Truth in Lending Tila Statute by pki59770

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									Office of Thrift Supervision                                           December 10, 2009
Department of the Treasury

Transmittal

TR-442
Federal Register, Vol. 74, No. 223, pp. 60143-60153                       Number TR-442




On November 20, 2009 the Board of Governors of the Federal Reserve System published for
public comment an interim final rule amending Regulation Z. The interim rule would implement
Section 131(g) of the Truth in Lending Act (TILA).




Office of Thrift Supervision                                                       Page 1 of 1
                                                                Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations                                         60143

                                           ■ 8. Amend Appendix A to part 325 by                          Dated: November 10, 2009.                           operational changes, compliance with
                                           revising footnote 39 to read as follows:                    John C. Dugan,                                        this interim final rule is optional until
                                                                                                       Comptroller of Currency.                              January 19, 2010. Comments must be
                                           Appendix A to Part 325—Statement of                                                                               received on or before January 19, 2010.
                                           Policy on Risk-Based Capital                                  By order of the Board of Governors of the
                                                                                                       Federal Reserve System, November 12, 2009.            ADDRESSES: You may submit comments,
                                           *       *        *       *      *                           Jennifer J. Johnson,                                  identified by Docket No. R– 1378, by
                                               II * * *                                                Secretary of the Board.                               any of the following methods:
                                               C.* * *                                                                                                         • Agency Web Site: http://
                                                                                                         Dated at Washington DC, this 12th day of            www.federalreserve.gov. Follow the
                                           *       *        *       *      *                           November 2009.
                                               39 Thiscategory would also include a first-                                                                   instructions for submitting comments at
                                                                                                       Federal Deposit Insurance Corporation.                http://www.federalreserve.gov/
                                           lien residential mortgage loan on a one-to-
                                                                                                       Valerie J. Best,                                      generalinfo/foia/ProposedRegs.cfm.
                                           four family property that was appropriately
                                           assigned a 50 percent risk weight pursuant to               Assistant Executive Secretary.                          • Federal eRulemaking Portal: http://
                                           this section immediately prior to                             Dated: October 29, 2009.                            www.regulations.gov. Follow the
                                           modification (on a permanent or trial basis)                  By the Office of the Thrift Supervision.            instructions for submitting comments.
                                           under the Home Affordable Mortgage                                                                                  • E-mail:
                                                                                                       John E. Bowman,
                                           Program established by the U.S. Department                                                                        regs.comments@federalreserve.gov.
                                                                                                       Acting Director.                                      Include the docket number in the
                                           of Treasury, so long as the loan, as modified,
                                                                                                       [FR Doc. E9–27776 Filed 11–19–09; 8:45 am]            subject line of the message.
                                           is not 90 days or more past due or in
                                           nonaccrual status and meets other applicable                BILLING CODE 6714–01–P; 6210–01–P; 4810–33–P;           • Fax: (202) 452–3819 or (202) 452–
                                                                                                       6720–01–P
                                           criteria for a 50 percent risk weight. In                                                                         3102.
                                           addition, real estate loans that do not meet                                                                        • Mail: Address to Jennifer J. Johnson,
                                           all of the specified criteria or that are made                                                                    Secretary, Board of Governors of the
                                                                                                       FEDERAL RESERVE SYSTEM                                Federal Reserve System, 20th Street and
                                           for the purpose of property development are
                                           placed in the 100 percent risk category.                                                                          Constitution Avenue, NW., Washington,
                                                                                                       12 CFR Part 226
                                           *       *        *       *      *                                                                                 DC 20551.
                                                                                                       [Regulation Z; Docket No. R–1378]                       All public comments will be made
                                           Department of the Treasury                                                                                        available on the Board’s Web site at
                                                                                                       Truth in Lending                                      http://www.federalreserve.gov/
                                           Office of Thrift Supervision                                                                                      generalinfo/foia/ProposedRegs.cfm as
                                                                                                       AGENCY: Board of Governors of the
                                           12 CFR Chapter V                                            Federal Reserve System.                               submitted, unless modified for technical
                                                                                                                                                             reasons. Accordingly, comments will
                                                                                                       ACTION: Interim final rule; request for
                                           ■ For reasons set forth in the common                                                                             not be edited to remove any identifying
                                                                                                       public comment.
                                           preamble, the Office of Thrift                                                                                    or contact information. Public
                                           Supervision amends part 567 of Chapter                      SUMMARY: The Board is publishing for                  comments may also be viewed
                                           V of title 12 of the Code of Federal                        public comment an interim final rule                  electronically or in paper in Room MP–
                                           Regulations as follows:                                     amending Regulation Z (Truth in                       500 of the Board’s Martin Building (20th
                                                                                                       Lending). The interim rule implements                 and C Streets, NW.,) between 9 a.m. and
                                           PART 567—CAPITAL                                            Section 131(g) of the Truth in Lending                5 p.m. on weekdays.
                                                                                                       Act (TILA), which was enacted on May                  FOR FURTHER INFORMATION CONTACT: Paul
                                           ■ 9. The authority for citation for part                    20, 2009, as Section 404(a) of the                    Mondor, Senior Attorney, or Stephen
                                           567 continues to read as follows:                           Helping Families Save Their Homes                     Shin, Attorney; Division of Consumer
                                                                                                       Act. TILA Section 131(g) became                       and Community Affairs, Board of
                                             Authority: 12 U.S.C. 1462, 1462a, 1463,
                                                                                                       effective immediately upon enactment                  Governors of the Federal Reserve
                                           1464, 1467a, 1828 (note)
                                                                                                       and established a new requirement for                 System, Washington, DC 20551, at (202)
                                           PART 567—CAPITAL                                            notifying consumers of the sale or                    452–2412 or (202) 452–3667. For users
                                                                                                       transfer of their mortgage loans. The                 of Telecommunications Device for the
                                           ■ 10. Section 576.1 is amended in the                       purchaser or assignee that acquires the               Deaf (TDD) only, contact (202) 263–
                                           definition Qualifying mortgage loan by                      loan must provide the required                        4869.
                                           revising paragraph (4) to read as follows                   disclosures in writing no later than 30               SUPPLEMENTARY INFORMATION:
                                                                                                       days after the date on which the loan is
                                           § 567.1       Definitions.                                  sold or otherwise transferred or                      I. Background
                                           *     *     *     *     *                                   assigned. The Board is issuing this                      The Truth in Lending Act (TILA), 15
                                                                                                       interim rule, effective immediately upon              U.S.C. 1601 et seq., seeks to promote the
                                             Qualifying mortgage loan                                  publication, so that parties subject to the           informed use of consumer credit by
                                           *     *     *     *     *                                   statutory requirement have guidance on                requiring disclosures about its costs and
                                             (4) A loan that meets the requirements                    how to comply. However, to allow time                 terms. TILA requires additional
                                           of this section prior to modification on                    for any necessary operational changes,                disclosures for loans secured by
                                           a permanent or trial basis under the U.S.                   compliance with the interim final rule                consumers’ homes and permits
                                           Department of Treasury’s Home                               is optional for 60 days from the date of              consumers to rescind certain
                                           Affordable Mortgage Program may be                          publication; during this period, covered              transactions that involve their principal
                                                                                                       persons would continue to be subject to               dwelling. TILA directs the Board to
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                                           included as a qualifying mortgage loan,
                                           so long as the loan is not 90 days or                       the statute’s requirements. The Board                 prescribe regulations to carry out its
                                                                                                       seeks comment on all aspects of the                   purposes and specifically authorizes the
                                           more past due.
                                                                                                       interim rule.                                         Board, among other things, to issue
                                           *     *     *     *     *                                   DATES: This interim final rule is                     regulations that contain such
                                                                                                       effective November 20, 2009; however,                 classifications, differentiations, or other
                                                                                                       to allow time for any necessary                       provisions, or that provide for such


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                                           adjustments and exceptions for any                      that right against the purchaser or                   III. Legal Authority
                                           class of transactions, that in the Board’s              assignee. See TILA Section 131(c), 15
                                                                                                                                                         General Rulemaking Authority
                                           judgment are necessary or proper to                     U.S.C. 1641(c). Among other things, the
                                           effectuate the purposes of TILA,                        2009 Act seeks to ensure that consumers                  As noted above, TILA Section 105(a)
                                           facilitate compliance with TILA, or                     attempting to exercise this right know                directs the Board to prescribe
                                           prevent circumvention or evasion of                     the identity of the assignee and how to               regulations to carry out the act’s
                                           TILA. 15 U.S.C. 1604(a). TILA is                        contact the assignee or its agent for that            purposes. 15 U.S.C. 1604(a). Section 404
                                           implemented by the Board’s Regulation                   purpose. See 155 Cong. Rec. S5098–99                  of the 2009 Act became effective
                                           Z, 12 CFR part 226. An Official Staff                   (daily ed. May 5, 2009); 155 Cong. Rec.               immediately without any requirement
                                           Commentary interprets the requirements                  S5173–74 (daily ed. May 6, 2009). The                 that the Board first issue implementing
                                           of the regulation and provides guidance                 legislative history indicates, however,               rules. Nevertheless, the Board finds that
                                           to creditors in applying the rules to                   that TILA Section 131(g) was not                      the legislative purpose of Section 404
                                           specific transactions. See 12 CFR part                  intended to require notice when a                     will be furthered and its effectiveness
                                           226, Supp. I.                                           transaction ‘‘does not involve a change               enhanced by the issuance of rules that
                                              On May 20, 2009, the Helping                         in the ownership of the physical note,’’              specify the manner in which covered
                                           Families Save Their Homes Act of 2009                   such as when the note holder issues                   persons can comply with its provisions.
                                           (the ‘‘2009 Act’’) was signed into law.                 mortgage-backed securities but does not               In addition, the Board believes that
                                           Public Law 111–22, 123 Stat. 1632.                      transfer legal title to the loan. 155 Cong.           implementing regulations will facilitate
                                           Section 404(a) of the 2009 Act amended                  Rec. S5099.                                           covered persons’ compliance with the
                                           TILA to establish a new requirement for                                                                       statutory provisions.
                                           notifying consumers of the sale or                      II. Summary of the Interim Final Rule                    TILA also specifically authorizes the
                                           transfer of their mortgage loans. The                      Consistent with the legislative intent,            Board, among other things, to:
                                           purchaser or assignee that acquires the                                                                          • Issue regulations that contain such
                                                                                                   this interim final rule implements
                                           loan must provide the required                                                                                classifications, differentiations, or other
                                                                                                   Section 404(a) of the 2009 Act by
                                           disclosures no later than 30 days after                                                                       provisions, or that provide for such
                                                                                                   applying the new disclosure
                                           the date on which the loan is acquired.                                                                       adjustments and exceptions for any
                                                                                                   requirements to any person or entity
                                           This provision is contained in TILA                                                                           class of transactions, that in the Board’s
                                                                                                   that acquires ownership of an existing
                                           Section 131(g), 15 U.S.C. 1641(g), which                                                                      judgment are necessary or proper to
                                                                                                   consumer mortgage loan, whether the
                                           applies to any consumer credit                                                                                effectuate the purposes of TILA,
                                                                                                   acquisition occurs as a result of a
                                           transaction secured by the principal                                                                          facilitate compliance with the act, or
                                                                                                   purchase or other transfer or
                                           dwelling of a consumer. Consequently,                                                                         prevent circumvention or evasion. 15
                                                                                                   assignment. A person is covered by the
                                           the disclosure requirements in Section                                                                        U.S.C. 1604(a).
                                                                                                   rule only if the person acquires legal                   • Exempt from all or part of TILA any
                                           131(g) apply to both closed-end                         title to the debt obligation. Although
                                           mortgage loans and open-end home                                                                              class of transactions if the Board
                                                                                                   TILA and Regulation Z generally apply                 determines that TILA coverage does not
                                           equity lines of credit (HELOCs).                        only to persons to whom the obligation
                                              Section 131(g) became effective                                                                            provide a meaningful benefit to
                                                                                                   is initially made payable and that                    consumers in the form of useful
                                           immediately upon enactment on May                       regularly engage in extending consumer
                                           20, 2009, and did not require the                                                                             information or protection. The Board
                                                                                                   credit, Section 404(a) and the interim                must consider factors identified in the
                                           issuance of implementing regulations.                   final rule apply to persons that acquire
                                           Mortgage loans sold or transferred on or                                                                      act and publish its rationale at the time
                                                                                                   mortgage loans without regard to                      it proposes an exemption for comment.
                                           after that date became subject to the                   whether they also extend consumer
                                           requirements of Section 131(g), and                                                                           15 U.S.C. 1604(f).
                                                                                                   credit by originating mortgage loans.
                                           failure to comply can result in civil                   However, the interim final rule applies               Authority To Issue Interim Final Rules
                                           liability under TILA Section 130(a). See                only to persons that acquire more than                Without Notice and Comment
                                           15 U.S.C. 1640(a). Accordingly, as                      one mortgage loan in any 12-month                        The Administrative Procedures Act
                                           discussed below, the Board finds there                  period.                                               (APA), 5 U.S.C. 551 et seq., generally
                                           is good cause for issuing an interim rule
                                                                                                      To comply with the interim rule, a                 requires public notice before
                                           that is effective immediately upon
                                                                                                   covered person must mail or deliver the               promulgation of regulations. See 5
                                           publication, so that parties subject to the
                                                                                                   required disclosures on or before the                 U.S.C. 553(b). Unless notice or a hearing
                                           rule have guidance on how to interpret
                                                                                                   30th day following the date that the                  is specifically required by statute,
                                           and comply with the statutory
                                                                                                   covered person acquired the loan. The                 however, the APA also provides an
                                           requirements.
                                                                                                   disclosure need not be given, however,                exception ‘‘when the agency for good
                                              Under the Real Estate Settlement
                                                                                                   if the covered person transfers or assigns            cause finds (and incorporates the
                                           Procedures Act (RESPA), consumers
                                                                                                   the loan to another party on or before                finding and a brief statement of reasons
                                           must be notified when the servicer of
                                                                                                   that date. This exception seeks to                    therefore in the rules issued) that notice
                                           their mortgage loan has changed.1 The
                                                                                                   prevent the confusion that could result               and public procedure thereon are
                                           2009 Act’s legislative history reflects
                                                                                                   if consumers receive outdated contact                 impracticable, unnecessary, or contrary
                                           that, in addition to the information
                                                                                                   information for parties that no longer                to the public interest.’’ 5 U.S.C.
                                           provided under RESPA, the Congress
                                                                                                   own their loan. For example, a covered                553(b)(B).
                                           intended to provide consumers with
                                                                                                   person that acquires a mortgage loan on                  As an initial matter, neither TILA nor
                                           information about the identity of the
                                                                                                   March 1 must mail or deliver the                      the 2009 Act specifically requires the
                                           owner of their mortgage loan. In some
                                                                                                   disclosures on or before March 31.                    Board to provide notice or a hearing
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                                           cases, consumers that have an extended
                                                                                                   However, if the covered person sells or               with respect to this rulemaking. See
                                           right to rescind the loan under TILA
                                                                                                   assigns the loan to a third party on                  TILA Section 105(a), 15 U.S.C. 1604(a).
                                           Section 125, 15 U.S.C. 1635, can assert
                                                                                                   March 31 (or earlier), the covered                    In addition, the Board finds that there
                                             1 RESPA is implemented by Regulation X, 24 CFR        person need not provide the disclosures,              is good cause to conclude that providing
                                           part 3500, which is issued by the Department of         but subsequent purchasers would have                  notice and an opportunity to comment
                                           Housing and Urban Development (HUD).                    to comply with the rule.                              before issuing this interim final rule


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                                           would be impracticable and contrary to                  provided by the agency for good cause                    mortgage loan in any 12-month period.
                                           the public interest. The statutory                      found and published with the rule.’’ 5                   Consistent with the statute, the rule
                                           requirements in Section 404 became                      U.S.C. 553(d)(3). Similarly, Section 302                 applies to all consumer mortgage
                                           effective upon enactment on May 20,                     of the Riegle Community Development                      transactions secured by the principal
                                           2009, as noted above. Covered persons                   and Regulatory Improvement Act of                        dwelling of a consumer, whether the
                                           must comply with those requirements                     1994 generally requires that new                         transaction is a closed-end loan or an
                                           even if the Board does not issue this                   regulations and amendments to existing                   open-end line of credit.
                                           interim final rule.                                     regulations prescribed by a Federal                         Generally, TILA and Regulation Z
                                              This interim final rule implements the               banking agency, which impose                             apply to parties that regularly extend
                                           requirements contained in the 2009 Act                  additional reporting, disclosure, or other               consumer credit. However, Section
                                           but also interprets the statutory text to               new requirements on insured depository                   404(a) of the 2009 Act is not limited to
                                           resolve issues and ambiguities not                      institutions, take effect on the first day               persons that extend credit by originating
                                           directly addressed by the statute.                      of the calendar quarter that begins on or                loans. Section 404(a) imposes the
                                           Providing notice and opportunity for                    after the date on which the regulations                  disclosure duty on the ‘‘creditor that is
                                           comment on these matters before                         are published in final form.2 There is an                the new owner or assignee of the debt.’’
                                           issuing these rules is not in the public                exception, however, when ‘‘the agency                    The Board believes that to give effect to
                                           interest because the legislation was                    determines, for good cause published                     the legislative purpose, the term
                                           effective upon enactment. As a result,                  with the regulation, that the regulations                ‘‘creditor’’ in Section 404(a) must be
                                           persons covered by Section 404(a)                       should become effective before such                      construed to refer to the owner of the
                                           already must be in compliance with the                  time.’’ 12 U.S.C. 4802(b)(1)(A).                         debt following the sale, transfer or
                                           law or face potential liability for                        The interim final rule implements                     assignment, without regard to whether
                                           violations. The Board is issuing final                  statutory disclosure requirements that                   that party would be a ‘‘creditor’’ for
                                           rules at this time so that covered                      have been in effect since May 20, 2009.                  other purposes under TILA or
                                           persons receive immediate guidance on                   For the reasons discussed above, the                     Regulation Z. The Board declines to
                                           how they can comply with the law in a                   Board finds there is good cause to make                  limit Section 404(a) to parties that
                                           manner that effectuates its purposes and                these rules effective immediately. These                 originate consumer loans because such
                                           avoids potential liability. The Board’s                 rules are intended to interpret and                      an interpretation would exempt a
                                           issuance of a notice of proposed                        clarify the statutory requirements and                   significant percentage of mortgage
                                           rulemaking for public comment would                     provide compliance guidance. The                         transfers which are acquisitions by
                                           not serve this purpose because it would                 Board will consider public comments                      secondary market investors that do not
                                           not provide certainty regarding a                       on the provisions before adopting                        extend consumer credit and are not
                                           covered person’s compliance obligations                 further rules.                                           ‘‘creditors’’ for purposes of other
                                           until the rules were finalized. By                         Finally, TILA Section 105(d) generally                provisions of Regulation Z.
                                           clarifying that Section 404(a) of the 2009              provides that a regulation requiring any                    The Board also believes that Section
                                           Act covers persons that acquire                         disclosure that differs from the                         404(a) of the 2009 Act does not alter the
                                           mortgage loans even if they are not                     disclosures previously required shall                    definition of ‘‘creditor’’ as currently
                                           ‘‘creditors’’ as defined under TILA, the                have an effective date no earlier than                   used in TILA or Regulation Z. Thus, the
                                           interim final rule also ensures that                    ‘‘that October 1 which follows by at                     fact that a person purchases mortgage
                                           consumers will receive the notice that                  least six months the date of                             loans and provides disclosures under
                                           was intended by the legislation.                        promulgation.’’ To the extent that the                   § 226.39 does not by itself make that
                                           Consequently, the Board finds that the                  interim rule contains disclosure                         person a ‘‘creditor’’ for purposes of
                                           use of notice and comment procedures                    requirements that are already in effect                  TILA and Regulation Z (even if the
                                           before issuing these rules would be                     under the statute, Section 105(d) does                   disclosure provided under Section
                                           impracticable and would not be in the                   not apply. Moreover, the Board believes                  404(a) uses the term ‘‘creditor’’).
                                           public interest. Interested parties will                that the effective date mandated by the                  Accordingly, in describing the persons
                                           still have an opportunity to submit                     2009 Act for the specific disclosures                    subject to the requirements of § 226.39,
                                           comments in response to this interim                    required under section 404 overrides the                 the interim final rule uses the term
                                           final rule.                                             general provision in TILA Section                        ‘‘covered person’’ rather than the term
                                                                                                                                                            ‘‘creditor.’’
                                           Authority To Issue Interim Final Rules                  105(d).
                                                                                                                                                               Under the interim final rule, the
                                           That Are Effective Immediately                          IV. Section-by-Section Analysis                          disclosure requirements in § 226.39
                                              This interim final rule is effective                                                                          apply only to persons that acquire more
                                                                                                   Section 226.39—Mortgage Transfer                         than one consumer mortgage transaction
                                           upon publication in the Federal
                                                                                                   Disclosures                                              in any 12-month period. Generally,
                                           Register. Institutions may rely on the
                                           rules immediately to ensure they are                    39(a) Scope                                              TILA and Regulation Z cover only
                                           complying with the statutory                               Section 226.39(a) defines the scope of                parties that are regularly engaged in
                                           requirements. However, to allow time                    the interim rule’s coverage. The                         consumer credit transactions, who are
                                           for any necessary operational changes,                  disclosure requirements of § 226.39                      expected to have the capacity to put
                                           compliance with the interim final rules                 apply to any ‘‘covered person,’’ with                    systems in place to ensure compliance
                                           is optional until January 19, 2010.                                                                              with the rules. There is no indication in
                                                                                                   certain exceptions that are specified in
                                           During this 60-day period, institutions                                                                          the legislative history that Section 404
                                                                                                   the rule. For purposes of the rule, a
                                           continue to be subject to the statute’s                                                                          was intended to apply more broadly.
                                                                                                   ‘‘covered person’’ includes any natural
                                           requirements.                                                                                                    For example, individual homeowners
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                                                                                                   person or organization (as defined in
                                              The APA generally requires that rules                section 226.2(a)(22) of the regulation)
                                                                                                                                                            might choose to facilitate the sale of
                                           be published not less than 30 days                      that acquires more than one existing
                                                                                                                                                            their home by providing seller financing
                                           before their effective date. See 5 U.S.C.                                                                        and accepting the buyer’s promissory
                                           553(d). As with the notice and comment                    2 See Public Law 103–325, Title III, § 302(b), Sept.   note for a portion of the purchase price.
                                           requirement, however, the APA                           23, 1994, 108 Stat. 2214, codified at 12 U.S.C.          At a later date, ownership of the debt
                                           provides an exception when ‘‘otherwise                  4802(b).                                                 obligation might be transferred to


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                                           60146            Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations

                                           another family member or to a trust for                 Association (Ginnie Mae), seeking to                  person, the interim rule provides that
                                           estate planning purposes, or might be                   clarify Ginnie Mae’s status under                     only one disclosure shall be given; the
                                           transferred to another person if the                    Section 404(a) of the 2009 Act. Ginnie                covered persons must determine among
                                           original note holder dies. The Board                    Mae guarantees securities that are                    themselves which one of them will
                                           believes that a formal notice under                     collateralized by mortgage loans. HUD’s               provide the disclosure. If there is more
                                           Section 404 is not needed in situations                 letter states that, as the guarantor of               than one consumer, a covered person
                                           involving individual transfers because                  these securities, Ginnie Mae obtains                  may mail or deliver the disclosures to
                                           the acquiring party is likely to provide                equitable title in the mortgage loans but             any consumer who is primarily liable on
                                           adequate information to borrowers to                    further states that the issuers of the                the obligation.
                                           ensure that they know to whom the loan                  securities retain legal title to the loans               The transfer of ownership of a
                                           payments should be made.                                that collateralize the securities.                    mortgage loan is subject to the
                                              Accordingly, to prevent undue burden                 According to HUD, legal title to the                  disclosure requirements of this section
                                           on individuals under the interim rule, a                loans is not conveyed to Ginnie Mae                   when the acquiring party is a separate
                                           person who acquires only one existing                   unless the issuer of the securities                   legal entity from the transferor, even if
                                           mortgage loan in any 12-month period                    defaults in its obligations. If the                   the parties are affiliated entities.
                                           is not a covered person. The Board                      securities issuer defaults, Ginnie Mae                However, if a covered person acquires a
                                           intends to exclude persons who are not                  can immediately extinguish the                        mortgage loan and subsequently
                                           regularly engaged in the business of                    securities issuer’s interest in the loans             transfers the loan to another entity, the
                                           purchasing or investing in consumer                     and take legal title. Based on HUD’s                  regulation does not prohibit the two
                                           mortgages loans and are involved in                     representations and legal opinion                     entities from combining their
                                           such transactions infrequently and                      regarding Ginnie Mae’s status, the Board              disclosures on a single document.
                                           would not have systems in place to                      believes that the requirements of                     Comment 39(b)–2 clarifies how two
                                           comply. The Board specifically solicits                 § 226.39 do not apply to Ginnie Mae                   entities may comply with the rules in
                                           comment on this definition and whether                  until it finds the issuer in default and              certain circumstances by providing a
                                           the scope of the interim final rule’s                   acquires legal title to the loans.                    single form that covers both entities. For
                                           coverage is appropriate, or whether a                      Section 131(f) of TILA addresses the               example, a covered person that acquires
                                           different standard should apply in                      treatment of loan servicers under the                 a loan on August 31 might mail a single
                                           determining which persons must                          assignee liability provisions in Section              disclosure on or before September 30
                                           comply with the disclosure requirement                  131 as well as the provisions of Section              with the knowledge that it will assign
                                           in § 226.39. For example, comment is                    131(g) which were added by the 2009                   the loan to another entity on October 15.
                                           requested on whether the Board should                   Act. Under TILA section 131(f)(2), a                  The covered person could mail a single
                                           use the same standard that applies in                   party servicing the mortgage loan is not              disclosure providing the required
                                           determining whether a person is                         treated as the owner of the obligation if             information for both entities and
                                           regularly engaged in extending                          the obligation was assigned to the                    indicating when the subsequent transfer
                                           consumer credit, which would limit the                  servicer solely for the administrative                will occur.
                                           application of § 226.39 to persons that                 convenience of the servicer in servicing
                                                                                                                                                         39(c) Exceptions
                                           have acquired more than five mortgage                   the obligation. Accordingly, the
                                           loans in the preceding or current                       requirements of § 226.39 do not apply to                To comply with the interim final rule,
                                           calendar year. See § 226.2(a)(17)(i),                   a loan servicer in this circumstance,                 a covered person must mail or deliver
                                           footnote 3.                                             even if the servicer holds legal title to             the required disclosures on or before the
                                              To become a ‘‘covered person’’ subject               the loan.                                             30th day following the date that the
                                           to § 226.39, a person must become the                      Some industry representatives have                 covered person acquired the loan.
                                           owner of an existing mortgage loan by                   requested clarification whether a                     Section 226.39(c)(1) provides an
                                           acquiring legal title to the debt                       disclosure under § 226.39 is required in              exception, however, if the covered
                                           obligation. Consequently, § 226.39 does                 the case of a merger, acquisition, or                 person transfers or assigns the loan to
                                           not apply to persons who acquire only                   reorganization. The Board believes that               another party on or before that date.
                                           a beneficial interest in the loan or a                  the statute covers acquisitions that                  This exception is made pursuant to the
                                           security interest in the loan, such as                  occur in these situations when                        Board’s authority to make exceptions
                                           when the owner of the debt obligation                   ownership of the loan is transferred to               and exemptions under TILA Sections
                                           uses the loan as security to obtain                     a different legal entity. Accordingly, the            105(a) and 105(f). 15 U.S.C. 1604(a),
                                           financing and the party providing the                   interim final rule does not provide an                1604(f). This exception seeks to prevent
                                           financing obtains only a security                       exception for such transactions.                      the confusion that could result if
                                           interest in the loan. Section 226.39 also                                                                     consumers receive outdated contact
                                                                                                   39(b) Disclosure Required                             information for parties that no longer
                                           does not apply to a party that assumes
                                           the credit risk without acquiring legal                   Section 226.39(b) contains the general              own their loans. For example, if a
                                           title to the loans. Accordingly, an                     requirement for covered persons to                    mortgage loan is originated on February
                                           investor who purchases an interest in a                 provide the disclosures required under                22 and the original creditor sells the
                                           pool of loans (such as mortgage-backed                  Section 404 of the 2009 Act, unless the               loan on March 1 to a covered person,
                                           securities, pass-through certificates,                  exception specified in § 226.39(c)                    the covered person must mail or deliver
                                           participation interests, or real estate                 applies. The disclosures must be mailed               the disclosures required by § 226.39 on
                                           mortgage investment conduits) but does                  or delivered to the consumer on or                    or before March 31. However, under the
                                           not directly acquire legal title in the                 before the 30th calendar day following                exception in § 226.39(c)(1) the covered
                                           underlying mortgage loan, is not                        the date that the covered person                      person would not be required to provide
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                                           covered by § 226.39.                                    acquires the loan. For purposes of this               the disclosures if the loan is sold or
                                              The Board has received a letter from                 requirement, the date that the covered                otherwise transferred or assigned to a
                                           the Department of Housing and Urban                     person acquires the loan is deemed to be              third party on or before March 31.
                                           Development’s Office of General                         the acquisition date that is recognized in              The Board specifically solicits public
                                           Counsel, in its capacity as legal counsel               the books and records of the acquiring                comment on the need for this exception
                                           for the Government National Mortgage                    party. If there is more than one covered              and its scope. The Board believes that


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                                                            Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations                                           60147

                                           this exception is necessary and proper                  Board requests comment on whether the                   provided under this section. The
                                           to effectuate the purposes of Section 404               scope of this exemption is appropriate                  disclosures must identify the loan that
                                           and to facilitate compliance. The Board                 and whether the 30-day period should                    was acquired or transferred and,
                                           is concerned about the potential for                    be shorter or longer.                                   consistent with the statute, contain the
                                           consumers to receive multiple                              In some cases, the original creditor or              following: (1) The identity, address, and
                                           disclosures, some of which contain                      owner of the mortgage loan may sell or                  telephone number of the covered person
                                           information that is outdated and                        transfer the legal title to secure business             that owns the mortgage loan; (2) the date
                                           inaccurate by the time it is received.                  financing, pursuant to a repurchase                     of the acquisition or transfer; (3) contact
                                           This can occur because during the                       agreement that obligates the original                   information that the consumer can use
                                           normal securitization process, several                  creditor or owner to repurchase the loan                to reach an agent or party having
                                           legal entities may be created to serve as               within a short period, typically a month                authority to act on behalf of the covered
                                           acquisition vehicles to hold the loan for               or less. Under § 226.39(c)(2) of the                    person; (4) the location of the place
                                           a short period before delivering the loan               interim final rule, if the original creditor            where the transfer of the ownership of
                                           to an entity that ultimately holds it for               or owner does not recognize the                         the debt is recorded.
                                           the investors. After origination, a loan                transaction as a sale of the loan on its                   Identity, address, and telephone
                                           might be assigned to one or more                        books and records for accounting                        number. Section 226.39(d)(1) requires
                                           entities for only a few days before it is               purposes, the acquiring party is not                    acquiring parties to provide their name,
                                           transferred to an entity that will hold it              subject to the disclosure requirements of               as well as their address and telephone
                                           for a much longer time period.                          § 226.39. However, if the transferor does               number. Under the interim final rule,
                                              The Board believes that consumers                    not repurchase the mortgage loan, the                   the party identified must be the covered
                                           may be confused if they receive one or                  acquiring party must make the                           person who owns the mortgage loan,
                                           more notices on or around the 30th day                  disclosures required by § 226.39 within                 regardless of whether another party has
                                           identifying multiple parties that no                    30 days after the date that the                         been appointed to service the loan or
                                           longer own the loan. Consequently, the                  transaction is recognized as an                         otherwise serve as the covered person’s
                                           interim final rule requires notices to be               acquisition in its books and records.                   agent. The covered person has the
                                           provided only by a covered person that                  This exception is also being adopted                    option of also providing an electronic
                                           still owns the loan on the 30th day after               pursuant to the Board’s authority in                    mail address or Internet Web site
                                           the acquisition. Thus consumers would                   TILA Sections 105(a) and 105(f). As                     address but is not required to do so.
                                           be likely to receive notices only from                  with the exception in § 226.39(c)(1), the                  Section 226.39(d)(1) provides that if
                                           parties actually holding the loan as of                 exception for repurchase agreements in                  there is more than one covered person,
                                           that date. In contrast, notices sent by                 § 226.39(c)(2) seeks to prevent consumer                the required information must be
                                           temporary holders would provide                         confusion from the receipt of outdated                  provided for each of them. The Board
                                           information that most consumers are                     disclosures. The Board believes that                    specifically solicits comments on the
                                           unlikely to need or use and could create                providing disclosures for the                           benefits of this approach, or whether the
                                           information overload for many                           transactions covered by the exception in                identification of multiple parties may
                                           consumers, thereby hindering their                      § 226.39(c)(2) would not provide a                      create confusion for consumers. Should
                                           ability to determine which party should                 meaningful benefit to consumers in the                  there be limits on the number of covered
                                           be contacted to address a particular                    form of useful information or protection.               persons identified and, if so, what limits
                                           concern. The Board believes that the                    The Board also believes that the                        would be appropriate consistent with
                                           disclosure of short-term holdings of the                disclosure of transfers that are subject to             the legislative intent?
                                           debt obligation that do not reflect the                                                                            Acquisition date. Section 226.39(d)(2)
                                                                                                   repurchase agreements would
                                           current ownership status at the time the                                                                        requires disclosure of the date that the
                                                                                                   complicate compliance and impose
                                           consumer receives the notice would be                                                                           covered person acquired the loan. For
                                                                                                   unnecessary burden and expense for
                                           of minimal value to consumers and does                                                                          purposes of this section, this is defined
                                                                                                   persons that would be required to
                                           not provide meaningful disclosure                                                                               as the date of acquisition recognized in
                                                                                                   comply, that would not be outweighed
                                           consistent with the purposes of TILA or                                                                         the books and records of the covered
                                                                                                   by the benefits to consumers. Comment
                                           the 2009 Act. Thus, the Board believes                                                                          person. The Board believes that this
                                                                                                   is requested on this exception, and any
                                           that a regulatory exception adopted                                                                             approach provides flexibility to
                                                                                                   unintended consequences that may
                                           pursuant to TILA Section 105(a) would                                                                           accommodate a variety of circumstances
                                                                                                   result.                                                 in which the acquisition could occur.
                                           effectuate TILA’s purposes and facilitate
                                           compliance.                                             39(d) Content of Required Disclosures                      Agent’s contact information. Under
                                              The Board has also considered the                      Section 226.39(d) sets forth the                      § 226.39(d)(3), a covered person must
                                           relevant statutory factors in TILA                                                                              identify and provide contact
                                                                                                   contents of the notice that must be
                                           Section 105(f). The Board believes that                                                                         information for the agent or party
                                           the Section 105(f) exemption is                         coverage of such transactions provides a meaningful
                                                                                                                                                           having authority to act on behalf of the
                                           appropriate because the disclosure of                   benefit to consumers in light of specific factors. 15   covered person. The notice must
                                           ownership interests that are held less                  U.S.C. 1604(f)(2). These factors, which the Board       identify one or more persons who are
                                                                                                   has reviewed, are (1) the amount of the loan and        authorized to receive legal notices on
                                           than the 30-day period would not                        whether the disclosure provides a benefit to
                                           provide a meaningful benefit to                         consumers who are parties to the transaction
                                                                                                                                                           behalf of the covered person and resolve
                                           consumers in the form of useful                         involving a loan of such amount; (2) the extent to      issues concerning the consumer’s
                                           information or protection. It would also                which the requirement complicates, hinders, or          payments on the loan. However, contact
                                                                                                   makes more expensive the credit process; (3) the        information for an agent is not required
                                           complicate compliance and impose                        status of the borrower, including any related
                                                                                                                                                           to be provided under § 226.39(d)(3) if
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                                           unnecessary burden and expense for                      financial arrangements of the borrower, the
                                           persons that would be required to                       financial sophistication of the borrower relative to    the consumer can use the information
                                           comply, that would not be outweighed                    the type of transaction, and the importance to the      provided for the covered person
                                                                                                   borrower of the credit, related supporting property,    provided under paragraph § 226.39(d)(1)
                                           by the benefits to consumers.3 The                      and coverage under TILA; (4) whether the loan is
                                                                                                   secured by the principal residence of the borrower;
                                                                                                                                                           for these purposes. Thus, the interim
                                             3 In exercising its exemption authority under         and (5) whether the exemption would undermine           final rule implements the disclosure
                                           Section 105(f), Board must determine whether            the goal of consumer protection.                        requirement in Section 404 but does not


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                                           60148            Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations

                                           require that the owner of a loan                        recorded at the time the disclosure is                location where the lender’s security
                                           designate an agent or other party for any               sent.                                                 interest is or may be recorded.
                                           specific purpose. The rule simply                          Consistent with the statute,                       39(e) Optional Disclosures
                                           requires that the owner disclose contact                § 226.39(d)(4) of the interim final rules
                                           information when there is such an                       requires covered persons to disclose the                 Section 404 provides that the party
                                           agent, so that consumers can direct their               location where their ownership of the                 acquiring a loan shall notify the
                                           inquiries to the appropriate party.                     debt is recorded. However, if the                     borrower of ‘‘any other relevant
                                              The Board recognizes that separate                   transfer of ownership has not been                    information’’ regarding the new owner
                                           entities may be authorized by the owner                 recorded in public records at the time                of the loan. The Board interprets this
                                           of the loan to act on its behalf for                    the disclosure is provided, the covered               statutory language as permitting the
                                           different purposes. Identifying the party               person can comply with the rule by                    Board to impose additional disclosure
                                           authorized to receive legal notices is                  stating this fact. Whether or not the                 requirements to further the legislative
                                           intended to ensure that consumers have                  transfer of ownership has been recorded               purpose. Any additional disclosure
                                           sufficient information to assert legal                  in public records at the time the                     requirements would be imposed by
                                           claims, including a right to rescind the                disclosure is made, the disclosure may                regulation after notice and comment.
                                           loan, if applicable. However, a covered                 state that the transfer ‘‘is or may be                The Board does not believe that the
                                           person might appoint a different agent                  recorded’’ at the specified location.                 statutory language requires covered
                                           to resolve loan servicing issues. In such                  The covered person also has the                    persons to determine independently
                                           cases, the covered person must provide                  option of disclosing the location where               what additional information a reviewing
                                           contact information for each agent. If                  the covered person’s security interest in             court might subsequently determine to
                                           multiple agents are listed, the disclosure              the property is or may be recorded. In                be legally relevant in order to avoid
                                           must state the extent to which the                      light of the fact that the transfer in                liability. Although the interim final rule
                                           authority of each agent differs, for                    ownership of the debt instrument                      does not contain any additional
                                           example, by indicating if only one of the               usually is not recorded in public                     disclosure requirements, the Board
                                           agents is authorized to receive legal                   records, the Board specifically solicits              solicits comment on whether the rule
                                           notices or only one is authorized to                    comment on whether disclosure of the                  should include any such requirements.
                                           resolve issues concerning payments.                     location where the security interest is               The Board also believes that, under the
                                              A covered person may comply with                                                                           statutory language, covered persons are
                                                                                                   recorded should be required.
                                           § 226.39(d)(3) by providing a telephone
                                                                                                      Comment 39(d)(4)–2 clarifies that the              permitted, in their sole discretion, to
                                           number on the written disclosure if the
                                                                                                   covered person is not required to                     include additional information that they
                                           consumer can use the telephone number
                                                                                                   provide the postal address for the                    might deem relevant or helpful to
                                           to obtain the address of the agent or
                                                                                                   governmental office where the covered                 consumers, which is reflected in
                                           other authorized person identified. This
                                                                                                   person’s ownership interest is recorded               § 226.39(e) of the interim final rule. For
                                           differs from the requirement in
                                                                                                   or the name of the jurisdiction where                 example, the covered person may
                                           § 226.39(d)(1), which requires covered
                                                                                                   the property is located. For example, it              choose to inform consumers that the
                                           persons who acquire a loan to provide
                                                                                                   would be sufficient in all cases to                   location where they should send
                                           their name, address, and telephone
                                                                                                   disclose that the transaction is or may               mortgage payments has not changed.
                                           number in all cases. The flexibility in
                                           § 226.39(d)(3) is intended to allow                     be recorded in the office of public land              V. Initial Regulatory Flexibility
                                           covered persons to use a single                         records or the recorder of deeds office               Analysis
                                           disclosure form that contains a                         ‘‘for the county or local jurisdiction
                                           nationwide toll-free telephone number,                  where the property is located.’’                         The Regulatory Flexibility Act (5
                                           even though there may be different                         The Board has taken this approach                  U.S.C. 601 et seq.) requires an initial
                                           physical locations to which documents                   after considering the relative costs and              and final regulatory flexibility analysis
                                           should be sent in different regions of the              benefits of requiring that the disclosure             only when 15 U.S.C. 553 requires
                                           country. Comment is specifically                        provide more detailed information.                    publication of a notice of proposed
                                           solicited on this approach and whether                  Industry representatives have noted that              rulemaking. See 5 U.S.C. 603(a), 604(a).
                                           both a telephone number and address                     this information may not be readily                   However, the Board has found good
                                           for the agent or authorized                             accessible to the acquiring party. A                  cause under 5 U.S.C. 553(b)(B) to
                                           representative should be required to be                 requirement to provide the name and                   conclude that, with respect to this
                                           included on each disclosure under                       address of the governmental office                    interim final rule, publication of a
                                           § 226.39(d)(3).                                         would require parties that provide such               notice of proposed rulemaking is
                                              Comment 39(d)(3)–2 clarifies that the                notices to develop and maintain a                     impracticable and not in the public
                                           covered person has the option of also                   system for matching the property                      interest. Accordingly, the Board is not
                                           providing the agent’s electronic mail                   address to the correct governmental                   required to perform an initial or final
                                           address or internet web site address but                office, and keeping the database up to                regulatory flexibility analysis.
                                           is not required to do so.                               date with correct address information.                Nonetheless, to solicit additional
                                              Recording location. Section 404                      The Board does not believe that this                  information from small entities subject
                                           requires that the disclosure state the                  would provide substantial benefit to                  to the interim final rule, the Board is
                                           location of the place where the transfer                consumers because they presumably                     publishing an initial regulatory
                                           of ownership of the debt is recorded.                   know the county or jurisdiction in                    flexibility analysis.
                                           When a mortgage loan is sold, however,                  which the property is located and can                    Based on its analysis and for the
                                           the transfer in ownership of the debt                   easily obtain the address of the                      reasons stated below, the Board believes
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                                           instrument typically is not recorded in                 governmental office from public                       that this interim final rule will not have
                                           public records. The new owner’s                         directories or other sources. The Board               a significant economic impact on a
                                           security interest in the property that                  solicits comments on the approach                     substantial number of small entities.
                                           secures the debt may or may not be                      taken in the interim final rule and the               The Board invites comment on the effect
                                           recorded in the public land records or,                 relative costs and benefits of requiring              of the interim final rule on small
                                           if it is recorded, it may not yet be                    more detailed disclosures about the                   entities.


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                                                            Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations                                       60149

                                           A. Reasons for the Interim Final Rule                   D. Description of Small Entities to                   Accordingly, the 553 institutions that
                                                                                                   Which the Interim Final Rule Would                    reported loan purchases in 2008
                                              As indicated above, the 2009 Act was                 Apply                                                 probably do not represent all mortgage
                                           signed into law on May 20, 2009.                                                                              acquirers; institutions must report loan
                                           Section 404 amended TILA to establish                      The interim final rule would apply to
                                                                                                   all persons that acquire more than one                purchases only if they are required to
                                           a new requirement for notifying                                                                               report under HMDA based on loan
                                           consumers of the sale or transfer of their              existing mortgage loan in any 12-month
                                                                                                   period, other than servicers that take                originations and assets. Nevertheless,
                                           mortgage loans. This requirement                                                                              the Board’s experience has been that the
                                           became effective immediately upon                       title solely as an administrative
                                                                                                   convenience to enable them to service                 HMDA data are reasonably
                                           enactment on May 20, 2009, and did not                                                                        representative of the whole mortgage
                                           require the issuance of implementing                    the loans. The Board cannot identify
                                                                                                                                                         market.
                                                                                                   with certainty the number of small
                                           regulations. As discussed above, the                                                                             A total of 2,921,684 loan purchases
                                                                                                   entities that meet this definition. The
                                           Board believes there is good cause for an                                                                     were reported under HMDA in 2008 by
                                                                                                   Board can estimate, however,                          entities reporting more than one
                                           interim final rule so that parties subject
                                                                                                   approximate numbers of small entities                 purchase (and thus subject to the
                                           to the rule have guidance on how to
                                                                                                   that purchase mortgage loans, as                      interim final rule). Of those loan
                                           interpret and comply with the statutory
                                                                                                   discussed below.                                      purchases, 2,773,918 were reported by
                                           requirements and consumers receive                         The Board can identify through data
                                           notices consistent with legislative                                                                           depository institutions. Of those
                                                                                                   from Reports of Condition and Income                  depository institution loan purchases,
                                           intent.                                                 (‘‘call reports’’) approximate numbers of             2,122,288 (76.5%) were reported by
                                              Congress enacted TILA based on                       small depository institutions that would              large depository institutions (assets
                                           findings that economic stability would                  be subject to the interim final rules if              greater than $175 million), and 651,630
                                           be enhanced and competition among                       they acquire more than one mortgage                   (23.5%) were reported by small
                                           consumer credit providers would be                      loan in a 12-month period.                            depository institutions (assets of $175
                                           strengthened by the informed use of                     Approximately 16,345 depository                       million or less). Of the 553 HMDA
                                           credit resulting from consumers’                        institutions in the United States filed               reporters reporting more than one loan
                                           awareness of the cost of credit. One of                 call report data in December of 2008, of              purchase, 502 were depository
                                           the stated purposes of TILA is to                       which approximately 11,907 had total                  institutions. Of those 502 depository
                                           provide a meaningful disclosure of                      domestic assets of $175 million or less               institutions, 387 (77.1%) were large and
                                           credit terms to enable consumers to                     and thus were considered small entities               115 (22.9%) were small. Those 115
                                           compare credit terms available in the                   for purposes of the Regulatory                        small depository institutions represent
                                           marketplace more readily and avoid the                  Flexibility Act. Of 4231 banks, 565                   just slightly less than one percent
                                           uninformed use of credit.                               thrifts and 7111 credit unions that filed             (0.97%) of the 11,907 total small
                                                                                                   call report data and were considered                  institutions estimated above from call
                                           B. Summary of 2009 Act                                  small entities, 4091 banks, 530 thrifts,              report data.
                                              As described previously, the                         and 4797 credit unions, totaling 9418                    A total of 147,766 loan purchases
                                           purchaser or assignee that acquires a                   institutions, extended mortgage credit.               were reported under HMDA by non-
                                           loan must provide the required                          For purposes of this analysis, thrifts                depository institutions that reported
                                           disclosures no later than 30 days after                 include savings banks, savings and loan               more than one loan purchase in 2008.
                                           the date on which the loan is acquired.                 entities, co-operative banks and                      The Board cannot tell from the HMDA
                                           Section 226.39(c) of the rule provides an               industrial banks.                                     data how many of those loan purchases
                                           exception if the covered person transfers                  The Board cannot identify with                     were reported by small entities. Neither
                                           or assigns the loan to another party on                 certainty the number of small non-                    can the Board tell how many of the 51
                                           or before that date. Section 226.39(d)                  depository institutions because they do               non-depository institutions that
                                                                                                   not file call reports. Neither can the                reported those loan purchases are small
                                           sets forth the contents of the notice.
                                                                                                   Board determine with certainty how                    entities. If the relative shares among
                                           Consistent with the statute, the interim
                                                                                                   many of the 11,907 institutions                       small and large non-depository
                                           final rule requires that the notice
                                                                                                   identified above as small entities                    institutions do not differ significantly
                                           contain the following: (1) The identity,
                                                                                                   acquired mortgage loans in 2008.                      from those among depository
                                           address, and telephone number of the
                                                                                                   Although an estimated 9418 such                       institutions, however, the shares for
                                           covered person who owns the mortgage
                                                                                                   institutions extended mortgage credit,                non-depository institutions can be
                                           loan; (2) the acquisition date; (3) a
                                                                                                   the Board recognizes that not all entities            estimated. On that basis, the Board
                                           mailing address and telephone number
                                                                                                   that extend mortgage credit also acquire              estimates that 12 small non-depository
                                           that the borrower can use to reach an
                                                                                                   existing mortgage loans. Moreover, the                institutions reported 34,725 loan
                                           agent of the covered person; and (4) the
                                                                                                   reverse is also true: there are entities              purchases and that 39 large non-
                                           location where the covered person’s                     that acquire existing mortgage loans but              depository institutions reported 113,041
                                           interest in the property securing the                   do not extend mortgage credit.                        loan purchases (estimates are rounded
                                           loan is or may be recorded.                                The Board has another source of                    to whole numbers).
                                           C. Statement of Objectives and Legal                    information, data obtained under the                     Using the foregoing numbers from
                                           Basis                                                   Home Mortgage Disclosure Act (HMDA),                  2008 HMDA data for depository
                                                                                                   12 U.S.C. 2801 et seq.; 12 CFR part 203.              institutions and the foregoing estimates
                                             The SUPPLEMENTARY INFORMATION                         Based on loan purchases reported for                  for non-depository institutions, the
                                           contains this information. The legal                    2008 under HMDA, the Board estimates                  Board estimates the following numbers
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                                           basis for the interim final rule is in TILA             that 553 of the reporting institutions                for all entities reporting under HMDA
                                           Sections 105(a), 105(f). 15 U.S.C.                      engaged in more than one mortgage                     combined: of the 2,921,684 loan
                                           1604(a), 1604(f). A more detailed                       acquisition. The 8388 lenders covered                 purchases reported by 553 entities
                                           discussion of the Board’s rulemaking                    by HMDA in 2008 accounted for the                     reporting more than one purchase,
                                           authority is set forth in the                           majority, but not all, of the home                    2,235,329 (76.5%) were reported by 426
                                           SUPPLEMENTARY INFORMATION.                              lending in the United States.                         large entities (77%), and 686,355


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                                           60150            Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations

                                           (23.5%) were reported by 127 small                      significant burden in responding to                   respond to, this information collection
                                           entities (23%). Based on these estimates,               consumer requests. Furthermore, the                   unless the information collection
                                           less than one-quarter of the institutions               Board has provided an exception to the                displays a currently valid OMB control
                                           reporting covered loan purchases under                  rule for mortgage owners who do not                   number. The OMB control number is
                                           HMDA were small entities, and less                      hold the loan more than 30 days. The                  7100–0199.
                                           than one-quarter of the covered loan                    Board believes that this exception                      This information collection is
                                           purchases reported were reported by                     balances the needs of consumers for                   required to provide benefits for
                                           small entities.                                         information with the burdens on                       consumers and is mandatory (15 U.S.C.
                                             The foregoing data are not complete                   industry of compliance and the                        1601 et seq.). Since the Board does not
                                           in many respects. Not all depository                    potential for confusion to consumers of               collect any information, no issue of
                                           institutions that file call reports are                 multiple disclosures.                                 confidentiality arises. The respondents/
                                           reporters under HMDA, and not all                                                                             recordkeepers are persons or entities
                                           HMDA reporters file call reports.                       F. Other Federal Rules                                that acquire legal title to more than one
                                           Further, some unknown number of                           The Board has not identified other                  mortgage loan in any 12-month period,
                                           entities purchase more than one                         rules that conflict with the rule. As                 including for-profit financial
                                           mortgage loan in any 12-month period                    indicated previously, under RESPA and                 institutions and small businesses.
                                           and yet file neither call reports nor                   HUD’s Regulation X, consumers must be                   TILA and Regulation Z are intended
                                           HMDA data; how many of those are                        notified when the servicer of their                   to ensure effective disclosure of the
                                           small entities also is unknown.                         mortgage loan has changed. Therefore,                 costs and terms of credit to consumers.
                                           Nevertheless, if one assumes that the                   the disclosure of contact information for             For closed-end loans, such as mortgage
                                           existing data are reasonably                            the agent of the owner of the mortgage                and installment loans, cost disclosures
                                           representative of the market as a whole,                loan, typically the servicer under                    are required to be provided prior to
                                           they present an overall picture of                      applicable agreements, is already                     consummation. Special disclosures are
                                           minimal economic impact on small                        generally required by law. As a result of             required in connection with certain
                                           entities. For all these reasons, the Board              existing requirements, servicers are                  products, such as reverse mortgages,
                                           believes that the interim final rule will               already subject to disclosure of their                certain variable-rate loans, and certain
                                           not have a significant economic impact                  contact information and are already                   mortgages with rates and fees above
                                           on a substantial number of small                        subject to calls regarding administration             specified thresholds. To ease the burden
                                           entities.                                               of payment information.                               and cost of complying with Regulation
                                                                                                                                                         Z (particularly for small entities), the
                                           E. Projected Reporting, Recordkeeping,                  G. Significant Alternatives to the Interim            Board provides model forms, which are
                                           and Other Compliance Requirements                       Final Rule                                            appended to the regulation. TILA and
                                              The compliance requirements of the                     As noted above, this interim final rule             Regulation Z also contain rules
                                           interim final rules are described in the                implements the statutory requirements                 concerning credit advertising. Creditors
                                           SUPPLEMENTARY INFORMATION. As                           of the 2009 Act that were effective on                are required to retain evidence of
                                           indicated above, the Board is adopting                  May 20, 2009. The Board has                           compliance with Regulation Z for 24
                                           a new disclosure rule requiring that                    implemented these requirements to                     months (12 CFR 226.25), but Regulation
                                           consumers receive notice when                           minimize burden while retaining                       Z does not specify the types of records
                                           ownership of their mortgage loan is                     benefits to consumers. The Board was                  that must be retained.
                                           transferred. The Board is aware that                    not required to issue rules but has                     Under the PRA, the Board accounts
                                           numerous covered persons are already                    decided that rules are needed to clarify              for the paperwork burden associated
                                           complying with these statutory                          who is subject to the requirements and                with Regulation Z for the state member
                                           provisions, which became effective on                   what information must be disclosed,                   banks and other entities supervised by
                                           May 20, 2009. Therefore the additional                  and to ensure that consumers receive                  the Board that engage in activities
                                           burden imposed by the Board’s rule                      disclosures of ownership that are                     covered by Regulation Z and, therefore,
                                           itself is likely to be minimal.                         consistent with legislative intent. The               are respondents under the PRA.
                                           Furthermore, the information required                   Board welcomes comment on any                         Appendix I of Regulation Z defines the
                                           to be provided is easily obtainable by                  significant alternatives that would                   institutions supervised by the Federal
                                           the covered person. The covered person                  minimize the impact of the interim final              Reserve System as: state member banks,
                                           must provide contact information for                    rule on small entities.                               branches and agencies of foreign banks
                                           itself and any agent (but is not required                 The Board welcomes further                          (other than federal branches, Federal
                                           to designate an agent), may use the                     information and comment on any costs,                 agencies, and insured state branches of
                                           acquisition date in its own books and                   compliance requirements, or changes in                foreign banks), commercial lending
                                           records, and may generally describe the                 operating procedures arising from the                 companies owned or controlled by
                                           location where the covered person’s                     application of the interim final rule to              foreign banks, and organizations
                                           interest in the property securing the                   small businesses.                                     operating under section 25 or 25A of the
                                           mortgage loan is or may be recorded.                                                                          Federal Reserve Act. Other Federal
                                           This information generally is already                   VI. Paperwork Reduction Act                           agencies account for the paperwork
                                           required by the statute.                                  In accordance with the Paperwork                    burden imposed on the entities for
                                              Based on informal surveys of industry                Reduction Act (PRA) of 1995 (44 U.S.C.                which they have administrative
                                           representatives and practices in effect,                3506; 5 CFR part 1320 appendix A.1),                  enforcement authority under TILA.
                                           the Board understands that entities are                 the Board reviewed the interim final                    The current total annual burden to
                                           likely to designate servicers as their                  rule under the authority delegated to the             comply with the provisions of
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                                           agents. Servicers already respond to                    Board by the Office of Management and                 Regulation Z is estimated to be
                                           consumer requests on the behalf of                      Budget (OMB). The collection of                       1,011,311 hours for the 1,138
                                           covered persons. Therefore, other than                  information that is required by this final            institutions supervised by the Federal
                                           providing the notice itself, covered                    rule is found in 12 CFR 226.39. The                   Reserve that are deemed to be
                                           persons (including those who are small                  Board may not conduct or sponsor, and                 respondents for the purposes of the
                                           entities) are not likely to incur                       an organization is not required to                    PRA.


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                                                            Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations                                          60151

                                              As discussed in the preamble, the                    total paperwork burden for the                        Subpart E—Special Rules for Certain
                                           Board is adopting a new disclosure rule                 domestically chartered commercial                     Home Mortgage Transactions
                                           requiring that consumers receive notice                 banks, thrifts, and federal credit unions
                                           when ownership of their mortgage loan                   and U.S. branches and agencies of                     ■ 2. Add a new § 226.39 to Subpart E of
                                           is transferred. The new disclosure                      foreign banks for which they have                     Part 226 to read as follows:
                                           requirement will impose a one-time                      primary administrative enforcement
                                           increase in the total annual burden                                                                           § 226.39   Mortgage transfer disclosures.
                                                                                                   jurisdiction under TILA Section 108(a),
                                           under Regulation Z for respondents                      15 U.S.C. 1607(a). These agencies may,                   (a) Scope. The disclosure
                                           supervised by the Federal Reserve that                  but are not required to, use the Board’s              requirements of this section apply to
                                           engage in mortgage acquisitions. The                    methodology for estimating burden.                    any covered person except as otherwise
                                           Board estimates that 68 respondents 4                   Using the Board’s method, the total                   provided in this section. For purposes of
                                           supervised by the Federal Reserve will                  current estimated annual burden for the               this section:
                                           take, on average, 40 hours (one business                approximately 17,200 domestically                        (1) A ‘‘covered person’’ means any
                                           week) to update their systems, internal                 chartered commercial banks, thrifts, and              person, as defined in § 226.2(a)(22), that
                                           procedure manuals, and provide                          federal credit unions and U.S. branches               becomes the owner of an existing
                                           training for relevant staff to comply with              and agencies of foreign banks                         mortgage loan by acquiring legal title to
                                           the new disclosure requirements in                      supervised by the Board, OCC, OTS,                    the debt obligation, whether through a
                                           § 226.39. Accordingly, this revision is                 FDIC, and NCUA under TILA would be                    purchase, assignment, or other transfer,
                                           estimated to result in a one-time                       approximately 17,765,525 hours. The                   and who acquires more than one
                                           increase in the aggregate burden by                     final rule will impose a one-time                     mortgage loan in any twelve-month
                                           2,720 hours for these 68 respondents.                   increase in the estimated annual burden               period. For purposes of this section, a
                                              On a continuing basis, the Board                     for the estimated 638 institutions                    servicer of a mortgage loan shall not be
                                           estimates that 68 respondents                           thought to engage in mortgage                         treated as the owner of the obligation if
                                           supervised by the Federal Reserve                       acquisitions by 25,520 hours. On a                    the servicer holds title to the loan or it
                                           would take, on average, 8 hours 5 per                   continuing basis the annual burden                    is assigned to the servicer solely for the
                                           month to comply with the new                            would increase by 61,248 hours. The                   administrative convenience of the
                                           disclosure requirements, which would                    total annual burden is estimated to be                servicer in servicing the obligation.
                                           increase the ongoing aggregate burden                   17,852,293 hours. The above estimates                    (2) A ‘‘mortgage loan’’ means any
                                           by 6,528 hours annually for these                       represent an average across all                       consumer credit transaction that is
                                           respondents. Accordingly, the Board                     respondents and reflect variations                    secured by the principal dwelling of a
                                           estimates that the new disclosure                       between institutions based on their size,             consumer.
                                           requirement will increase the total                     complexity, and practices.                               (b) Disclosure required. Except as
                                           annual burden on a continuing basis for                                                                       provided in paragraph (c) of this
                                           respondents supervised by the Federal                      The Board has a continuing interest in
                                                                                                   public opinion on its collections of                  section, any person that becomes a
                                           Reserve from 1,011,311 to 1,017,839                                                                           covered person as defined in this
                                           hours (not including the one-time                       information. At any time, comments
                                                                                                   regarding the burden estimate or any                  section shall mail or deliver the
                                           increase of 2,720 hours to implement                                                                          disclosures required by this section to
                                           the changes, as described above). This                  other aspect of this collection of
                                                                                                   information, including suggestions for                the consumer on or before the 30th
                                           total estimated burden increase                                                                               calendar day following the acquisition
                                           represents averages for all respondents                 enhancing the quality of information
                                                                                                   collected and ways for reducing the                   date. If there is more than one covered
                                           supervised by the Federal Reserve. The
                                                                                                   burden on respondent. Comments on                     person, only one disclosure shall be
                                           Board expects that the amount of time
                                                                                                   the collection of information may be                  given and the covered persons shall
                                           required to implement each of the
                                                                                                   sent to: Secretary, Board of Governors of             agree among themselves which covered
                                           changes for a given institution may vary
                                                                                                   the Federal Reserve System, 20th and C                person shall comply with the
                                           based on the size and complexity of the
                                                                                                   Streets, NW., Washington, DC 20551;                   requirements that this section imposes
                                           respondent.
                                              The other federal financial institution              and to the Office of Management and                   on any or all of them.
                                           supervisory agencies (the Office of the                 Budget, Paperwork Reduction Project                      (1) Acquisition date. For purposes of
                                           Comptroller of the Currency (OCC), the                  (7100–0199), Washington, DC 20503.                    this section, the date that the covered
                                           Office of Thrift Supervision (OTS), the                                                                       person acquired the mortgage loan shall
                                                                                                   List of Subjects in 12 CFR Part 226                   be the date of acquisition recognized in
                                           Federal Deposit Insurance Corporation
                                           (FDIC), and the National Credit Union                     Consumer protection, Federal Reserve                the books and records of the acquiring
                                           Administration (NCUA)) are responsible                  System, Mortgages, Reporting and                      party.
                                           for estimating and reporting to OMB the                 recordkeeping requirements, Truth in                     (2) Multiple consumers. If there is
                                                                                                   lending.                                              more than one consumer liable on the
                                              4 Based on loan purchases reported for 2008                                                                obligation, a covered person may mail
                                           under the Home Mortgage Disclosure Act (HMDA),          Authority and Issuance                                or deliver the disclosures to any
                                           12 U.S.C. 2801 et seq., and Regulation C (12 CFR                                                              consumer who is primarily liable.
                                           part 203), the Board estimates that 58 of the 553       ■ For the reasons set forth in the
                                           institutions engaged in such mortgage acquisitions      preamble, the Board amends Regulation                    (c) Exceptions. Notwithstanding
                                           are supervised by the Federal Reserve. Based on         Z, 12 CFR part 226, as set forth below:               paragraph (b) of this section, a covered
                                           average Call Report data for the past four quarters,                                                          person is not subject to the requirements
                                           approximately 95 institutions that do not report                                                              of this section with respect to a
                                           under HMDA also would be subject to these new
                                                                                                   PART 226—TRUTH IN LENDING
                                                                                                   (REGULATION Z)                                        particular mortgage loan if:
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                                           disclosure requirements and 10 of these institutions
                                           are supervised by the Federal Reserve.                                                                           (1) The covered person sells or
                                              5 Because financial institutions are familiar with   ■ 1. The authority citation for part 226              otherwise transfers or assigns legal title
                                           the existing RESPA provisions which require             continues to read as follows:                         to the mortgage loan on or before the
                                           notification to consumers when the servicer of their
                                           mortgage loan has changed, the Federal Reserve             Authority: 12 U.S.C. 3806; 15 U.S.C. 1604,         30th calendar day following the date
                                           believes that implementation of requirements in         1637(c)(5), and 1639(l); Public Law 111–24            that the covered person acquired the
                                           § 226.39 should not be overly burdensome.               § 2, 123 Stat. 1734.                                  mortgage loan; or


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                                           60152            Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations

                                              (2) The mortgage loan is transferred to              Supplement I to Part 226—Official Staff               delivered on or before March 31. For
                                           the covered person in connection with                   Interpretations                                       purposes of this requirement, the date that
                                           a repurchase agreement and the                                                                                the covered person acquires the loan is the
                                                                                                   *      *      *      *       *                        acquisition date recognized in its books and
                                           transferor that is obligated to repurchase                                                                    records.
                                           the loan continues to recognize the loan                Subpart E—Special Rules for Certain                      2. Disclosure provided on behalf of
                                           as an asset on its own books and                        Home Mortgage Transactions                            multiple entities. A mortgage loan may be
                                           records. However, if the transferor does                                                                      acquired by a covered person and
                                           not repurchase the mortgage loan, the                   *      *      *      *       *                        subsequently transferred to an affiliate or
                                           acquiring party must make the                                                                                 other entity that is also a covered person
                                                                                                   Section 226.39—Mortgage transfer                      required to provide disclosures under
                                           disclosures required by § 226.39 within                 disclosures.                                          § 226.39. In such cases, a single disclosure
                                           30 days after the date that the
                                                                                                      39(a) Scope.                                       may be provided on behalf of both entities
                                           transaction is recognized as an                                                                               instead of providing two separate
                                                                                                      Paragraph 39(a)(1).
                                           acquisition in its books and records.                      1. Covered persons. The disclosure                 disclosures, as long as the disclosure satisfies
                                              (d) Content of required disclosures.                 requirements of § 226.39 apply to any                 the timing and content requirements
                                           The disclosures required by this section                ‘‘covered person’’ that becomes the legal             applicable to both entities. For example, if a
                                           shall identify the loan that was acquired               owner of an existing mortgage loan, whether           covered person acquires a loan on August 31
                                                                                                   through a purchase, assignment, or other              with the knowledge that it will assign the
                                           or transferred and state the following:
                                                                                                   transfer, regardless of whether the person            loan to another entity on October 15, the
                                              (1) The identity, address, and                                                                             covered person could mail a single disclosure
                                                                                                   also meets the definition of a ‘‘creditor’’ in
                                           telephone number of the covered person                  Regulation Z. The fact that a person                  on or before September 30 which provides
                                           who owns the mortgage loan. If there is                 purchases or acquires mortgage loans and              the required information for both entities and
                                           more than one covered person, the                       provides disclosures under § 226.39 does not          indicates when the subsequent transfer is
                                           information required by this paragraph                  by itself make that person a ‘‘creditor’’ as          expected to occur. Even though one person
                                           shall be provided for each of them.                     defined in the regulation.                            delegates responsibility for the disclosures to
                                                                                                      2. Acquisition of legal title. To become a         another covered person, each has a duty to
                                              (2) The acquisition date recognized by                                                                     ensure that disclosures related to its
                                                                                                   ‘‘covered person’’ subject to § 226.39, a
                                           the covered person.                                                                                           acquisition are accurate and provided in a
                                                                                                   person must become the owner of an existing
                                              (3) How to reach an agent or party                   mortgage loan by acquiring legal title to the         timely manner.
                                           having authority to act on behalf of the                debt obligation. The transfer of ownership of            39(c) Exceptions.
                                           covered person (or persons), which shall                                                                         Paragraph 39(c)(1).
                                                                                                   a mortgage loan is subject to the disclosure
                                                                                                                                                            1. Example. If a mortgage loan is originated
                                           identify a person (or persons)                          requirements of this section when the
                                                                                                                                                         on February 22nd and the original creditor
                                           authorized to receive legal notices on                  acquiring party is a separate legal entity from
                                                                                                                                                         sells the loan on March 1 to a covered
                                           behalf of the covered person and resolve                the transferor, even if the parties are affiliated
                                                                                                                                                         person, under the exception in § 226.39(c)
                                           issues concerning the consumer’s                        entities. Section 226.39 does not apply to
                                                                                                                                                         the covered person would not be required to
                                                                                                   persons who acquire only a beneficial                 provide disclosures under § 226.39 if the loan
                                           payments on the loan. However, no                       interest in the loan or a security interest in
                                           information is required to be provided                                                                        is sold or otherwise transferred or assigned
                                                                                                   the loan. Section 226.39 also does not apply          to another party on or before March 31.
                                           under this paragraph if the consumer                    to a party that assumes the credit risk                  Paragraph 39(c)(2).
                                           can use the information provided under                  without acquiring legal title to the loan.               1. Repurchase agreements. The original
                                           paragraph (d)(1) of this section for these              Thus, an investor that acquires mortgage-             creditor or owner of the mortgage loan might
                                           purposes. If multiple persons are                       backed securities, pass-through certificates,         sell or transfer legal title to the loan to secure
                                           identified under this paragraph, the                    or participation interests and does not               short-term business financing under an
                                           disclosure shall provide contact                        directly acquire legal title in the underlying        agreement where the original creditor or
                                           information for each and indicate the                   mortgage loans is not covered by this section.        owner is also obligated to repurchase the
                                                                                                      3. Loan servicers. Pursuant to TILA Section        loan within a brief period, typically a month
                                           extent to which the authority of each                   131(f)(2), the servicer of a mortgage loan is
                                           agent differs. For purposes of this                                                                           or less. If the original creditor or owner does
                                                                                                   not treated as the owner of the obligation for        not recognize such transactions as a sale of
                                           paragraph (d)(3), it is sufficient if the               purposes of § 226.39 if the servicer holds title      the loan on its own books and records for
                                           covered person provides only a                          to the loan as a result of the assignment of          accounting purposes, the transfer of the loan
                                           telephone number provided that the                      the obligation to the servicer solely for the         in connection with such a repurchase
                                           consumer can use the telephone number                   administrative convenience of the servicer in         agreement is not covered by § 226.39 and the
                                           to obtain the address for the agent or                  servicing the obligation.                             acquiring party is not required to provide
                                           other person identified.                                   4. Mergers, corporate acquisitions, or             disclosures. However, if the transferor does
                                                                                                   reorganizations. Disclosures are required             not repurchase the mortgage loan, the
                                              (4) The location where transfer of                   under § 226.39 when, as a result of a merger,         acquiring party must make the disclosures
                                           ownership of the debt to the covered                    corporate acquisition, or reorganization the          required by § 226.39 within 30 days after the
                                           person is recorded. However, if the                     ownership of a mortgage loan is transferred           date that the transaction is recognized as an
                                           transfer of ownership has not been                      to a different legal entity.                          acquisition in its books and records.
                                           recorded in public records at the time                     Paragraph 39(a)(2).                                   39(d) Content of required disclosures.
                                           the disclosure is provided, the covered                    1. Mortgage transactions covered. Section             1. Identifying the loan. The disclosures
                                           person complies with this paragraph by                  226.39 applies to any consumer credit                 required by this section should identify the
                                           stating this fact.                                      transaction secured by the principal dwelling         loan that was acquired or transferred. The
                                                                                                   of a consumer, which includes closed-end              covered person has flexibility in determining
                                              (e) Optional disclosures. In addition                mortgage loans as well as home equity lines           what information to provide for this purpose.
                                           to the information required to be                       of credit.                                            For example, the covered person may
                                           disclosed under paragraph (d) of this                      39(b) Disclosure required.                         identify the loan by stating the address of the
                                           section, a covered person may, at its                      1. Generally. A covered person must mail           mortgaged property along with the account
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                                           option, provide any other information                   or deliver the disclosures required by                number or other identification number
                                           regarding the transaction.                              § 226.39 on or before the 30th calendar day           previously known to the consumer, which
                                                                                                   following the date that the covered person            may appear in a truncated format.
                                           ■ 3. In Supplement I to Part 226, under                 acquired the loan, unless the exception in            Alternatively, the covered person might
                                           Subpart E, a new Section 226.39—                        § 226.39(c) applies. For example, if a covered        identify the loan by specifying the date on
                                           Mortgage Transfer Disclosures is added                  person acquires a mortgage loan on March 1,           which the credit was extended and the
                                           to read as follows:                                     the required disclosure must be mailed or             original amount of the loan or credit line.



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                                                            Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations                                                  60153

                                              Paragraph 39(d)(1).                                  include additional information about the              potential for abuse.1 On October 15,
                                              1. Identification of covered person. Section         mortgage transaction that they consider               2009, the Commission issued Order No.
                                           226.39(d)(1) requires acquiring parties to              relevant or helpful to consumers. For                 717–A to address requests for rehearing
                                           provide their name, address, and telephone              example, the covered person may choose to
                                           number. The party identified must be the
                                                                                                                                                         and clarification of Order No. 717,
                                                                                                   inform consumers that the location where
                                           covered person who owns the mortgage loan,              they should send mortgage payments has not
                                                                                                                                                         largely affirming the reforms adopted in
                                           regardless of whether another party has been            changed.                                              Order No. 717.2 In this order, the
                                           appointed to service the loan or otherwise                                                                    Commission grants limited rehearing
                                           serve as the covered person’s agent. In                   By order of the Board of Governors of the           and clarification to address certain
                                           addition to providing a postal address and a            Federal Reserve System, November 13, 2009.
                                                                                                                                                         specific matters petitioners raised
                                           telephone number, the covered person may,               Jennifer J. Johnson,                                  regarding one of the Commission’s
                                           at its option, provide an address for receiving         Secretary of the Board.                               determinations in Order No. 717–A.
                                           electronic mail or an internet web site                 [FR Doc. E9–27742 Filed 11–19–09; 8:45 am]
                                           address but is not required to do so.                                                                         II. Discussion
                                                                                                   BILLING CODE 6210–01–P
                                              Paragraph 39(d)(3).
                                              1. Identifying agents. Under § 226.39(d)(3),                                                               Independent Functioning Rule:
                                           the covered person must provide contact                                                                       Marketing Function Employees
                                           information for the agent or other party                DEPARTMENT OF ENERGY
                                           having authority to act on behalf of the
                                                                                                                                                           2. In paragraph 80 of Order No. 717–
                                           covered person and who is authorized to                                                                       A, the Commission stated the following:
                                                                                                   Federal Energy Regulatory
                                           receive legal notices on behalf of the covered          Commission                                               The Commission clarifies that an employee
                                           person and resolve issues concerning the                                                                      in the legal, finance or regulatory division of
                                           consumer’s payments on the loan. Section                                                                      a jurisdictional entity, whose intermittent
                                           226.39(d)(3) does not require that a covered            18 CFR Part 358
                                                                                                                                                         day-to-day duties include the drafting and
                                           person designate an agent or other party, but           [Docket No. RM07–1–002; Order No. 717–                redrafting of non-price terms and conditions
                                           if the consumer cannot use the covered                  B]                                                    of, or exemptions to, umbrella agreements is
                                           person’s contact information for these                                                                        a ‘‘marketing function employee.’’
                                           purposes the disclosure must provide contact                                                                  ‘‘Marketing functions’’ are not limited to only
                                                                                                   Standards of Conduct for
                                           information for an agent or other party that                                                                  price terms and conditions of a contract,
                                           can address these matters. If multiple agents           Transmission Providers; Order on
                                                                                                   Rehearing and Clarification                           because non-price terms and conditions of a
                                           are listed on the disclosure, the disclosure                                                                  contract could contain information that an
                                           shall state the extent to which the authority                                                                 affiliate could use to its advantage. For
                                           of each agent differs by indicating if only one         Issued November 16, 2009.
                                                                                                   AGENCY: Federal Energy Regulatory                     example, delivery or hub locations in a
                                           of the agents is authorized to receive legal                                                                  contract are non-price terms that could be
                                           notices, or only one of the agents is                   Commission.                                           used to favor an affiliate. In addition,
                                           authorized to resolve issues concerning                 ACTION: Order on rehearing and                        negotiated terms and conditions could affect
                                           payments. For purposes of § 226.39(d)(3), it            clarification.                                        the substantive rights of the parties. For this
                                           is sufficient to provide a telephone number
                                                                                                                                                         reason, we decline to make a generic finding
                                           as the contact information provided that                SUMMARY: The Federal Energy                           to limit ‘‘marketing functions’’ to only price
                                           consumers can use the telephone number to
                                                                                                   Regulatory Commission (Commission)                    terms and conditions, but will consider
                                           obtain the mailing address for the agent or
                                                                                                   issued Order No. 717–A to make even                   waiver requests concerning an employee
                                           other person identified.
                                                                                                   clearer the Standards of Conduct as                   whose intermittent duties involve drafting
                                              2. Other contact information. The covered
                                                                                                   implemented by Order No. 717. This                    non-price terms and conditions.3
                                           person may also provide an agent’s electronic
                                           mail address or internet web site address but           order addresses requests for rehearing                Requests for Rehearing and Clarification
                                           is not required to do so.                               and clarification concerning paragraph
                                              Paragraph 39(d)(4).                                  80 of Order No. 717–A and whether an                     3. Several parties have requested
                                              1. Recording location. Section 226.39(d)(4)          employee who is not making business                   expedited clarification regarding
                                           requires disclosure of the location where
                                                                                                   decisions about contract non-price                    paragraph 80 of Order No. 717–A.4
                                           transfer of ownership of the debt to the                                                                      Specifically, EEI and Western Utilities
                                           covered person is recorded. If the transfer of          terms and conditions is considered a
                                                                                                   ‘‘marketing function employee.’’                      request that the Commission clarify that
                                           ownership has not been recorded in public                                                                     legal, finance, and regulatory personnel
                                           records at the time the disclosure is                   DATES: Effective Date: This rule will                 can be shared between an entity’s
                                           provided, the covered person complies with              become effective November 23, 2009.
                                           § 226.39(d)(4) by stating this fact. Whether or                                                               transmission and marketing function
                                                                                                   FOR FURTHER INFORMATION CONTACT:                      units.5 Similarly, Otter Tail and Central
                                           not the transfer has been recorded at the time
                                           the disclosure is made, the disclosure may              Leonard Tao, Office of the General                    Vermont seek clarification that lawyers,
                                           state that the transfer ‘‘is or may be recorded’’       Counsel—Energy Markets, Federal                       finance, and regulatory personnel may
                                           at the specified location.                              Energy Regulatory Commission, 888                     continue to provide support to
                                              2. Postal address not required. In                   First Street, NE., Washington, DC 20426,
                                           disclosing the location where the transfer of           (202) 502–8214.                                         1 Standards of Conduct for Transmission
                                           ownership is recorded, the covered person is                                                                  Providers, Order No. 717, 73 FR 63796 (Oct. 27,
                                                                                                   SUPPLEMENTARY INFORMATION:
                                           not required to provide a postal address for                                                                  2008), FERC Stats. & Regs. ¶ 31,280 (2008) (‘‘Order
                                           the governmental office where the covered               129 FERC ¶ 61,123                                     No. 717’’).
                                           person’s ownership interest is recorded. The            Before Commissioners: Jon Wellinghoff,                  2 Standards of Conduct for Transmission

                                           covered person also is not required to                    Chairman; Suedeen G. Kelly, Marc Spitzer,           Providers, Order No. 717–A, 74 FR 54463 (Oct. 22,
                                           provide the name of the county or                         and Philip D. Moeller.                              2009), FERC Stats. & Regs. ¶ 31,297 (2009) (‘‘Order
                                           jurisdiction where the property is located.                                                                   No. 717–A’’).
                                           For example, it would be sufficient to                  I. Introduction                                         3 Order No. 717–A at P 80.
                                                                                                                                                           4 Edison Electric Institute (EEI) Oct. 30, 2009
                                           disclose that the transaction is or may be                1. On October 16, 2008, the
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                                                                                                                                                         Request for Clarification at 7; The Western Utilities
                                           recorded in the office of public land records           Commission issued Order No. 717                       Compliance Group (Western Utilities) Nov. 2, 2009
                                           or the recorder of deeds office ‘‘for the county
                                           or local jurisdiction where the property is
                                                                                                   amending the Standards of Conduct for                 Request for Clarification at 6; Otter Tail Power
                                                                                                   Transmission Providers (the Standards                 Company (Otter Tail) Nov. 10, 2009 Request for
                                           located.’’                                                                                                    Clarification at 1; Central Vermont Public Service
                                              39(e) Optional disclosures.                          of Conduct or the Standards) to make                  Corporation (Central Vermont) Nov. 12, 2009
                                              1. Generally. Section 226.39(e) provides             them clearer and to refocus the rules on              Request for Clarification at 1.
                                           that covered persons may, at their option,              the areas where there is the greatest                   5 EEI at 7; Western Utilities at 6.




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