b)(7)(iii)

   1. Permissible use of proceeds. The exemption for a refinancing under SEC 226.43(b)(7) is available only if the proceeds from the refinancing are used exclusively for the existing obligation and amounts attributed solely to the costs of the refinancing. The existing obligation includes the unpaid principal balance of the existing first lien loan, any earned unpaid finance charges, and any other lawful charges related to the existing loan. For guidance on the meaning of refinancing costs, see 12 CFR 1026.23, the Official Staff Interpretations to the Bureau's Regulations Z, comment 23(f)-4. If the proceeds of a refinancing are used for other purposes, such as to pay off other liens or to provide additional cash to the consumer for discretionary spending, the transaction does not qualify for the exemption for a refinancing under SEC 226.43(b)(7) from the appraisal requirements in SEC 226.43.

For applications received on or after July 18, 2015

Paragraph 43(b)(8)

Paragraph 43(b)(8)(i)

   1. Secured by new manufactured home and land--physical visit of the interior. A transaction secured by a new manufactured home and land is subject to the requirements of SEC 226.43(c) through (f) except for the requirement in SEC 226.43(c)(1) that the appraiser conduct a physical inspection of the interior of the property. Thus, for example, a creditor of a loan secured by a new manufactured home and land could comply with SEC 226.43(c)(1) by obtaining an appraisal conducted by a state-certified or -licensed appraiser based on plans and specifications for the new manufactured home and an inspection of the land on which the property will be sited, as well as any other information necessary for the appraiser to complete the appraisal assignment in conformity with the Uniform Standards of Professional Appraisal Practice and the requirements of FIRREA and any implementing regulations.

Paragraph 43(b)(8)(ii)

   1. Secured by a manufactured home and not land. Section 226.43(b)(8)(ii) applies to a higher-priced mortgage loan secured by a manufactured home and not land, regardless of whether the home is titled as realty by operation of State law.

Paragraph 43(b)(8)(ii)(B)

   1. Independent. A cost service provider from which the creditor obtains a manufactured home unit cost estimate under SEC 226.43(b)(8)(ii)(B) is "independent" if that person is not affiliated with the creditor in the transaction, such as by common corporate ownership, and receives no direct or indirect financial benefits based on whether the transaction is consummated.

   2. Adjustments. The requirement that the cost estimate be from an independent cost service provider does not prohibit a creditor from providing a cost estimate that reflects adjustments to account for factors such as special features, condition or location. However, the requirement that the estimate be obtained from an independent cost service provider means that any adjustments to the estimate must be based on adjustment factors available as part of the independent cost service used, with associated values that are determined by the independent cost service.

Paragraph 43(b)(8)(ii)(C)

   1. Interest in the property. A person has a direct or indirect in the property if, for example, the person has any ownership or reasonably foreseeable ownership interest in the manufactured home. To illustrate, a person who seeks a loan to purchase the manufactured home to be valued has a reasonably foreseeable ownership interest in the property.

   2. Interest in the transaction. A person has a direct or indirect interest in the transaction if, for example, the person or an affiliate of that person also serves as a loan officer of the creditor or otherwise arranges the credit transaction, or is the retail dealer of the manufactured home. A person also has a prohibited interest in the transaction if the person is compensated or otherwise receives financial or other benefits based on whether the transaction is consummated.

   3. Training in valuing manufactured homes. Training in valuing manufactured homes includes, for example, successfully completing a course in valuing manufactured homes offered by a State or national appraiser association or receiving job training from an employer in the business of valuing manufactured homes.

   4. Manufactured home valuation--example. A valuation in compliance with SEC 226.43(b)(8)(ii)(C) would include, for example, an appraisal of the manufactured home in accordance with the appraisal requirements for a manufactured home classified as personal property under the Title I Manufactured Home Loan Insurance Program of the U.S. Department of Housing and Urban Development, pursuant to section 2(b)(10) of the National Housing Act, 12 U.S.C. 1703(b)(10).

* * * * *

43(f)(2) Timing

* * * * *

   2. No waiver. Regulation B, 12 CFR 1002.14(a)(1), allowing the consumer to waive the requirement that the appraisal copy be provided three business days before consummation, does not apply to higher-priced mortgage loans subject to SEC 226.43. A consumer of a higher-priced mortgage loan subject to SEC 226.43 may not waive the timing requirement to receive a copy of the appraisal under SEC 226.43(f)(2).

* * * * *

Bureau of Consumer Financial Protection

Authority and Issuance

   For the reasons stated above, the Bureau further amends Regulation Z, 12 CFR part 1026, as amended February 13, 2013 (78 FR 10368), as follows:

PART 1026--TRUTH IN LENDING ACT (REGULATION Z)

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

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

Subpart E--Special Rules for Certain Home Mortgage Transactions

   11a. Section 1026.35 is amended by;

   a. Revising the paragraph (c) subject heading and paragraphs (c)(1)(ii) through (iv);

   b. Adding paragraphs (c)(1)(v) through (vii);

   c. Revising paragraphs (c)(2) introductory text, (c)(2)(i) and (ii), and (v); and

   d. Adding paragraphs (c)(2)(vii) and (viii).

   The revisions and additions read as follows:

SEC 1026.35 Requirements for higher-priced mortgage loans.

* * * * *

   (c) Appraisals --(1) * * *

   (ii) Credit risk means the financial risk that a consumer will default on a loan.

   (iii) Manufactured home has the same meaning as in 24 CFR 3280.2.

   (iv) Manufacturer's invoice means a document issued by a manufacturer and provided with a manufactured home to a retail dealer that separately details the wholesale (base) prices at the factory for specific models or series of manufactured homes and itemized options (large appliances, built-in items and equipment), plus actual itemized charges for freight from the factory to the dealer's lot or the homesite (including any rental of wheels and axles) and for any sales taxes to be paid by the dealer. The invoice may recite such prices and charges on an itemized basis or by stating an aggregate price or charge, as appropriate, for each category.

   (v) National Registry means the database of information about State certified and licensed appraisers maintained by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council.

   (vi) New manufactured home means a manufactured home that has not been previously occupied.

   (vii) State agency means a "State appraiser certifying and licensing agency" recognized in accordance with section 1118(b) of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (12 U.S.C. 3347(b)) and any implementing regulations.

   (2) Exemptions. Unless otherwise specified, the requirements in paragraph (c)(3) through (6) of this section do not apply to the following types of transactions:

   (i) A loan that satisfies the criteria of a qualified mortgage as defined pursuant to 15 U.S.C. 1639c;

   (ii) An extension of credit for which the amount of credit extended is equal to or less than the applicable threshold amount, which is adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, as applicable, and published in the official staff commentary to this paragraph (c)(2)(ii);

* * * * *

   (v) A loan with a maturity of 12 months or less, if the purpose of the loan is a "bridge" loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling.

* * * * *

   (vii) An extension of credit that is a refinancing secured by a first lien, with refinancing defined as in SEC 1026.20(a) (except that the creditor need not be the original creditor or a holder or servicer of the original obligation), provided that the refinancing meets the following criteria:

   (A) Either--

   ( 1) The credit risk of the refinancing is retained by the person that held the credit risk of the existing obligation and there is no commitment, at consummation, to transfer the credit risk to another person; or

   ( 2) The refinancing is insured or guaranteed by the same Federal government agency that insured or guaranteed the existing obligation;

   (B) The regular periodic payments under the refinance loan do not--

   ( 1) Cause the principal balance to increase;

   ( 2) Allow the consumer to defer repayment of principal; or

   ( 3) Result in a balloon payment, as defined in SEC 1026.18(s)(5)(i); and

   (C) The proceeds from the refinancing are used solely to satisfy the existing obligation and amounts attributed solely to the costs of the refinancing; and

   (viii) A transaction secured in whole or in part by a manufactured home.

   11b. Effective July 18, 2015, SEC 1026.35(c)(2)(viii) is revised to read as follows:

SEC 1026.35 Requirements for higher-priced mortgage loans.

* * * * *

   (c) * * *

   (2) * * *

   (viii) A transaction secured by:

   (A) A new manufactured home and land, but the exemption shall only apply to the requirement in paragraph (c)(3)(i) of this section that the appraiser conduct a physical visit of the interior of the new manufactured home; or

   (B) A manufactured home and not land, for which the creditor obtains one of the following and provides a copy to the consumer no later than three business days prior to consummation of the transaction--

   ( 1) For a new manufactured home, the manufacturer's invoice for the manufactured home securing the transaction, provided that the date of manufacture is no earlier than 18 months prior to the creditor's receipt of the consumer's application for credit;

   ( 2) A cost estimate of the value of the manufactured home securing the transaction obtained from an independent cost service provider; or

   ( 3) A valuation, as defined in SEC 1026.42(b)(3), of the manufactured home performed by a person who has no direct or indirect interest, financial or otherwise, in the property or transaction for which the valuation is performed and has training in valuing manufactured homes.

* * * * *

   12. In Appendix N to part 1026, the introductory text is republished and paragraph 7 is revised to read as follows:

Appendix N To Part 1026--Higher-Priced Mortgage Loan Appraisal Safe Harbor Review

   To qualify for the safe harbor provided in SEC 1026.35(c)(3)(ii), a creditor must confirm that the written appraisal:

* * * * *

   7. Indicates that a physical property visit of the interior of the property was performed, as applicable.

* * * * *

   13. In Supplement I to part 1026, under Section 1026.35--Requirements for Higher Priced Mortgages Loans:

   a. The 35(c)(2) entry is amended by adding paragraph 1.

   b. A 35(c)(2)(i) entry is added.

   c. The 35(c)(2)(ii) entry is revised.

   d. The 35(c)(2)(iv) entry is amended by adding paragraph 2.

   e. A 35(c)(2)(vii)(A)( 1) entry is added.

   f. Entries for 35(c)(2)(vii)(B) and (C) are added.

   g. Effective July 18, 2015, entries for 35(c)(2)(viii)(A) and (B) are added.

   h. Effective July 18, 2015, a 35(c)(2)(viii)(B)( 2) entry is added.

   i. Effective July 18, 2015, a 35(c)(2)(viii)(C)( 3) entry is added.

   j. Under the 35(c)(6)(ii) entry, paragraph 2 is removed and paragraph 3 is redesignated as paragraph 2.

   The revisions and additions read as follows:

Supplement I to Part 1026--Official Interpretations

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Subpart E--Special Rules for Certain Home Mortgage Transactions

Section 1026.35--Requirements for Higher-Priced Mortgage Loans

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Paragraph 35(c)(2) Exemptions

   1. Compliance with title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Section 1026.35(c)(2) provides exemptions solely from the requirements of section 1026.35(c)(3) through (6). Institutions subject to the requirements of FIRREA and its implementing regulations that make a loan qualifying for an exemption under section 1026.35(c)(2) must still comply with appraisal and evaluation requirements under FIRREA and its implementing regulations.

Paragraph 35(c)(2)(i)

   1. Qualified mortgage criteria. Under SEC 1026.35(c)(2)(i), a loan is exempt from the appraisal requirements of SEC 1026.35(c) if either:

   i. The loan is--(1) subject to the Bureau's ability-to-repay requirements in SEC 1026.43 as a "covered transaction" (defined in SEC 1026.43(b)(1)) and (2) a qualified mortgage pursuant to the Bureau's rules or, for loans insured, guaranteed, or administered by the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Veterans Affairs (VA), U.S. Department of Agriculture (USDA), or Rural Housing Service (RHS), a qualified mortgage pursuant to applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's definition of a qualified mortgage applies to those loans); or

   ii. The loan is--(1) not subject to the Bureau's ability-to-repay requirements in SEC 1026.43 as a "covered transaction" (defined in SEC 1026.43(b)(1)), but (2) meets the criteria for a qualified mortgage in the Bureau's rules or, for loans insured, guaranteed, or administered by HUD, VA, USDA, or RHS, meets the criteria for a qualified mortgage in the applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's criteria for a qualified mortgage applies to those loans). To explain further, loans enumerated in SEC 1026.43(a) are not "covered transactions" under the Bureau's ability-to-repay requirements in SEC 1026.43, and thus cannot be qualified mortgages (entitled to a rebuttable presumption or safe harbor of compliance with the ability-to-repay requirements of SEC 1026.43, see, e.g., SEC 1026.43(e)(1)). These include an extension of credit made pursuant to a program administered by a Housing Finance Agency, as defined under 24 CFR 266.5, or pursuant to a program authorized by sections 101 and 109 of the Emergency Economic Stabilization Act of 2008. See SEC 1026.43(a)(3)(iv) and (vi). They also include extensions of credit made by a creditor identified in SEC 1026.43(a)(3)(v). However, these loans are eligible for the exemption in SEC 1026.35(c)(2)(i) if they meet the Bureau's qualified mortgage criteria in SEC 1026.43(e)(2), (4), (5), or (6) or SEC 1026.43(f) (including limits on when loans must be consummated) or, for loans that are insured, guaranteed, or administered by HUD, VA, USDA, or RHS, in applicable rules prescribed by those agencies (but only once such rules are in effect; otherwise, the Bureau's criteria for a qualified mortgage applies to those loans). For example, assume that HUD has prescribed rules to define loans insured under its programs that are qualified mortgages and those rules are in effect. Assume further that a creditor designated as a Community Development Financial Institution, as defined under 12 CFR 1805.104(h), originates a loan insured by the Federal Housing Administration, which is a part of HUD. The loan is not a "covered transaction" and thus is not a qualified mortgage. See SEC 1026.43(a)(3)(v)(A) and (b)(1). Nonetheless, the transaction is eligible for an exemption from the appraisal requirements of SEC 1026.35(c) if it meets the qualified mortgage criteria in HUD's rules. Nothing in SEC 1026.35(c)(2)(i) alters the definition of a qualified mortgage under regulations of the Bureau, HUD, VA, USDA, or RHS.

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Paragraph 35(c)(2)(ii)

   1. Threshold amount. For purposes of SEC 1026.35(c)(2)(ii), the threshold amount in effect during a particular one-year period is the amount stated below for that period. The threshold amount is adjusted effective January 1 of every year by the 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. Every year, this comment will be amended to provide the threshold amount for the upcoming one-year period after the annual percentage change in the CPI-W that was in effect on June 1 becomes available. Any increase in the threshold amount will be rounded to the nearest $100 increment. For example, if the 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 percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900.

   i. From January 18, 2014, through December 31, 2014, the threshold amount is $25,000.

   2. Qualifying for exemption--in general. A transaction is exempt under SEC 1026.35(c)(2)(ii) if the creditor makes an extension of credit at consummation that is equal to or below the threshold amount in effect at the time of consummation.

   3. Qualifying for exemption--subsequent changes. A transaction does not meet the condition for an exemption under SEC 1026.35(c)(2)(ii) merely because it is used to satisfy and replace an existing exempt loan, unless the amount of the new extension of credit is equal to or less than the applicable threshold amount. For example, assume a closed-end loan that qualified for a SEC 1026.35(c)(2)(ii) exemption at consummation in year one is refinanced in year ten and that the new loan amount is greater than the threshold amount in effect in year ten. In these circumstances, the creditor must comply with all of the applicable requirements of SEC 1026.35(c) with respect to the year ten transaction if the original loan is satisfied and replaced by the new loan, unless another exemption from the requirements of SEC 1026.35(c) applies. See SEC 1026.35(c)(2) and SEC 1026.35(c)(4)(vii).

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Paragraph 35(c)(2)(iv)

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   2. Financing initial construction. The exemption for construction loans in SEC 1026.35(c)(2)(iv) applies to temporary financing of the construction of a dwelling that will be replaced by permanent financing once construction is complete. The exemption does not apply, for example, to loans to finance the purchase of manufactured homes that have not been or are in the process of being built when the financing obtained by the consumer at that time is permanent. See SEC 1026.35(c)(2)(viii).

Paragraph 35(c)(2)(vii)(A)( 1)

   1. Same credit risk holder. The requirement that the holder of the credit risk on the existing obligation and the refinancing be the same applies to situations in which an entity bears the financial responsibility for the default of a loan by either holding the loan in its portfolio or guaranteeing payments of principal and any interest to investors in a mortgage-backed security in which the loan is pooled. See SEC 1026.35(c)(1)(ii) (defining "credit risk"). For example, a credit risk holder could be a bank that bears the credit risk on the existing obligation by holding the loan in the bank's portfolio. Another example of a credit risk holder would be a government-sponsored enterprise that bears the risk of default on a loan by guaranteeing the payment of principal and any interest on a loan to investors in a mortgage-backed security. The holder of credit risk under SEC 1026.35(c)(2)(vii)(A)( 1) does not mean individual investors in a mortgage-backed security or providers of private mortgage insurance.

   2. Same credit risk holder--illustrations.

   Illustrations of the credit risk holder of the existing obligation continuing to be the credit risk holder of the refinancing include, but are not limited to, the following:

   i. The existing obligation is held in the portfolio of a bank, thus the bank holds the credit risk. The bank arranges to refinance the loan and also will hold the refinancing in its portfolio. If the refinancing otherwise meets the requirements for an exemption under SEC 1026.35(c)(2)(vii), the transaction will qualify for the exemption because the credit risk holder is the same for the existing obligation and the refinance transaction. In this case, the exemption would apply regardless of whether the bank arranged to refinance the loan directly or indirectly, such as through the servicer or subservicer on the existing obligation.

   ii. The existing obligation is held in the portfolio of a government-sponsored enterprise (GSE), thus the GSE holds the credit risk. The existing obligation is then refinanced by the servicer of the loan and immediately transferred to the GSE. The GSE pools the refinancing in a mortgage-backed security guaranteed by the GSE, thus the GSE holds the credit risk on the refinance loan. If the refinance transaction otherwise meets the requirements for an exemption under SEC 1026.35(c)(2)(vii), the transaction will qualify for the exemption because the credit risk holder is the same for the existing obligation and the refinance transaction. In this case, the exemption would apply regardless of whether the existing obligation was refinanced by the servicer or subservicer on the existing obligation (acting as a "creditor" under SEC 1026.2(a)(17)) or by a different creditor.

   3. Forward commitments. A creditor may make a mortgage loan that will be sold or otherwise transferred pursuant to an agreement that has been entered into at or before the time the transaction is consummated. Such an agreement is sometimes known as a "forward commitment." A refinance loan does not satisfy the requirement of SEC 1026.35(c)(2)(vii)(A)( 1) if the loan will be acquired pursuant to a forward commitment, such that the credit risk on the refinance loan will transfer to a person who did not hold the credit risk on the existing obligation.

Paragraph 35(c)(2)(vii)(B)

   1. Regular periodic payments. Under SEC 1026.35(c)(2)(vii)(B), the regular periodic payments on the refinance loan must not: result in an increase of the principal balance (negative amortization); allow the consumer to defer repayment of principal (See comment 43(e)(2)(i)-2); or result in a balloon payment. Thus, the terms of the legal obligation must require the consumer to make payments of principal and interest on a monthly or other periodic basis that will repay the loan amount over the loan term. Except for payments resulting from any interest rate changes after consummation in an adjustable-rate or step-rate mortgage, the periodic payments must be substantially equal. For an explanation of the term "substantially equal," see comment 43(c)(5)(i)-4. In addition, a single-payment transaction is not a refinancing meeting the requirements of SEC 1026.35(c)(2)(vii) because it does not require "regular periodic payments."

Paragraph 35(c)(2)(vii)(C)

   1. Permissible use of proceeds. The exemption for a refinancing under SEC 1026.35(c)(2)(vii) is available only if the proceeds from the refinancing are used exclusively for the existing obligation and amounts attributed solely to the costs of the refinancing. The existing obligation includes the unpaid principal balance of the existing first lien loan, any earned unpaid finance charges, and any other lawful charges related to the existing loan. For guidance on the meaning of refinancing costs, see comment 23(f)-4. If the proceeds of a refinancing are used for other purposes, such as to pay off other liens or to provide additional cash to the consumer for discretionary spending, the transaction does not qualify for the exemption for a refinancing under SEC 1026.35(c)(2)(vii) from the appraisal requirements in SEC 1026.35(c).

For applications received on or after July 18, 2015

Paragraph 35(c)(2)(viii)(A)

   1. Secured by new manufactured home and land--physical visit of the interior. A transaction secured by a new manufactured home and land is subject to the requirements of SEC 1026.35(c)(3) through (6) except for the requirement in SEC 1026.35(c)(3)(i) that the appraiser conduct a physical inspection of the interior of the property. Thus, for example, a creditor of a loan secured by a new manufactured home and land could comply with SEC 1026.35(c)(3)(i) by obtaining an appraisal conducted by a state-certified or -licensed appraiser based on plans and specifications for the new manufactured home and an inspection of the land on which the property will be sited, as well as any other information necessary for the appraiser to complete the appraisal assignment in conformity with the Uniform Standards of Professional Appraisal Practice and the requirements of FIRREA and any implementing regulations.

Paragraph 35(c)(2)(viii)(B)

   1. Secured by a manufactured home and not land. Section 1026.35(c)(2)(viii)(B) applies to a higher-priced mortgage loan secured by a manufactured home and not land, regardless of whether the home is titled as realty by operation of state law.

Paragraph 35(c)(2)(viii)(B)( 2)

   1. Independent. A cost service provider from which the creditor obtains a manufactured home unit cost estimate under SEC 1026.35(c)(2)(viii)(B)( 2) is "independent" if that person is not affiliated with the creditor in the transaction, such as by common corporate ownership, and receives no direct or indirect financial benefits based on whether the transaction is consummated.

   2. Adjustments. The requirement that the cost estimate be from an independent cost service provider does not prohibit a creditor from providing a cost estimate that reflects adjustments to account for factors such as special features, condition or location. However, the requirement that the estimate be obtained from an independent cost service provider means that any adjustments to the estimate must be based on adjustment factors available as part of the independent cost service used, with associated values that are determined by the independent cost service.

Paragraph 35(c)(2)(viii)(C)( 3)

   1. Interest in the property. A person has a direct or indirect in the property if, for example, the person has any ownership or reasonably foreseeable ownership interest in the manufactured home. To illustrate, a person who seeks a loan to purchase the manufactured home to be valued has a reasonably foreseeable ownership interest in the property.

   2. Interest in the transaction. A person has a direct or indirect interest in the transaction if, for example, the person or an affiliate of that person also serves as a loan officer of the creditor or otherwise arranges the credit transaction, or is the retail dealer of the manufactured home. A person also has a prohibited interest in the transaction if the person is compensated or otherwise receives financial or other benefits based on whether the transaction is consummated.

   3. Training in valuing manufactured homes. Training in valuing manufactured homes includes, for example, successfully completing a course in valuing manufactured homes offered by a state or national appraiser association or receiving job training from an employer in the business of valuing manufactured homes.

   4. Manufactured home valuation--example. A valuation in compliance with SEC 1026.35(c)(2)(viii)(B)( 3) would include, for example, an appraisal of the manufactured home in accordance with the appraisal requirements for a manufactured home classified as personal property under the Title I Manufactured Home Loan Insurance Program of the U.S. Department of Housing and Urban Development, pursuant to section 2(b)(10) of the National Housing Act, 12 U.S.C. 1703(b)(10).

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   Dated: December 10, 2013.

Thomas J. Curry,

Comptroller of the Currency.

   By order of the Board of Governors of the Federal Reserve System, December 11, 2013.

Robert deV. Frierson,

Secretary of the Board.

   Dated: December 10, 2013.

Richard Cordray,

Director, Bureau of Consumer Financial Protection.

In consultation with:

By the National Credit Union Administration Board on December 10, 2013.

Gerard Poliquin,

Secretary of the Board.

   Dated at Washington, DC, this 10th day of December, 2013.

By order of the Board of Directors.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

   Dated: December 9, 2013.

Edward J. DeMarco,

Acting Director, Federal Housing Finance Agency.

[FR Doc. 2013-30108 Filed 12-18-13; 4:15 pm]

BILLING CODE 4810-33-P