Home Equity Lending Market; Notice of Public Hearings, 26513-26516 [E6-6803]
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Federal Register / Vol. 71, No. 87 / Friday, May 5, 2006 / Notices
FEDERAL RESERVE SYSTEM
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Formations of, Acquisitions by, and
Mergers of Bank Holding Companies
The companies listed in this notice
have applied to the Board for approval,
pursuant to the Bank Holding Company
Act of 1956 (12 U.S.C. 1841 et seq.)
(BHC Act), Regulation Y (12 CFR part
225), and all other applicable statutes
and regulations to become a bank
holding company and/or to acquire the
assets or the ownership of, control of, or
the power to vote shares of a bank or
bank holding company and all of the
banks and nonbanking companies
owned by the bank holding company,
including the companies listed below.
The applications listed below, as well
as other related filings required by the
Board, are available for immediate
inspection at the Federal Reserve Bank
indicated. The application also will be
available for inspection at the offices of
the Board of Governors. Interested
persons may express their views in
writing on the standards enumerated in
the BHC Act (12 U.S.C. 1842(c)). If the
proposal also involves the acquisition of
a nonbanking company, the review also
includes whether the acquisition of the
nonbanking company complies with the
standards in section 4 of the BHC Act
(12 U.S.C. 1843). Unless otherwise
noted, nonbanking activities will be
conducted throughout the United States.
Additional information on all bank
holding companies may be obtained
from the National Information Center
Web site at https://www.ffiec.gov/nic/.
Unless otherwise noted, comments
regarding each of these applications
must be received at the Reserve Bank
indicated or the offices of the Board of
Governors not later than June 1, 2006.
A. Federal Reserve Bank of Boston
(Richard Walker, Community Affairs
Officer) P.O. Box 55882, Boston,
Massachusetts 02106–2204:
1. Braintree Bancorp, MHC, Braintree,
Massachusetts; to become a bank
holding company by acquiring 100
percent of the voting shares of Braintree
Co–Operative Bank, Braintree,
Massachusetts.
B. Federal Reserve Bank of Atlanta
(Andre Anderson, Vice President) 1000
Peachtree Street, NE., Atlanta, Georgia
30309:
1. RockBridge Financial Holdings,
Inc., Atlanta, Georgia; to become a bank
holding company by acquiring 100
percent of the voting shares of
RockBridge Commercial Bank, Atlanta,
Georgia (in organization).
C. Federal Reserve Bank of Kansas
City (Donna J. Ward, Assistant Vice
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19:52 May 04, 2006
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President) 925 Grand Avenue, Kansas
City, Missouri 64198-0001:
1. Baltz Family Partnership, Parker,
Colorado; to become a bank holding
company by retaining 100 percent of the
voting shares of United Banks of
Colorado, Inc., Englewood, Colorado,
and First United Bank, National
Association, Englewood, Colorado.
Board of Governors of the Federal Reserve
System, May 2, 2006.
Robert deV. Frierson,
Deputy Secretary of the Board.
[FR Doc. E6–6837 Filed 5–4–06; 8:45 am]
BILLING CODE 6210–01–S
FEDERAL RESERVE SYSTEM
[Docket No. OP–1253]
Home Equity Lending Market; Notice of
Public Hearings
Board of Governors of the
Federal Reserve System.
ACTION: Public hearings; request for
comment.
AGENCY:
SUMMARY: Section 158 of the Home
Ownership and Equity Protection Act of
1994 (HOEPA) 1 directs the Board to
hold public hearings periodically on the
home equity lending market and the
adequacy of existing regulatory and
legislative provisions (including
HOEPA) in protecting the interests of
consumers. Consequently, the Board
will hold hearings on the home equity
lending market and invites the public to
attend and to comment on the issues
that will be the focus of the hearings.
Additional information about the
hearings will be posted to the Board’s
Web site at https://
www.federalreserve.gov.
DATES: The dates of the hearings are:
1. June 7, 2006, 8:30 a.m. to 4 p.m.,
Chicago, IL.
2. June 9, 2006, 8:30 a.m. to 4 p.m.,
Philadelphia, PA.
3. June 16, 2006, 8:30 a.m. to 4 p.m.,
San Francisco, CA.
4. July 11, 2006, 8:30 a.m. to 4 p.m.,
Atlanta, GA.
Comments. Comments from persons
unable to attend the hearings or
otherwise wishing to submit written
views on the issues raised in this notice
must be received by August 15, 2006.
ADDRESSES: The locations of the
hearings are:
1. Chicago—The Federal Reserve
Bank of Chicago, 230 South LaSalle
Street, Chicago, IL 60604.
1 Pub.
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L. 103–325, 108 Stat. 2160.
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2. Philadelphia—The Federal Reserve
Bank of Philadelphia, 10 Independence
Mall, Philadelphia, PA 19106.
3. San Francisco—The Federal
Reserve Bank of San Francisco, 101
Market Street, San Francisco, CA 94105.
4. Atlanta—The Federal Reserve Bank
of Atlanta, 1000 Peachtree Street, NE.,
Atlanta, GA 30309.
You may submit comments, identified
by Docket No. OP–1253, by any of the
following methods:
• Agency Web site: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail:
regs.comments@federalreserve.gov.
Include the docket number in the
subject line of the message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Address to Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551.
All public comments will be made
available on the Board’s Web site at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical
reasons. Accordingly, comments will
not be edited to remove any identifying
or contact information. Public
comments may also be viewed
electronically or in paper in Room MP–
500 of the Board’s Martin Building (20th
and C Streets, NW.) between 9 a.m. and
5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT:
Kathleen C. Ryan, Counsel, Minh-Duc T.
Le, Senior Attorney, or Ellen A. Merry,
Economist, Division of Consumer and
Community Affairs, Board of Governors
of the Federal Reserve System,
Washington, DC 20551, at (202) 452–
2412 or (202) 452–3667. For users of
Telecommunications Device for the Deaf
(TDD) only, contact (202) 263–4869.
SUPPLEMENTARY INFORMATION:
I. Background
In 1994, Congress enacted the Home
Ownership and Equity Protection Act
(HOEPA) as an amendment to the Truth
in Lending Act (TILA), in response to
testimony before Congress of predatory
home equity lending practices in
underserved markets, where some
lenders were making high-rate, high-fee
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home equity loans to cash-poor
homeowners. HOEPA identifies a class
of high-cost mortgage loans through
criteria keyed to the loans’ rates and fees
and requires creditors to provide
enhanced disclosures of, and to comply
with substantive restrictions on, the
terms of those loans. Section 158 of
HOEPA also directs the Board to hold
public hearings periodically on the
home equity lending market and the
adequacy of existing regulatory and
legislative provisions for protecting the
interests of consumers, particularly low
income consumers.
The Board last held hearings under
HOEPA in 2000, at a time when
heightened concerns were being
expressed about predatory lending. The
2000 hearings focused on the Board’s
ability to use its regulatory authority
under HOEPA to address abusive
lending practices. Following those
hearings and the receipt of public
comment, the Board amended the
provisions of Regulation Z that
implement HOEPA. The revisions took
effect in October 2002.
II. Information About and Goals of the
Hearings
The 2006 hearings are open to the
public to attend. Seating will be limited,
however. Further information about the
hearings, as it becomes available, will be
posted on the Board’s Web site at https://
www.federalreserve.gov.
The Board will invite persons to
participate in panel discussions on the
topics discussed below. In addition to
the panel discussions, the Board intends
to reserve about one hour at the end of
each hearing to permit interested parties
other than those on the panels to make
brief statements. To allow as many
persons as possible to offer their views
during this period, oral statements will
be limited to five minutes or less;
written statements of any length may be
submitted for the record. Interested
parties who wish to participate during
this ‘‘open-mike’’ period may contact
the Board in advance of the hearing date
at the telephone numbers provided in
this notice, to facilitate planning for this
portion of the hearings.
The Board’s hearings will examine
developments in the home equity
lending market, with a focus on four
objectives. First, the Board wishes to
gather views on the effectiveness of the
2002 revisions to the HOEPA rules in
protecting consumers and on the rules’
impact on the availability of credit in
the higher-cost portion of the subprime
market. Second, the Board would like to
gather information that will assist its
review of Regulation Z, which
implements TILA and HOEPA. In
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particular, the Board anticipates that the
hearings will provide information that
would help in its review of the rules
governing home mortgage loans under
Regulation Z. Third, the hearings may
help identify matters for which the
Board or other entities can develop
educational materials to help consumers
make informed choices about mortgage
loans. Fourth, the Board anticipates that
the hearings may help identify matters
for which additional research about the
mortgage lending market would be
beneficial.
III. Hearing Topics
The Board consulted with its
Consumer Advisory Council (CAC),
lenders and their trade associations,
consumer advocacy groups, secondary
market participants, and other federal
agencies to identify issues the Board
might address at the hearings. The
following three topics will be discussed
at the hearings.
Topic 1: Predatory Lending: The Impact
of HOEPA Rules and State and Local
Predatory Lending Laws
For loans covered by HOEPA,
creditors must provide enhanced
disclosures to consumers three days
before consummation of the transaction,
in addition to the disclosures required
by TILA for all home mortgage loans.
HOEPA also prohibits lenders from
including certain terms in their loan
agreements with borrowers and bars
certain acts or practices in connection
with HOEPA-covered loans.
One of the goals of the hearings is to
help the Board assess the impact of the
HOEPA rules on improving consumers’
understanding of their mortgage loan
terms, and on curbing abusive practices,
while preserving access to subprime
credit. The Board is also interested in
gathering information about any new
practices that have developed since the
2000 hearings that may be abusive, and
other practices in the subprime market
that continue to raise concerns, such as
the amount and prevalence of
prepayment penalties, as well as
whether creditors make loans with
appropriate evaluation of each
borrower’s repayment ability.
In addition, the Board wishes to
gather information about how state and
local laws that address predatory
lending have affected abusive lending
practices and access to credit. Since the
2000 hearings, numerous state and local
governments have enacted laws to
address predatory lending practices,
some of which are modeled on HOEPA,
but with stricter terms. Consumer
advocates generally assert that these
laws are effective in protecting
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consumers from abusive lending, while
lenders, mortgage brokers, and investors
have expressed concerns that these laws
have adversely affected consumers’
access to legitimate subprime loans.
Available research is not definitive
regarding whether these laws have been
effective in eliminating abusive
practices and whether they have
reduced the availability of legitimate
high-cost credit.
The Board invites comment on the
following questions related to HOEPA
and predatory lending practices:
1. Have the revisions to the HOEPA
regulations (12 CFR 226.32 et seq.) been
effective in curtailing predatory lending
practices? What has been the impact of
these changes on the availability of
subprime credit? Have other abusive
practices emerged since the 2002
revisions? If so, what are they?
2. What has been the impact of state
and local anti-predatory lending laws on
curbing abusive practices? Have these
laws adversely affected consumers’
access to legitimate subprime lending?
Have certain provisions been
particularly effective, or particularly
likely to negatively affect credit
availability?
3. Since the 2002 revisions to HOEPA,
what efforts to educate consumers about
predatory lending have been successful?
What is needed to help such efforts
succeed?
4. Should the existing HOEPA
disclosures in Regulation Z be changed
to improve consumers’ understanding of
high-cost loan products? If so, in what
way?
Topic 2: Nontraditional Mortgage
Products and Reverse Mortgages Interest
Only Loans and Payment Option
Adjustable Rate Mortgages
In recent years, rising home prices
and marketing activities have led to
growing consumer demand for mortgage
products designed to minimize initial
monthly mortgage payments. As a
result, nontraditional mortgage products
have become more prevalent in the
market, including interest-only
mortgage loans, for which a borrower
pays no principal for the first few years
of the loan, and ‘‘payment option’’
adjustable rate mortgages, for which a
borrower has flexible payment options,
including a payment choice that results
in negative amortization. Some
institutions also increasingly combine
these nontraditional mortgages with
other practices, such as making
simultaneous second-lien mortgages and
allowing reduced documentation in
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evaluating an applicant’s
creditworthiness.2
Nontraditional mortgage products can
enable a broader segment of consumers
to achieve home ownership or access to
home equity. However, concerns have
been raised that such loans may expose
marginally qualified, highly leveraged
borrowers to a greater risk of default
than other products, such as a
traditional thirty-year, fixed rate
mortgage, in the event of widespread or
regional cooling in housing prices or
when rates adjust upward. These
products and practices are being offered
to a wider spectrum of borrowers,
including subprime borrowers and
others who may not otherwise qualify
for more traditional mortgage loans or
who may not fully understand the risks
of nontraditional mortgages.
Nontraditional mortgage products are
more complex than traditional fixed rate
products and adjustable rate products
and also can present greater risks of
payment shock and negative
amortization.
While the Board’s Regulation Z
requires creditors to provide disclosures
to consumers in connection with
mortgages, including nontraditional
mortgages, consumer groups and others
have stated that additional disclosures
are needed.
The Board seeks public comment on
the following questions regarding
nontraditional mortgage products:
1. Do consumers have sufficient
information (from disclosures and from
advertisements) about nontraditional
mortgage products to understand the
risks (such as payment increases and
negative amortization) associated with
them?
2. Should any disclosures required
under Regulation Z be eliminated or
modified because they are confusing to
consumers, unduly burdensome to
creditors, or are simply not relevant to
nontraditional mortgage products? Do
the required disclosures present
information about nontraditional
mortgage products in an understandable
manner?
3. Are there some Regulation Z
disclosures that should be provided
earlier in the mortgage shopping and
application process to aid consumers’
2 Concerns about nontraditional mortgage
products led the Board, the Office of the
Comptroller of the Currency, the Federal Deposit
Insurance Corporation, the Office of Thrift
Supervision, and the National Credit Union
Administration to jointly propose Guidance on
Nontraditional Mortgages on December 20, 2005.
The proposed Guidance addresses loan terms and
underwriting standards; portfolio and risk
management practices; and consumer protection
issues.
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understanding of key credit terms and
costs for these products?
Reverse Mortgages. Reverse mortgages
have increased in popularity in the last
5 years. For example, according to the
National Reverse Mortgage Lenders
Association, the number of reverse
mortgages insured by the Department of
Housing and Urban Development (HUD)
(representing 90 percent of reverse
mortgages) grew from about 8,000
originations in 2001 to about 43,000
originations in 2005. Reverse mortgages
allow borrowers to convert equity in
their homes to a loan, which need not
be repaid until the borrower dies or sells
the home.
Reverse mortgages can have relatively
high up front fees (e.g., for insurance
and origination costs) and are
complicated transactions. Although
Regulation Z requires lenders to provide
special disclosures for reverse mortgage
transactions (12 CFR 226.33), some
concerns have been raised that
consumers may not understand the
terms of these products. In the HUDinsured reverse mortgage program,
borrowers must receive pre-application
counseling from a counselor approved
by HUD.
The Board seeks comments on the
following questions related to reverse
mortgages:
1. Are current Regulation Z
disclosures adequate to inform
consumers about the costs of reverse
mortgages and to ensure that they
understand the terms of the product?
2. Has counseling (under the HUD
program) been effective in educating
consumers about reverse mortgages and
in preventing abuses from occurring?
3. In reverse mortgages that are not
insured by HUD, is counseling offered
to applicants? Do borrowers of these
loans have difficulty understanding
their loan terms or encounter other
difficulties? Do these lenders employ
alternate disclosure approaches that
have proven to be effective?
Topic 3: Informed Consumer Choice in
the Subprime Market
The growth of the subprime market
over the last several years has expanded
access to credit, helping to increase
homeownership and opportunities for
consumers to use the equity in their
homes. However, the growth of the
subprime market has also raised public
policy concerns. Among the concerns is
whether consumers who obtain higherpriced loans are sufficiently informed
about mortgage products, their options,
how to effectively shop for the best rates
and terms, and ultimately how to obtain
the best available mortgage for their
needs.
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In addition, the variation in prices
paid by some borrowers has led to
concerns that price disparities may
reflect illegal discrimination rather than
legitimate cost and risk-related factors.
Home loan price data disclosed in 2005
for the first time under the Home
Mortgage Disclosure Act show that
African-American and Hispanic
borrowers obtain higher-priced
mortgage loans more frequently than do
white and Asian borrowers, and obtain
loans from lenders that specialize in
higher-priced loans more frequently
than do other groups.3 These differences
may reflect legitimate distinctions
among the credit characteristics of
borrowers, or may be the result of other
factors. The Board would like to use the
hearings to gather information about
borrowers’ knowledge and shopping
behavior in the subprime market that
may stimulate additional research in
this area.
The growth of the subprime market
has also raised concerns about
consumers’ understanding of the role of
mortgage brokers. Some consumer
advocates have asserted that because
brokers’ fees are based on the amount of
a loan, brokers may encourage
consumers to obtain mortgage products
that enable consumers to obtain larger
loans without providing information
about the risks for those products or
other mortgage products that might
better meet the consumer’s needs. The
hearings will be used to gather
information about the role of brokers, to
assist the Board in identifying new
consumer education strategies, and to
enable the Board to provide informed
consultation with Congress and other
agencies on possible legislative and
non-legislative measures that might
improve consumer understanding and
protection in this area.
The Board solicits comment on the
following questions regarding
consumers in the subprime loan market:
1. How do consumers who get higherpriced loans shop for those loans? How
do they select a particular lender?
2. What do consumers understand
about the role of mortgage brokers in
offering mortgage products? Has their
understanding been furthered by staterequired mortgage broker disclosures?
3 In the case of conventional first-lien homepurchase loans extended in 2004, 32.4 percent of
African-Americans and 20.3 percent of Hispanic
whites obtained higher priced-loans, compared to
8.7 percent of non-Hispanic whites and 5.9 percent
of Asians. More information about these findings
and the HMDA data in general, is available on the
Board’s Web site at https://www.federalrserve.gov/
pubs/bulletin/2005/summer05_hmda.pdf, and
https://www.federalreserve.gov/boarddocs/press/
bcreg/2005/20050331/default.htm.
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3. What strategies have been helpful
in educating consumers about their
options in the mortgage market? What
efforts are needed to help educate
consumers about the mortgage credit
process and how to shop and compare
loan terms and fees?
4. What are some of the ‘‘best
practices’’ that lenders, mortgage
brokers, consumer advocates and
community development groups have
employed to help consumers
understand the mortgage market and
their loan choices?
5. What explains the differences in
borrowing patterns among racial and
ethnic groups? How much are the
patterns attributable to differences in
credit history and other underwriting
factors such as loan-to-value? What
other factors may explain these
patterns?
By order of the Board of Governors of the
Federal Reserve System, May 1, 2006.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E6–6803 Filed 5–4–06; 8:45 am]
BILLING CODE 6210–01–P
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Request for Applications for the In
Community Spirit—Prevention of HIV/
AIDS for Native/American Indian and
Alaska Native Women Living in Rural
and Frontier Indian Country Program
Office of the Secretary, Office
of Public Health and Science, Office on
Women’s Health, HHS.
ACTION: Notice.
cchase on PROD1PC60 with NOTICES
AGENCY:
Announcement Type: Cooperative
Agreement—FY 2006 Initial
announcement.
OMB Catalog of Federal Domestic
Assistance: The OMB Catalog of Federal
Domestic Assistance number is 93.015.
DATES: Application availability May 5,
2006.
Applications due by 5 p.m. eastern
time June 5, 2006.
SUMMARY: This program is authorized by
42. U.S.C. 300u–2(a).
The Office on Women’s Health (OWH)
is the focal point for women’s health
within the Department of Health and
Human Services (DHHS). Under the
direction of the Deputy Assistant
Secretary for Women’s Health, OWH
provides leadership to promote health
equity for women and girls through
gender-specific approaches. To that end,
OWH has established public/private
partnerships to address critical women’s
health issues nationwide. These include
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18:48 May 04, 2006
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supporting collaborative efforts to
provide accurate prevention education
to Native/American Indian and Alaska
Native (AI/AN) women living in rural 1
and frontier Indian Country. The
emphasis of these efforts is on
prevention education covering the full
spectrum of primary and secondary
prevention adapted to a female centered
perspective. This initiative is intended
to pilot a collaborative partnership
approach between the grantee and local
health or social service providers, e.g.,
community health centers, rural health
centers, family planning clinics, Indian
Health Service (IHS) facilities, 2 Special
Supplemental Nutrition Program for
Women, Infants and Children (WIC),
community based organizations, faith
based organizations, public assistance
programs, and local health departments.
The partnership is expected to be a
viable strategy for identifying and
educating Native/American Indian and
Alaska Native women in a culturally
appropriate manner that reduces denial,
demystifies stigma, clarifies false
information, and increases knowledge
for self-protection and access to
counseling and testing resources. It is
expected that the prevention education
pilot will provide accurate, culturally
and linguistically appropriate
information to women at risk for or
living with HIV/AIDS in Indian
Country. Also, it is expected that the
program model will integrate the
strengths of traditions, values, culture,
and spirituality of the indigenous
communities of the target population.
The OWH HIV/AIDS program began
in 1999 with funding from the Minority
AIDS Fund (formerly Minority AIDS
Initiative) to address the gaps in services
provided to women who are at risk or
living with HIV. Since the inception of
the HIV/AIDS programs, the program
focus has expanded from two to seven.
These programs include: (1) HIV
Prevention for Women Living in the
Rural South, (2) Prevention and Support
for Incarcerated/ Newly Released
Women, (3) Model Mentorship for
Strengthening Organizational Capacity,
(4) HIV Prevention for Young Women
Attending Minority Institutions (e.g.
Historically Black Colleges and
Universities, Hispanic Serving
Institutions, and Tribal Colleges and
Universities), (5) HIV Prevention for
Women Living in the U.S. Virgin
Islands, (6) Prevention and Support for
HIV Positive Women Living in Puerto
Rico, and (7) Intergenerational
Approaches to HIV/AIDS Prevention
1 Access:
https://www.cdc.gov/hiv/graphics/ruralurban.htm for definitions.
2 https:///www.ihs.gov/Facilities for locations.
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Education with Women across the
Lifespan.
Funding will be directed at activities
designed to improve the delivery of
services to women disproportionately
impacted by HIV/AIDS.
I. Funding Opportunity Description
The primary purpose of this OWH
HIV/AIDS program is to increase HIV
prevention knowledge and reduce the
risk of contracting HIV among Native/
American Indian and Alaska Native
women living in Indian Country. The
goals for this program are:
• Develop and sustain HIV
prevention services to increase
awareness of and receptivity to HIV
prevention information among AI/AN
women living in rural and frontier
Indian Country experiencing high rates
of HIV infection within female
populations.
• Develop gender specific education
and prevention training modules on
critical HIV/AIDS primary and
secondary prevention/education
information. (CDC recommended
effective interventions may be used as
well as adapted interventions which
demonstrate core elements of
interventions with evidence of
effectiveness.3)
• Implement education and
prevention training modules that are
culturally and linguistically
appropriate, building on strengths of
traditions, values, culture, and
spirituality of indigenous communities
of AI/AN women living in Indian
Country.
The OWH hopes to fulfill this purpose
by providing funding to communitybased organizations to enhance their
prevention and support activities to
Native/American Indian and Alaska
Native women. The proposed program
must address false HIV information,
stigma, denial, knowledge, selfprotection behaviors, and the
importance of knowing one’s
seropositive status. A gender specific
approach shall be an integral element of
the piloted intervention. Information
and services provided must be
culturally and linguistically appropriate
for the individuals for whom the
information and services are intended.
Women’s health issues are defined in
the context of women’s lives, including
their multiple social roles and the
importance of relationships with other
people to their lives. This definition of
women’s health encompasses mental,
3 Compendium of HIV Prevention Interventions
with Evidence of Effectiveness, CDC’s HIV/AIDS
Prevention Research Synthesis Project, November
1999.
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]]>Agencies
[Federal Register Volume 71, Number 87 (Friday, May 5, 2006)]
[Notices]
[Pages 26513-26516]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-6803]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
[Docket No. OP-1253]
Home Equity Lending Market; Notice of Public Hearings
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Public hearings; request for comment.
-----------------------------------------------------------------------
SUMMARY: Section 158 of the Home Ownership and Equity Protection Act of
1994 (HOEPA) \1\ directs the Board to hold public hearings periodically
on the home equity lending market and the adequacy of existing
regulatory and legislative provisions (including HOEPA) in protecting
the interests of consumers. Consequently, the Board will hold hearings
on the home equity lending market and invites the public to attend and
to comment on the issues that will be the focus of the hearings.
Additional information about the hearings will be posted to the Board's
Web site at https://www.federalreserve.gov.
---------------------------------------------------------------------------
\1\ Pub. L. 103-325, 108 Stat. 2160.
DATES: The dates of the hearings are:
1. June 7, 2006, 8:30 a.m. to 4 p.m., Chicago, IL.
2. June 9, 2006, 8:30 a.m. to 4 p.m., Philadelphia, PA.
3. June 16, 2006, 8:30 a.m. to 4 p.m., San Francisco, CA.
4. July 11, 2006, 8:30 a.m. to 4 p.m., Atlanta, GA.
Comments. Comments from persons unable to attend the hearings or
otherwise wishing to submit written views on the issues raised in this
notice must be received by August 15, 2006.
ADDRESSES: The locations of the hearings are:
1. Chicago--The Federal Reserve Bank of Chicago, 230 South LaSalle
Street, Chicago, IL 60604.
2. Philadelphia--The Federal Reserve Bank of Philadelphia, 10
Independence Mall, Philadelphia, PA 19106.
3. San Francisco--The Federal Reserve Bank of San Francisco, 101
Market Street, San Francisco, CA 94105.
4. Atlanta--The Federal Reserve Bank of Atlanta, 1000 Peachtree
Street, NE., Atlanta, GA 30309.
You may submit comments, identified by Docket No. OP-1253, by any
of the following methods:
Agency Web site: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: regs.comments@federalreserve.gov. Include the
docket number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Address to Jennifer J. Johnson, Secretary, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue, NW., Washington, DC 20551.
All public comments will be made available on the Board's Web site
at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons. Accordingly, comments
will not be edited to remove any identifying or contact information.
Public comments may also be viewed electronically or in paper in Room
MP-500 of the Board's Martin Building (20th and C Streets, NW.) between
9 a.m. and 5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Kathleen C. Ryan, Counsel, Minh-Duc T.
Le, Senior Attorney, or Ellen A. Merry, Economist, Division of Consumer
and Community Affairs, Board of Governors of the Federal Reserve
System, Washington, DC 20551, at (202) 452-2412 or (202) 452-3667. For
users of Telecommunications Device for the Deaf (TDD) only, contact
(202) 263-4869.
SUPPLEMENTARY INFORMATION:
I. Background
In 1994, Congress enacted the Home Ownership and Equity Protection
Act (HOEPA) as an amendment to the Truth in Lending Act (TILA), in
response to testimony before Congress of predatory home equity lending
practices in underserved markets, where some lenders were making high-
rate, high-fee
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home equity loans to cash-poor homeowners. HOEPA identifies a class of
high-cost mortgage loans through criteria keyed to the loans' rates and
fees and requires creditors to provide enhanced disclosures of, and to
comply with substantive restrictions on, the terms of those loans.
Section 158 of HOEPA also directs the Board to hold public hearings
periodically on the home equity lending market and the adequacy of
existing regulatory and legislative provisions for protecting the
interests of consumers, particularly low income consumers.
The Board last held hearings under HOEPA in 2000, at a time when
heightened concerns were being expressed about predatory lending. The
2000 hearings focused on the Board's ability to use its regulatory
authority under HOEPA to address abusive lending practices. Following
those hearings and the receipt of public comment, the Board amended the
provisions of Regulation Z that implement HOEPA. The revisions took
effect in October 2002.
II. Information About and Goals of the Hearings
The 2006 hearings are open to the public to attend. Seating will be
limited, however. Further information about the hearings, as it becomes
available, will be posted on the Board's Web site at https://
www.federalreserve.gov.
The Board will invite persons to participate in panel discussions
on the topics discussed below. In addition to the panel discussions,
the Board intends to reserve about one hour at the end of each hearing
to permit interested parties other than those on the panels to make
brief statements. To allow as many persons as possible to offer their
views during this period, oral statements will be limited to five
minutes or less; written statements of any length may be submitted for
the record. Interested parties who wish to participate during this
``open-mike'' period may contact the Board in advance of the hearing
date at the telephone numbers provided in this notice, to facilitate
planning for this portion of the hearings.
The Board's hearings will examine developments in the home equity
lending market, with a focus on four objectives. First, the Board
wishes to gather views on the effectiveness of the 2002 revisions to
the HOEPA rules in protecting consumers and on the rules' impact on the
availability of credit in the higher-cost portion of the subprime
market. Second, the Board would like to gather information that will
assist its review of Regulation Z, which implements TILA and HOEPA. In
particular, the Board anticipates that the hearings will provide
information that would help in its review of the rules governing home
mortgage loans under Regulation Z. Third, the hearings may help
identify matters for which the Board or other entities can develop
educational materials to help consumers make informed choices about
mortgage loans. Fourth, the Board anticipates that the hearings may
help identify matters for which additional research about the mortgage
lending market would be beneficial.
III. Hearing Topics
The Board consulted with its Consumer Advisory Council (CAC),
lenders and their trade associations, consumer advocacy groups,
secondary market participants, and other federal agencies to identify
issues the Board might address at the hearings. The following three
topics will be discussed at the hearings.
Topic 1: Predatory Lending: The Impact of HOEPA Rules and State and
Local Predatory Lending Laws
For loans covered by HOEPA, creditors must provide enhanced
disclosures to consumers three days before consummation of the
transaction, in addition to the disclosures required by TILA for all
home mortgage loans. HOEPA also prohibits lenders from including
certain terms in their loan agreements with borrowers and bars certain
acts or practices in connection with HOEPA-covered loans.
One of the goals of the hearings is to help the Board assess the
impact of the HOEPA rules on improving consumers' understanding of
their mortgage loan terms, and on curbing abusive practices, while
preserving access to subprime credit. The Board is also interested in
gathering information about any new practices that have developed since
the 2000 hearings that may be abusive, and other practices in the
subprime market that continue to raise concerns, such as the amount and
prevalence of prepayment penalties, as well as whether creditors make
loans with appropriate evaluation of each borrower's repayment ability.
In addition, the Board wishes to gather information about how state
and local laws that address predatory lending have affected abusive
lending practices and access to credit. Since the 2000 hearings,
numerous state and local governments have enacted laws to address
predatory lending practices, some of which are modeled on HOEPA, but
with stricter terms. Consumer advocates generally assert that these
laws are effective in protecting consumers from abusive lending, while
lenders, mortgage brokers, and investors have expressed concerns that
these laws have adversely affected consumers' access to legitimate
subprime loans. Available research is not definitive regarding whether
these laws have been effective in eliminating abusive practices and
whether they have reduced the availability of legitimate high-cost
credit.
The Board invites comment on the following questions related to
HOEPA and predatory lending practices:
1. Have the revisions to the HOEPA regulations (12 CFR 226.32 et
seq.) been effective in curtailing predatory lending practices? What
has been the impact of these changes on the availability of subprime
credit? Have other abusive practices emerged since the 2002 revisions?
If so, what are they?
2. What has been the impact of state and local anti-predatory
lending laws on curbing abusive practices? Have these laws adversely
affected consumers' access to legitimate subprime lending? Have certain
provisions been particularly effective, or particularly likely to
negatively affect credit availability?
3. Since the 2002 revisions to HOEPA, what efforts to educate
consumers about predatory lending have been successful? What is needed
to help such efforts succeed?
4. Should the existing HOEPA disclosures in Regulation Z be changed
to improve consumers' understanding of high-cost loan products? If so,
in what way?
Topic 2: Nontraditional Mortgage Products and Reverse Mortgages
Interest Only Loans and Payment Option Adjustable Rate Mortgages
In recent years, rising home prices and marketing activities have
led to growing consumer demand for mortgage products designed to
minimize initial monthly mortgage payments. As a result, nontraditional
mortgage products have become more prevalent in the market, including
interest-only mortgage loans, for which a borrower pays no principal
for the first few years of the loan, and ``payment option'' adjustable
rate mortgages, for which a borrower has flexible payment options,
including a payment choice that results in negative amortization. Some
institutions also increasingly combine these nontraditional mortgages
with other practices, such as making simultaneous second-lien mortgages
and allowing reduced documentation in
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evaluating an applicant's creditworthiness.\2\
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\2\ Concerns about nontraditional mortgage products led the
Board, the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the Office of Thrift Supervision, and
the National Credit Union Administration to jointly propose Guidance
on Nontraditional Mortgages on December 20, 2005. The proposed
Guidance addresses loan terms and underwriting standards; portfolio
and risk management practices; and consumer protection issues.
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Nontraditional mortgage products can enable a broader segment of
consumers to achieve home ownership or access to home equity. However,
concerns have been raised that such loans may expose marginally
qualified, highly leveraged borrowers to a greater risk of default than
other products, such as a traditional thirty-year, fixed rate mortgage,
in the event of widespread or regional cooling in housing prices or
when rates adjust upward. These products and practices are being
offered to a wider spectrum of borrowers, including subprime borrowers
and others who may not otherwise qualify for more traditional mortgage
loans or who may not fully understand the risks of nontraditional
mortgages. Nontraditional mortgage products are more complex than
traditional fixed rate products and adjustable rate products and also
can present greater risks of payment shock and negative amortization.
While the Board's Regulation Z requires creditors to provide
disclosures to consumers in connection with mortgages, including
nontraditional mortgages, consumer groups and others have stated that
additional disclosures are needed.
The Board seeks public comment on the following questions regarding
nontraditional mortgage products:
1. Do consumers have sufficient information (from disclosures and
from advertisements) about nontraditional mortgage products to
understand the risks (such as payment increases and negative
amortization) associated with them?
2. Should any disclosures required under Regulation Z be eliminated
or modified because they are confusing to consumers, unduly burdensome
to creditors, or are simply not relevant to nontraditional mortgage
products? Do the required disclosures present information about
nontraditional mortgage products in an understandable manner?
3. Are there some Regulation Z disclosures that should be provided
earlier in the mortgage shopping and application process to aid
consumers' understanding of key credit terms and costs for these
products?
Reverse Mortgages. Reverse mortgages have increased in popularity
in the last 5 years. For example, according to the National Reverse
Mortgage Lenders Association, the number of reverse mortgages insured
by the Department of Housing and Urban Development (HUD) (representing
90 percent of reverse mortgages) grew from about 8,000 originations in
2001 to about 43,000 originations in 2005. Reverse mortgages allow
borrowers to convert equity in their homes to a loan, which need not be
repaid until the borrower dies or sells the home.
Reverse mortgages can have relatively high up front fees (e.g., for
insurance and origination costs) and are complicated transactions.
Although Regulation Z requires lenders to provide special disclosures
for reverse mortgage transactions (12 CFR 226.33), some concerns have
been raised that consumers may not understand the terms of these
products. In the HUD-insured reverse mortgage program, borrowers must
receive pre-application counseling from a counselor approved by HUD.
The Board seeks comments on the following questions related to
reverse mortgages:
1. Are current Regulation Z disclosures adequate to inform
consumers about the costs of reverse mortgages and to ensure that they
understand the terms of the product?
2. Has counseling (under the HUD program) been effective in
educating consumers about reverse mortgages and in preventing abuses
from occurring?
3. In reverse mortgages that are not insured by HUD, is counseling
offered to applicants? Do borrowers of these loans have difficulty
understanding their loan terms or encounter other difficulties? Do
these lenders employ alternate disclosure approaches that have proven
to be effective?
Topic 3: Informed Consumer Choice in the Subprime Market
The growth of the subprime market over the last several years has
expanded access to credit, helping to increase homeownership and
opportunities for consumers to use the equity in their homes. However,
the growth of the subprime market has also raised public policy
concerns. Among the concerns is whether consumers who obtain higher-
priced loans are sufficiently informed about mortgage products, their
options, how to effectively shop for the best rates and terms, and
ultimately how to obtain the best available mortgage for their needs.
In addition, the variation in prices paid by some borrowers has led
to concerns that price disparities may reflect illegal discrimination
rather than legitimate cost and risk-related factors. Home loan price
data disclosed in 2005 for the first time under the Home Mortgage
Disclosure Act show that African-American and Hispanic borrowers obtain
higher-priced mortgage loans more frequently than do white and Asian
borrowers, and obtain loans from lenders that specialize in higher-
priced loans more frequently than do other groups.\3\ These differences
may reflect legitimate distinctions among the credit characteristics of
borrowers, or may be the result of other factors. The Board would like
to use the hearings to gather information about borrowers' knowledge
and shopping behavior in the subprime market that may stimulate
additional research in this area.
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\3\ In the case of conventional first-lien home-purchase loans
extended in 2004, 32.4 percent of African-Americans and 20.3 percent
of Hispanic whites obtained higher priced-loans, compared to 8.7
percent of non-Hispanic whites and 5.9 percent of Asians. More
information about these findings and the HMDA data in general, is
available on the Board's Web site at https://www.federal rserve.gov/
pubs/bulletin/ 2005/summer05--hmda.pdf, and https://www.federal
reserve.gov/boarddocs/ press/bcreg/2005/20050331/default.htm.
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The growth of the subprime market has also raised concerns about
consumers' understanding of the role of mortgage brokers. Some consumer
advocates have asserted that because brokers' fees are based on the
amount of a loan, brokers may encourage consumers to obtain mortgage
products that enable consumers to obtain larger loans without providing
information about the risks for those products or other mortgage
products that might better meet the consumer's needs. The hearings will
be used to gather information about the role of brokers, to assist the
Board in identifying new consumer education strategies, and to enable
the Board to provide informed consultation with Congress and other
agencies on possible legislative and non-legislative measures that
might improve consumer understanding and protection in this area.
The Board solicits comment on the following questions regarding
consumers in the subprime loan market:
1. How do consumers who get higher-priced loans shop for those
loans? How do they select a particular lender?
2. What do consumers understand about the role of mortgage brokers
in offering mortgage products? Has their understanding been furthered
by state-required mortgage broker disclosures?
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3. What strategies have been helpful in educating consumers about
their options in the mortgage market? What efforts are needed to help
educate consumers about the mortgage credit process and how to shop and
compare loan terms and fees?
4. What are some of the ``best practices'' that lenders, mortgage
brokers, consumer advocates and community development groups have
employed to help consumers understand the mortgage market and their
loan choices?
5. What explains the differences in borrowing patterns among racial
and ethnic groups? How much are the patterns attributable to
differences in credit history and other underwriting factors such as
loan-to-value? What other factors may explain these patterns?
By order of the Board of Governors of the Federal Reserve
System, May 1, 2006.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E6-6803 Filed 5-4-06; 8:45 am]
BILLING CODE 6210-01-P
