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Board of Governors of the Federal Reserve System Wednesday, January 9, 2008 Part II Federal Reserve System 12 CFR Part 226 Truth in Lending; Proposed Rule VerDate Aug<31>2005 18:17 Jan 08, 2008 Jkt 214001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\09JAP2.SGM 09JAP2 pwalker on PROD1PC71 with PROPOSALS2 1672 Federal Register / Vol. 73, No. 6 / Wednesday, January 9, 2008 / Proposed Rules FEDERAL RESERVE SYSTEM instructions for submitting comments at VI. Proposed Definition of ‘‘Higher-Priced http://www.federalreserve.gov/ Mortgage Loan’’ 12 CFR Part 226 generalinfo/foia/ProposedRegs.cfm. A. Overview • B. Public Comment on the Scope of New [Regulation Z; Docket No. R–1305] Federal eRulemaking Portal: http:// www.regulations.gov. Follow the HOEPA Rules Truth in Lending instructions for submitting comments. C. General Principles Governing the • E-mail: regs.comments@ Board’s Determination of Coverage AGENCY: Board of Governors of the federalreserve.gov. Include the docket D. Types of Loans Proposed To Be Covered Federal Reserve System. number in the subject line of the Under § 226.35 E. Proposed APR Trigger for § 226.35 ACTION: Proposed rule; request for message. public comment. • F. Mechanics of the Proposed APR Trigger Fax: (202) 452–3819 or (202) 452– VII. Proposed Rules for Higher-Priced SUMMARY: The Board proposes to amend 3102. • Mortgage Loans—§ 226.35 Regulation Z, which implements the Mail: Address to Jennifer J. Johnson, A. Overview Truth in Lending Act and Home Secretary, Board of Governors of the B. Disregard of Consumers’ Ability To Ownership and Equity Protection Act. Federal Reserve System, 20th Street and Repay—§§ 226.34(a)(4) and 226.35(b)(1) The goals of the amendments are to Constitution Avenue, NW., Washington, C. Verification of Income and Assets Relied protect consumers in the mortgage DC 20551. On—§ 226.35(b)(2) market from unfair, abusive, or All public comments will be made D. Prepayment Penalties—§ 226.32(d)(6) deceptive lending and servicing available on the Board’s Web site at and (7); § 226.35(b)(3) practices while preserving responsible http://www.federalreserve.gov/ E. Requirement to Escrow—§ 226.35(b)(4) lending and sustainable generalinfo/foia/ProposedRegs.cfm as F. Evasion Through Spurious Open-end homeownership; ensure that submitted, unless modified for technical Credit—§ 226.35(b)(5) advertisements for mortgage loans reasons. Accordingly, comments will VIII. Proposed Rules for Mortgage Loans— provide accurate and balanced not be edited to remove any identifying § 226.36 information and do not contain or contact information. Public A. Creditor Payments to Mortgage misleading or deceptive representations; comments may also be viewed Brokers—§ 226.36(a) and provide consumers transaction- electronically or in paper in Room MP– B. Coercion of Appraisers—§ 226.36(b) specific disclosures early enough to use 500 of the Board’s Martin Building (20th C. Servicing Abuses—§ 226.36(c) while shopping for a mortgage. The and C Streets, NW.) between 9 a.m. and D. Coverage—§ 226.36(d) proposed revisions would apply four 5 p.m. on weekdays. IX. Other Potential Concerns A. Other HOEPA Prohibitions protections to a newly-defined category FOR FURTHER INFORMATION CONTACT: B. Steering of higher-priced mortgage loans secured Kathleen C. Ryan, Dan S. Sokolov, or X. Advertising by a consumer’s principal dwelling, David Stein, Counsels; Jamie Z. A. Advertising Rules for Open-end Home- including a prohibition on a pattern or Goodson, Brent Lattin, Jelena equity Plans—§ 226.16 practice of lending based on the McWilliams, or Paul Mondor, B. Advertising Rules for Closed-end collateral without regard to consumers’ Attorneys; Division of Consumer and Credit—§ 226.24 ability to repay their obligations from Community Affairs, Board of Governors XI. Mortgage Loan Disclosures income, or from other sources besides of the Federal Reserve System, A. Early Mortgage Loan Disclosures— the collateral. The proposed revisions Washington, DC 20551, at (202) 452– § 226.19 would apply three new protections to 2412 or (202) 452–3667. For users of B. Future Plans To Improve Disclosure mortgage loans secured by a consumer’s Telecommunications Device for the Deaf XII. Civil Liability and Remedies; principal dwelling regardless of loan (TDD) only, contact (202) 263–4869. Administrative Enforcement price, including a prohibition on a XIII. Effective Date SUPPLEMENTARY INFORMATION: creditor paying a mortgage broker more XIV. Paperwork Reduction Act than the consumer had agreed the I. Summary of Proposal XV. Initial Regulatory Flexibility Analysis broker would receive. The Board also A. Proposals To Prevent Unfairness, I. Summary of Proposal proposes to require that advertisements Deception, and Abuse B. Proposals To Improve Mortgage provide accurate and balanced Advertising The Board is proposing to establish information, in a clear and conspicuous C. Proposals To Give Consumers new regulatory protections for manner, about rates, monthly payments, Disclosures Early consumers in the residential mortgage and other loan features; and to ban II. Consumer Protection Concerns in the market through amendments to several deceptive or misleading Subprime Market Regulation Z, which implements the advertising practices, including A. Recent Problems in the Mortgage Market Truth in Lending Act (TILA) and the representations that a rate or payment is B. The Loosening of Underwriting Home Ownership and Equity Protection ‘‘fixed’’ when it can change. Finally, the Standards C. Market Imperfections That Can Act (HOEPA). The goals of the proposal would require creditors to amendments are to protect consumers in provide consumers with transaction- Facilitate Abusive and Unaffordable Loans the mortgage market from unfair, specific mortgage loan disclosures III. The Board’s Hoepa Hearings abusive, or deceptive lending and before they pay any fee except a A. Home Ownership and Equity Protection servicing practices while preserving reasonable fee for reviewing credit Act (HOEPA) responsible lending and sustainable history. B. Summary of 2006 Hearings homeownership; ensure that DATES: Comments must be received on C. Summary of June 2007 Hearing advertisements for mortgage loans or before April 8, 2008. D. Congressional Hearings provide accurate and balanced IV. Inter-Agency Supervisory Guidance ADDRESSES: You may submit comments, V. Legal Authority information and do not contain identified by Docket No. R–1305, by any A. The Board’s Authority Under TILA misleading or deceptive representations; of the following methods: Section 129(l)(2) and provide consumers transaction- • Agency Web site: http:// B. The Board’s Authority Under TILA specific disclosures early enough to use www.federalreserve.gov. Follow the Section 105(a) while shopping. VerDate Aug<31>2005 18:17 Jan 08, 2008 Jkt 214001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 E:\FR\FM\09JAP2.SGM 09JAP2 pwalker on PROD1PC71 with PROPOSALS2 Federal Register / Vol. 73, No. 6 / Wednesday, January 9, 2008 / Proposed Rules 1673 A. Proposals To Prevent Unfairness, consumer had agreed in advance that a mortgage lender not affiliated with the Deception, and Abuse the broker would receive; consumer’s current lender; Æ Æ The Board is proposing seven new Prohibit any creditor or mortgage Advertising claims of debt restrictions or requirements for broker from coercing, influencing, or elimination if the product advertised mortgage lending and servicing otherwise encouraging an appraiser to would merely replace one debt intended to protect consumers against provide a misstated appraisal in obligation with another; Æ Advertisements that create a false unfairness, deception, and abuse while connection with a mortgage loan; and Æ Prohibit mortgage servicers from impression that the mortgage broker or preserving responsible lending and ‘‘pyramiding’’ late fees, failing to credit lender has a fiduciary relationship with sustainable homeownership. The payments as of the date of receipt, the consumer; and restrictions would be adopted under Æ Foreign-language advertisements in TILA Section 129(l)(2), which failing to provide loan payoff statements upon request within a reasonable time, which certain information, such as a authorizes the Board to prohibit unfair low introductory ‘‘teaser’’ rate, is or deceptive practices in connection or failing to deliver a fee schedule to a consumer upon request. provided in a foreign language, while with mortgage loans, as well as to required disclosures are provided only prohibit abusive practices or practices B. Proposals To Improve Mortgage in English. not in the interest of the borrower in Advertising C. Proposal To Give Consumers connection with refinancings. 15 U.S.C. Another goal of this proposal is to Disclosures Early 1639(l)(2). Some of the restrictions ensure that mortgage loan would apply only to higher-priced advertisements provide accurate and A third goal of this proposal is to mortgage loans, while others would balanced information and do not provide consumers transaction-specific apply to all mortgage loans secured by contain misleading or deceptive disclosures early enough to use while a consumer’s principal dwelling. representations. Thus the Board is shopping for a mortgage loan. The Board Protections Covering Higher-Priced proposing to require that advertisements proposes to require creditors to provide Mortgage Loans for both open-end and closed-end transaction-specific mortgage loan disclosures such as the APR and The Board is proposing four mortgage loans provide accurate and payment schedule for all home-secured, protections
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