Federal Register Extracts

Agency: "Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (Board); and Bureau of Consumer Financial Protection (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, 2022, the exemption threshold will increase from $28,500 to $31,000, effective January 1, 2023.

DATES: This final rule is effective January 1, 2023.

FOR FURTHER INFORMATION CONTACT:

OCC: MaryAnn Nash, Counsel, Chief Counsel's Office, (202) 649-6287; for persons who are deaf or hard of hearing TTY, (202) 649-5597.

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

Bureau: Thomas Dowell, Senior Counsel, Office of Regulations, Bureau of Consumer Financial Protection, 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, Board's, and 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, Board's, and Bureau's regulations, /6/ and their accompanying interpretations, /7/ provide that the exemption threshold for smaller loans will be adjusted effective January 1 of each year based on any annual percentage increase in the 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 Agencies 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, Board, and Bureau will not adjust the exemption threshold from the prior year. The HPML Small Dollar Adjustment Calculation Rule also provided that, in years following a year in which the exemption threshold was not adjusted because there was a decrease in the CPI-W from the previous year, the threshold is calculated by applying the annual percentage change in the CPI-W to the dollar amount that would have resulted, after rounding, if the decreases and any subsequent increases in the CPI-W had been taken into account. If the resulting amount calculated, after rounding, is greater than the current threshold, then the threshold effective January 1 the following year will increase accordingly; if the resulting amount calculated, after rounding, is equal to or less than the current threshold, then the threshold effective January 1 the following year will not change, but future increases will be calculated based on the amount that would have resulted, after rounding.

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

II. 2023 Adjustment and Commentary Revision

Effective January 1, 2023, the exemption threshold amount is increased from $28,500 to $31,000. This amount is based on the CPI-W in effect on June 1, 2022, which was reported on May 11, 2022 (based on April 2022 data). /10/ The CPI-W is a subset of the CPI-U index (based on all urban consumers) and represents approximately 29 percent of the U.S. population. The CPI-W reported on May 11, 2022, reflects an 8.9 percent increase in the CPI-W from April 2021 to April 2022. Accordingly, the 8.9 percent increase in the CPI-W from April 2021 to April 2022 results in an exemption threshold amount of $31,000, 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, 2022 were reported on May 11, 2022 and reflect economic conditions in April 2022. END FOOTNOTE

* Comment 203(b)(2)-3.x to 12 CFR part 34, appendix C to subpart G (OCC);

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

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

These new comments state that, from January 1, 2023, through December 31, 2023, the threshold amount is $31,000. These revisions are effective January 1, 2023.

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

--This is a summary of a Federal Register article originally published on the page number listed below--

Final rules, official interpretations, and commentary.

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

RIN Number: "RIN 1557-AF17"; "RIN 7100-AG43"

Citation: "87 FR 63663"

Document Number: "Docket No. OCC-2022-0018"; "Docket No. R-1785"

Federal Register Page Number: "63663"

"Rules and Regulations"