Appraisals for Higher-Priced Mortgage Loans Exemption Threshold

Final rules, official interpretations, and commentary.

CFR Part: "12 CFR Part 34"; "12 CFR Part 226"; "12 CFR Part 1026"

RIN Number: "RIN 1557-AF23"; "RIN 7100-AG19"

Citation: "88 FR 83311"

Document Number: "Docket No. OCC-2023-0012"; "Docket No. R-1819"

Page Number: "83311"

"Rules and Regulations"

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

SUMMARY: The OCC, the Board, and the Bureau are finalizing amendments to the official interpretations for their regulations that implement section 129H of the Truth in Lending Act (TILA). Section 129H of TILA establishes special appraisal requirements for "higher-risk mortgages," termed "higher-priced mortgage loans" or "HPMLs" in the agencies' regulations. The OCC, the Board, the Bureau, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Federal Housing Finance Agency (FHFA) (collectively, the Agencies) jointly issued final rules implementing these requirements, effective January 18, 2014. The Agencies' rules exempted, among other loan types, transactions of $25,000 or less, and required that this loan amount be adjusted annually based on any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is no annual percentage increase in the CPI-W, the OCC, the Board, and the Bureau will not adjust this exemption threshold from the prior year. Additionally, in years following a year in which the exemption threshold was not adjusted because the CPI-W decreased, the threshold is calculated by applying the annual percentage increase in the CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account. Based on the CPI-W in effect as of June 1, 2023, the exemption threshold will increase from $31,000 to $32,400, effective January 1, 2024.

DATES:

This final rule is effective January 1, 2024.

FOR FURTHER INFORMATION CONTACT:

OCC: MaryAnn Nash, Counsel, Chief Counsel's Office, Office of the Comptroller of the Currency, at (202) 649-6287. If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services.

Board: Lorna M. Neill, Senior Counsel, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, at (202) 452-3667. For users of TTY-TRS, please call 711 from any telephone, anywhere in the United States.

Bureau: Anna Boadwee and Adrien Fernandez, Attorney-Advisors, Office of Regulations, Consumer Financial Protection Bureau, at (202) 435-7700. If you require this document in an alternative electronic format, please contact [email protected].

SUPPLEMENTARY INFORMATION:

I. Background The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) amended TILA to add special appraisal requirements for "higher-risk mortgages." /1/ In January 2013, the Agencies jointly issued a final rule implementing these requirements and adopted the term "higher-priced mortgage loan" (HPML) instead of "higher-risk mortgage" (the January 2013 Final Rule). /2/ In July 2013, the Agencies proposed additional exemptions from the January 2013 Final Rule. /3/ In December 2013, the Agencies issued a supplemental final rule with additional exemptions from the January 2013 Final Rule (the December 2013 Supplemental Final Rule). /4/ Among other exemptions, the Agencies adopted an exemption from the new HPML appraisal rules for transactions of $25,000 or less, to be adjusted annually for inflation.

FOOTNOTE 1 Public Law 111-203, section 1471, 124 Stat. 1376, 2185-87 (2010), codified at TILA section 129H, 15 U.S.C. 1639h. END FOOTNOTE

FOOTNOTE 2 78 FR 10368 (Feb. 13, 2013). END FOOTNOTE

FOOTNOTE 3 78 FR 48548 (Aug. 8, 2013). END FOOTNOTE

FOOTNOTE 4 78 FR 78520 (Dec. 26, 2013). END FOOTNOTE

The OCC's, the Board's, and the Bureau's versions of the January 2013 Final Rule and December 2013 Supplemental Final Rule and corresponding official interpretations are substantively identical. The FDIC, NCUA, and FHFA adopted the Bureau's version of the regulations under the January 2013 Final Rule and December 2013 Supplemental Final Rule. /5/

FOOTNOTE 5 See NCUA: 12 CFR 722.3; FHFA: 12 CFR part 1222. Although the FDIC adopted the Bureau's version of the regulation, the FDIC did not issue its own regulation containing a cross-reference to the Bureau's version. See 78 FR 10368, 10370 (Feb. 13, 2013). END FOOTNOTE

The OCC's, the Board's, and the Bureau's regulations, /6/ and their accompanying interpretations, /7/ provide that the exemption threshold for smaller loans will be adjusted effective January 1 of each year based on any annual percentage increase in the CPI-W that was in effect on the preceding June 1. Any increase in the threshold amount will be rounded to the nearest $100 increment. For example, if the annual percentage increase in the CPI-W would result in a $950 increase in the threshold amount, the threshold amount will be increased by $1,000. However, if the annual percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900. If there is no annual percentage increase in the CPI-W, the OCC, the Board, and the Bureau will not adjust the threshold amounts from the prior year. /8/

FOOTNOTE 6 12 CFR 34.203(b)(2) (OCC); 12 CFR 226.43(b)(2) (Board); and 12 CFR 1026.35(c)(2)(ii) (Bureau). END FOOTNOTE

FOOTNOTE 7 12 CFR part 34, appendix C to subpart G, comment 203(b)(2)-1 (OCC); 12 CFR part 226, Supplement I, comment 43(b)(2)-1 (Board); and 12 CFR part 1026, Supplement I, comment 35(c)(2)(ii)-1 (Bureau). END FOOTNOTE

FOOTNOTE 8 See 12 CFR part 34, appendix C to subpart G, comment 203(b)(2)-1 and -2 (OCC); 12 CFR part 226, Supplement I, comment 43(b)(2)-1 and -2 (Board); and 12 CFR part 1026, Supplement I, comment 35(c)(2)(ii)-1 and -2 (Bureau). END FOOTNOTE

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

FOOTNOTE 9 See 81 FR 86250 (Nov. 30, 2016). END FOOTNOTE

II. 2024 Adjustment and Commentary Revision

Effective January 1, 2024, the exemption threshold amount will increase from $31,000 to $32,400. This amount is based on the CPI-W in effect on June 1, 2023, which was reported on May 10, 2023 (based on April 2023 data). /10/ The CPI-W is a subset of the CPI-U index (based on all urban consumers) and represents approximately 30 percent of the U.S. population. The CPI-W reported on May 10, 2023, reflects a 4.6 percent increase in the CPI-W from April 2022 to April 2023. Accordingly, the 4.6 percent increase in the CPI-W from April 2022 to April 2023 results in an exemption threshold amount of $32,400, after rounding. The OCC, the Board, and the Bureau are revising the commentaries to their respective regulations to add new comments as follows:

FOOTNOTE 10 The Bureau of Labor Statistics calculates consumer-based indices for each month but does not report those indices until the middle of the following month. As such, the most recently reported indices as of June 1, 2023, were reported on May 10, 2023, and reflect economic conditions in April 2023. END FOOTNOTE

* Comment 203(b)(2)-3.xi to 12 CFR part 34, Appendix C to Subpart G (OCC);

* Comment 43(b)(2)-3.xi to Supplement I of 12 CFR part 226 (Board); and

* Comment 35(c)(2)(ii)-3.xi to Supplement I of 12 CFR part 1026 (Bureau).

These new comments state that, from January 1, 2024, through December 31, 2024, the threshold amount is $32,400. These revisions are effective January 1, 2024.

III. Regulatory Analysis

Administrative Procedure Act

Under the Administrative Procedure Act, notice and opportunity for public comment are not required if the agency finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. /11/ The amendments in this rule are technical and apply the method previously memorialized in the December 2013 Supplemental Final Rule and the HPML Small Dollar Adjustment Calculation Rule. For these reasons, the OCC, the Board, and the Bureau have determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendments are adopted in final form.

FOOTNOTE 11 5 U.S.C. 553(b)(B). END FOOTNOTE

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required. /12/ As noted previously, the OCC, the Board, and the Bureau have determined that it is unnecessary to publish a general notice of proposed rulemaking for this final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

FOOTNOTE 12 5 U.S.C. 603(a), 604(a). END FOOTNOTE

Paperwork Reduction Act

The information collections contained in Regulation Z which implements TILA are approved by OMB under Control number 3170-0015. The current approval for this control number expires on May 31, 2026. In accordance with the Paperwork Reduction Act of 1995, /13/ the OCC, the Board, and the Bureau reviewed this final rule. The OCC, the Board, and the Bureau have determined that this rule does not create any new information collections or substantially revise any existing collections.

FOOTNOTE 13 44 U.S.C. 3506; 5 CFR part 1320. END FOOTNOTE

Unfunded Mandates Reform Act

As a general matter, the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531 et seq., requires the preparation of 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. However, the UMRA does not apply to final rules for which a general notice of proposed rulemaking was not published. See 2 U.S.C. 1532(a). Therefore, because the OCC has found good cause to dispense with notice and comment for this final rule, the OCC has not prepared a budgetary impact statement for the final rule under the UMRA.

Bureau Congressional Review Act Statement

Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Bureau will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to the rule taking effect. The Office of Information and Regulatory Affairs has designated this rule as not a "major rule" as defined by 5 U.S.C. 804(2).

OCC Congressional Review Act Statement

For purposes of the Congressional Review Act, OMB makes a determination as to whether a final rule constitutes a "major" rule. /14/ If a rule is deemed a "major rule" by OMB, the Congressional Review Act generally provides that the rule may not take effect until at least 60 days following its publication. /15/

FOOTNOTE 14 5 U.S.C. 801 et seq. END FOOTNOTE

FOOTNOTE 15 5 U.S.C. 801(a)(3). END FOOTNOTE

The Congressional Review Act defines a "major rule" as any rule that the Administrator of the Office of Information and Regulatory Affairs of the OMB finds has resulted in or is likely to result in (A) an annual effect on the economy of $100,000,000 or more; (B) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies or geographic regions, or (C) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets. /16/ The OCC currently supervises approximately 1,060 national banks, federal savings associations, trust companies and federal branches and agencies of foreign banks (collectively, banks). /17/ Based on the CPI-W in effect as of June 1, 2023, this final rule will increase the exemption threshold from $31,000 to $32,400, effective January 1, 2024. The Office of Information and Regulatory Affairs has designated this rule as not a "major rule" as defined by 5 U.S.C. 804(2).

FOOTNOTE 16 5 U.S.C. 804(2). END FOOTNOTE

FOOTNOTE 17 Based on data as of February 28, 2023. END FOOTNOTE

For the same reasons set forth above, the OCC is adopting this final rule without the delayed effective date generally prescribed under the Congressional Review Act. The delayed effective date required by the Congressional Review Act does not apply to "any rule which an agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rule issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest." /18/ In light of the fact that the final rule will have a de minimis impact, delaying the effective date of the final rule is unnecessary.

FOOTNOTE 18 5 U.S.C. 808(2). END FOOTNOTE

As required by the Congressional Review Act, the OCC will submit the final rule and other appropriate reports to Congress and the Government Accountability Office for review.

List of Subjects

12 CFR Part 34

Accounting, 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, Reporting and recordkeeping requirements, Truth in lending.

12 CFR Part 1026

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

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

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

PART 34--REAL ESTATE LENDING AND APPRAISALS

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

Authority: 12 U.S.C. 1 et seq., 25b, 29, 93a, 371, 1462a, 1463, 1464, 1465, 1701j-3, 1828(o), 3331 et seq., 5101 et seq., 5412(b)(2)(B) and 15 U.S.C. 1639h.

2. In Appendix C to Subpart G, under Section 34.203--Appraisals for Higher-Priced Mortgage Loans, paragraph 34.203(b)(2) is revised to read as follows:

Appendix C to Subpart G--OCC Interpretations

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Section 34.203--Appraisals for Higher-Priced Mortgage Loans

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Paragraph 34.203(b)(2)

1. Threshold amount. For purposes of SEC 34.203(b)(2), the threshold amount in effect during a particular period is the amount stated in comment 203(b)(2)-3 for that period. The threshold amount is adjusted effective January 1 of each year by any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) that was in effect on the preceding June 1. Comment 203(b)(2)-3 will be amended to provide the threshold amount for the upcoming year 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 annual percentage increase in the CPI-W would result in a $950 increase in the threshold amount, the threshold amount will be increased by $1,000. However, if the annual percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900.

2. No increase in the CPI-W. If the CPI-W in effect on June 1 does not increase from the CPI-W in effect on June 1 of the previous year, the threshold amount effective the following January 1 through December 31 will not change from the previous year. When this occurs, for the years that follow, the threshold is calculated based on the annual percentage change in the CPI-W applied to the dollar amount that would have resulted, after rounding, if decreases and any subsequent increases in the CPI-W had been taken into account.

i. Net increases. If the resulting amount calculated, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly.

ii. Net decreases. If the resulting amount calculated, after rounding, is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted.

3. Threshold. For purposes of SEC 34.203(b)(2), the threshold amount in effect during a particular period is the amount stated below for that period.

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

ii. From January 1, 2015, through December 31, 2015, the threshold amount is $25,500.

iii. From January 1, 2016, through December 31, 2016, the threshold amount is $25,500.

iv. From January 1, 2017, through December 31, 2017, the threshold amount is $25,500.

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

vi. From January 1, 2019, through December 31, 2019, the threshold amount is $26,700.

vii. From January 1, 2020, through December 31, 2020, the threshold amount is $27,200.

viii. From January 1, 2021, through December 31, 2021, the threshold amount is $27,200.

ix. From January 1, 2022, through December 31, 2022, the threshold amount is $28,500.

x. From January 1, 2023, through December 31, 2023, the threshold amount is $31,000.

xi. From January 1, 2024, through December 31, 2024, the threshold amount is $32,400.

4. 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.

5. 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 (d)(7).

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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

Authority and Issuance

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

PART 226--TRUTH IN LENDING (REGULATION Z)

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

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

4. In Supplement I to part 226, under Section 226.43--Appraisals for Higher-Risk Mortgage Loans, paragraph 43(b)(2) is revised to read as follows:

Supplement I to Part 226--Official Staff Interpretations

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Section 226.43--Appraisals for Higher-Risk Mortgage Loans

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Paragraph 43(b)(2)

1. Threshold amount. For purposes of SEC 226.43(b)(2), the threshold amount in effect during a particular period is the amount stated in comment 43(b)(2)-3 for that period. The threshold amount is adjusted effective January 1 of each year by any annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) that was in effect on the preceding June 1. Comment 43(b)(2)-3 will be amended to provide the threshold amount for the upcoming year 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 annual percentage increase in the CPI-W would result in a $950 increase in the threshold amount, the threshold amount will be increased by $1,000. However, if the annual percentage increase in the CPI-W would result in a $949 increase in the threshold amount, the threshold amount will be increased by $900.

i. Net increases. If the resulting amount calculated, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly.

3. Threshold. For purposes of SEC 226.43(b)(2), the threshold amount in effect during a particular period is the amount stated below for that period.