Wednesday, July 30, 2008

"higher-priced mortgages" - new TILA/HOEPA regs

SUMMARY: The Board is publishing final rules amending Regulation Z, which implements the Truth in Lending Act and Home Ownership and Equity Protection Act.

The goals of the amendments are to protect consumers in the mortgage market from unfair, abusive, or deceptive lending and servicing practices while preserving responsible lending and sustainable homeownership; ensure that advertisements for mortgage loans provide accurate and balanced information and do not contain misleading or deceptive representations; and provide consumers transactionspecific disclosures early enough to use while shopping for a mortgage.

The final rule applies four protections to a newlydefined category of higher-priced mortgage loans secured by a consumer’s principal dwelling, including a prohibition on lending based on the collateral without regard to consumers’ ability to repay their obligations from income, or from other sources besides the collateral. The revisions apply two new protections to mortgage loans secured by a consumer’s principal dwelling regardless of loan price, including a prohibition on abusive servicing practices.

The Board is also finalizing rules requiring that advertisements provide accurate and balanced information, in a clear and conspicuous manner, about rates, monthly payments, and other loan features. The advertising rules ban several deceptive or misleading advertising practices, including representations that a rate or payment is ‘‘fixed’’ when it can change. Finally, the revisions require creditors to provide consumers with transaction-specific mortgage loan disclosures within three business days after application and before they pay any fee except a reasonable fee for reviewing credit history.

DATES: This final rule is effective on October 1, 2009, except for § 226.35(b)(3)) which is effective on April 1, 2010. See part XIII, below, regarding mandatory compliance with § 226.35(b)(3) on mortgages secured by manufactured housing.

I. Summary of Final Rules
A. Rules To Prevent Unfairness, Deception, and Abuse
B. Revisions To Improve Mortgage Advertising
C. Requirement To Give Consumers Disclosures Early

II. Consumer Protection Concerns in the Subprime Market
A. Recent Problems in the Mortgage Market
B. Market Imperfections That Can Facilitate Abusive and Unaffordable Loans

III. The Board’s HOEPA Hearings
A. Home Ownership and Equity Protection Act (HOEPA)
B. Summary of 2006 Hearings
C. Summary of June 2007 Hearing
D. Congressional Hearings
IV. Interagency Supervisory Guidance

V. Legal Authority
A. The Board’s Authority Under TILA Section 129(l)(2)
B. The Board’s Authority Under TILA Section 105(a)

VI. The Board’s Proposal
A. Proposals To Prevent Unfairness, Deception, and Abuse
B. Proposals To Improve Mortgage Advertising
C. Proposal To Give Consumers Disclosures Early

VII. Overview of Comments Received

VIII. Definition of ‘‘Higher-Priced Mortgage Loan’’—§ 226.35(a)
A. Overview
B. Public Comment on the Proposal
C. General Approach
D. Index for Higher-Priced Mortgage Loans
E. Threshold for Higher-Priced Mortgage Loans
F. The Timing of Setting the Threshold
G. Proposal To Conform Regulation C (HMDA)
H. Types of Loans Covered Under § 226.35

IX. Final Rules for Higher-Priced Mortgage Loans and HOEPA Loans
A. Overview
B. Disregard of Consumer’s Ability To Repay—§§ 226.34(a)(4) and 226.35(b)(1)
C. Prepayment Penalties—§ 226.32(d)(6) and (7); § 226.35(b)(2)
D. Escrows for Taxes and Insurance—§ 226.35(b)(3)
E. Evasion Through Spurious Open-End Credit—§ 226.35(b)(4)

X. Final Rules for Mortgage Loans—§ 226.36
A. Creditor Payments to Mortgage Brokers—§ 226.36(a)
B. Coercion of Appraisers—§ 226.36(b)