Loan Guaranty: Adjustable Rate Mortgage Notification Requirements and Look-Back Period, 48254-48255 [2015-19775]

Agencies

• DEPARTMENT OF VETERANS AFFAIRS

[Federal Register Volume 80, Number 155 (Wednesday, August 12, 2015)]
[Rules and Regulations]
[Pages 48254-48255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-19775]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 36

RIN 2900-AP25


Loan Guaranty: Adjustable Rate Mortgage Notification Requirements 
and Look-Back Period

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This document adopts as final, without change, a proposed rule 
of the Department of Veterans Affairs (VA) to amend its regulations 
that govern adjustable rate mortgages made in conjunction with the Home 
Loan Guaranty program. These revisions align VA's disclosure and 
interest rate adjustment requirements with the implementing regulations 
of the Truth in Lending Act (TILA), as recently revised by the Consumer 
Financial Protection Bureau (CFPB). This rulemaking will ensure VA 
remains consistent with other applicable consumer finance and housing 
regulations governing adjustable rate mortgages.

DATES: Effective Date: This rule is effective September 11, 2015.

FOR FURTHER INFORMATION CONTACT: John Bell III, Assistant Director for 
Loan Policy (262), Veterans Benefits Administration, Department of 
Veterans Affairs, 810 Vermont Ave. NW., Washington, DC 20420, (202) 
632-8786. (This is not a toll-free number.)

SUPPLEMENTARY INFORMATION:

The January 29, 2015 Proposed Rule

    On January 29, 2015, VA published a proposed rule in the Federal 
Register at 80 FR 4812, to revise VA's regulations governing adjustable 
rate mortgages set forth at 38 CFR 36.4312(d). VA proposed two 
amendments in this rulemaking to ensure VA regulations remain aligned 
with TILA and the implementing regulations set forth by the CFPB. 
First, VA proposed amending 38 CFR 36.4312(d)(6) so that the 
requirements for the disclosures and notifications that must be 
provided to borrowers prior to an interest-rate adjustment are cross-
referenced to those set forth in the TILA implementing regulations at 
12 CFR 1026.20(c) and (d). Second, VA proposed amending 38 CFR 
36.4312(d)(2) to require that lenders adjust interest rates based on 
the most recent interest rate index figure available 45 days prior to 
the interest rate adjustment, instead of the interest rate index 
available 30 days prior to the interest rate adjustment, as is 
currently required in VA's regulations.
    The public comment period for the proposed rule closed on March 30, 
2015. VA received two comments. The comments received on the proposed 
rule are discussed below. VA adopts without change the proposed rule 
that revises VA's adjustable rate mortgage regulations at 38 CFR 
36.4312(d) to ensure consistency with other Federal agency regulations.
    VA received one public comment on the proposed rule from a lender 
who participates in the VA Home Loan program. The commenter expressed 
support for the rule as written and stated that VA's alignment with 
CFPB's rules will reduce the regulatory burden [on lenders] and ensure 
protection for Veterans and Servicemembers.
    VA received one public comment on the proposed rule from an 
individual. The commenter stated that a three-year look-back period 
would be detrimental to veterans and their spouses. The commenter 
explained that veterans and their spouses currently have a good chance 
of moving to an assisted living facility of their choice or staying at 
home with a caregiver, but that with a three-year look-back period, the 
majority of these individuals will no longer have that choice. The 
commenter explained that this would result in these veterans relying on 
Medicaid and going to a facility not of their choosing, which would be 
more expensive.
    VA believes the commenter mistook the purpose of VA's proposal, as 
the term look-back often relates to the period preceding the date that 
a person applies for Medicaid. VA does not believe this regulatory 
change has any impact on veterans moving to an assisted living 
facility, staying with a caregiver, or relying on Medicaid, as the 
commenter stated. Instead, this change helps ensure VA alignment with 
other Federal laws and current lender practices with regard to 
adjustable rate mortgages. See 80 FR 4814. It provides veteran 
borrowers who have adjustable rate mortgages more advanced notice and 
detailed disclosures regarding a change in their interest rates, 
thereby affording them a better opportunity to respond to such changes 
and stay in their homes. Therefore, VA is adopting the proposed rule 
without change.

Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess the 
costs and benefits of available regulatory alternatives and, when 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, and other advantages; distributive impacts; 
and equity). Executive Order 13563 (Improving Regulation and Regulatory 
Review) emphasizes the importance of quantifying both costs and 
benefits, reducing costs, harmonizing rules, and promoting flexibility. 
Executive Order 12866 (Regulatory Planning and Review) defines a 
``significant regulatory action'' requiring review by the Office of 
Management and Budget (OMB), unless OMB waives such review, as ``any 
regulatory action that is likely to result in a rule that may: (1) Have 
an annual effect on the economy of $100 million or more or adversely 
affect in a material way the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities; (2) 
Create a serious inconsistency or otherwise interfere with an action 
taken or planned by another agency; (3) Materially alter the budgetary 
impact of entitlements, grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) Raise novel legal 
or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in this Executive Order.''
    The economic, interagency, budgetary, legal, and policy 
implications of this regulatory action have been examined, and it has 
been determined not to be a significant regulatory action under 
Executive Order

[[Page 48255]]

12866. VA's impact analysis can be found as a supporting document at 
https://www.regulations.gov, usually within 48 hours after the 
rulemaking document is published. Additionally, a copy of the 
rulemaking and its impact analysis are available on VA's Web site at 
https://www.va.gov/orpm/, by following the link for VA Regulations 
Published from FY 2004 to FYTD.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This final rule will have no such effect on 
State, local, and tribal governments, or on the private sector.

Paperwork Reduction Act

    Although this document contains a provision constituting a 
collection of information at 38 CFR 36.4312(d)(6), under the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3521), no new or proposed revised 
collections of information are associated with this final rule. The 
information collection provisions for this final rule are currently 
approved by OMB and have been assigned OMB control number 3170-0015.

Regulatory Flexibility Act

    The Secretary hereby certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities 
as they are defined in the Regulatory Flexibility Act (5 U.S.C. 601-
612).
    This rule aligns the disclosure and look-back requirements for 
adjustable rate mortgages to the revised requirements in the 2013 TILA 
servicing rule published by the CFPB. VA does not have discretion not 
to align these requirements with the new TILA requirements established 
by CFPB and implemented by CFPB in the 2013 TILA servicing rule. The 
revised disclosure and look-back requirements began applying to VA 
adjustable rate mortgages in January 2015, regardless of VA action. VA 
is publishing this rulemaking because it is important for VA 
regulations to be consistent with TILA and its implementing 
regulations. In this rule, VA will adopt the minimum 45-day look-back 
period to clarify that lenders making VA-guaranteed adjustable rate 
mortgages must meet the TILA minimum notification requirements. As 
discussed in the preamble to VA's proposed rule, CFPB noted in its 
rulemaking that the majority of adjustable rate mortgages in the 
conventional market already have look-back periods of 45 days or 
longer. 80 FR 4813. Additionally, the revisions to the disclosure 
requirements simply align VA requirements with the CFPB's 2013 TILA 
servicing rule and the procedures currently followed in the 
conventional mortgage lending market. See id.
    Accordingly, the Secretary certifies that the adoption of this 
final rule will not have a significant economic impact on a substantial 
number of small entities as they are defined in the Regulatory 
Flexibility Act, 5 U.S.C. 601-612. Therefore, under 5 U.S.C. 605(b), 
this rulemaking is exempt from the initial and final regulatory 
flexibility analysis requirements of sections 603 and 604.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number and title for the 
program affected by this document is 64.114, Veterans Housing--
Guaranteed and Insured Loans.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of the Department of Veterans Affairs. Robert L. 
Nabors II, Chief of Staff, Department of Veterans Affairs, approved 
this document on August 6, 2015, for publication.

List of Subjects in 38 CFR Part 36

    Condominiums, Flood insurance, Housing, Indians, Individuals with 
disabilities, Loan programs--housing and community development, Loan 
programs--Indians, Loan programs--veterans, Manufactured homes, 
Mortgage insurance, Reporting and recordkeeping requirements, Veterans.

    Dated: August 7, 2015.
Michael Shores,
Chief Impact Analyst, Office of Regulation Policy & Management, Office 
of the General Counsel, Department of Veterans Affairs.

    For the reasons set forth in the preamble, VA amends 38 CFR part 36 
as follows:

PART 36--LOAN GUARANTY

0
1. The authority citation for part 36 continues to read as follows:

    Authority:  38 U.S.C. 501 and as otherwise noted.


0
2. Amend Sec.  36.4312 by revising paragraphs (d)(2) and (6) and adding 
an information collection parenthetical to the end of the section to 
read as follows:


Sec.  36.4312  Interest rates.

* * * * *
    (d) * * *
    (2) Frequency of interest rate changes. Interest rate adjustments 
must occur on an annual basis, except that the first adjustment may 
occur no sooner than 36 months from the date of the borrower's first 
mortgage payment. The adjusted rate will become effective the first day 
of the month following the adjustment date; the first monthly payment 
at the new rate will be due on the first day of the following month. To 
set the new interest rate, the lender will determine the change between 
the initial (i.e., base) index figure and the current index figure. The 
initial index figure shall be the most recent figure available before 
the date of the note. For loans where the date of the note is before 
January 10, 2015, the current index figure shall be the most recent 
index figure available 30 days before the date of each interest rate 
adjustment. For loans where the date of the note is on or after January 
10, 2015, the current index figure shall be the most recent index 
figure available 45 days before the date of each interest rate 
adjustment.
* * * * *
    (6) Disclosures. The lender must provide the borrower with 
disclosures in accordance with the timing, content, and format required 
by the regulations implementing the Truth in Lending Act (15 U.S.C. 
1601 et seq.) at 12 CFR 1026.20(c) and (d). A copy of these disclosures 
will be made a part of the lender's permanent record on the loan.
* * * * *
(The Office of Management and Budget has approved the information 
collection requirements in this section under control number 3170-
0015.)

[FR Doc. 2015-19775 Filed 8-11-15; 8:45 am]
 BILLING CODE 8320-01-P