Truth in Lending, 23289-23305 [E9-11567]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 74, Number 95 (Tuesday, May 19, 2009)]
[Rules and Regulations]
[Pages 23289-23305]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-11567]



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Federal Register / Vol. 74, No. 95 / Tuesday, May 19, 2009 / Rules 
and Regulations

[[Page 23289]]



FEDERAL RESERVE SYSTEM

12 CFR Part 226

[Regulation Z; Docket No. R-1340]


Truth in Lending

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Final rule; official staff commentary.

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SUMMARY: On July 30, 2008, the Board published a final rule amending 
Regulation Z, which implements the Truth in Lending Act (TILA) and the 
Home Ownership and Equity Protection Act (HOEPA). The July 2008 final 
rule requires creditors to give consumers transaction-specific cost 
disclosures shortly after application for closed-end loans secured by a 
consumer's principal dwelling. The disclosures must be provided before 
the consumer pays any fee, other than a fee for obtaining the 
consumer's credit history. Also on July 30, 2008, the Congress enacted 
the Housing and Economic Recovery Act of 2008, which included 
amendments to TILA, known as the Mortgage Disclosure Improvement Act of 
2008 (MDIA). On October 3, 2008, the Congress amended the MDIA in 
connection with its enactment of the Emergency Economic Stabilization 
Act of 2008 (Stabilization Act). The Board is now revising Regulation Z 
to implement the provisions of the MDIA, as amended.
    The MDIA broadens and adds to the requirements of the Board's July 
2008 final rule. Among other things, the MDIA requires early, 
transaction-specific disclosures for mortgage loans secured by 
dwellings other than the consumer's principal dwelling and requires 
waiting periods between the time when disclosures are given and 
consummation of the mortgage transaction. Moreover, these requirements 
of the MDIA will become effective on July 30, 2009, about two months 
earlier than the Board's regulatory amendments adopted in the July 2008 
final rule.
    Consistent with the MDIA, the final rule amending Regulation Z 
requires creditors to make good faith estimates of the required 
mortgage disclosures, and deliver or place them in the mail, no later 
than three business days after receiving a consumer's application for a 
dwelling-secured closed-end loan. Consummation may occur on or after 
the seventh business day after the delivery or mailing of these 
disclosures. If the annual percentage rate provided in the good faith 
estimates changes beyond a specified tolerance for accuracy, creditors 
must provide corrected disclosures, which the consumer must receive on 
or before the third business day before consummation of the 
transaction. The final rule allows consumers to expedite consummation 
to meet a bona fide personal financial emergency. The MDIA, as amended 
by the Stabilization Act, specifies different requirements for 
providing early disclosures for mortgage transactions that are secured 
by a consumer's interest in a timeshare plan.

DATES: The amendments to Sec. Sec.  226.2(a)(6), 226.17(b) and (f), and 
226.19(a)(1); and amendments 13, 14, 16, and 17 to Supplement I to part 
226, published on July 30, 2008 (73 FR 44522), previously to become 
effective on October 1, 2009, are now effective on July 30, 2009.
    Additionally, this final rule is also effective on July 30, 2009 
and includes further amendments to Regulation Z.

FOR FURTHER INFORMATION CONTACT: Paul Mondor, Senior Attorney, or Jamie 
Z. Goodson, Attorney; 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

    One of the purposes of the Truth in Lending Act (TILA), 15 U.S.C. 
1601 et seq., is to promote the informed use of consumer credit by 
requiring disclosures about its terms and cost. The act requires 
creditors to disclose the cost of credit as a dollar amount (the 
finance charge) and as an annual percentage rate (APR). Uniformity in 
creditors' disclosures is intended to assist consumers in comparison 
shopping. TILA requires additional disclosures for loans secured by 
consumers' homes and permits consumers to rescind certain transactions 
that involve their principal dwelling.
    TILA mandates that the Board prescribe regulations to carry out the 
purposes of the act. 15 U.S.C. 1604(a). TILA is implemented by the 
Board's Regulation Z, 12 CFR part 226. An Official Staff Commentary 
interprets the requirements of the regulation and provides guidance to 
creditors in applying the rules to specific transactions. See 12 CFR 
part 226 (Supp. I).
    TILA Section 128, 15 U.S.C. 1638, requires creditors to make 
specified disclosures in connection with closed-end consumer credit 
transactions before the credit is extended. Before amendment by the 
MDIA, for certain mortgage loans TILA required creditors to make good 
faith estimates of the disclosures (``early disclosures'') within three 
business days after the consumer has submitted an application or before 
the credit is extended, whichever is earlier. In implementing TILA 
Section 128, Regulation Z requires creditors to give these early 
disclosures only for loans that finance the purchase or initial 
construction of a consumer's principal dwelling.
    On July 30, 2008, the Board published a final rule amending 
Regulation Z (the July 2008 final rule) (73 FR 44522). The July 2008 
final rule requires, among other things, that a creditor provide the 
early disclosures even when the loan is not for the purpose of 
financing the purchase or initial construction of the consumer's 
principal dwelling. Under the July 2008 final rule, the early 
disclosures also must be provided for non-purchase closed-end loans 
secured by the consumer's principal dwelling (such as a refinance 
loan). The July 2008 final rule also required these disclosures to be 
given before the consumer pays any fee, other than a bona fide and 
reasonable fee for obtaining the consumer's credit history. As 
published, these provisions of the July 2008 final rule were scheduled 
to become effective on October 1, 2009 (73 FR at 55494). Consistent 
with the MDIA, however, this final rule sets an earlier effective date 
of July 30, 2009 for these fee

[[Page 23290]]

collection restrictions, as discussed below.
    On the same day that the July 2008 final rule was published, 
Congress amended TILA by enacting the Mortgage Disclosure Improvement 
Act of 2008 (MDIA).\1\ The MDIA amends TILA and codifies some of the 
early disclosure requirements of the July 2008 final rule, but also 
expands upon the regulatory provisions.
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    \1\ The MDIA is contained in Sections 2501 through 2503 of the 
Housing and Economic Recovery Act of 2008 (HERA), Public Law 110-
289, enacted on July 30, 2008. The MDIA was amended by the Emergency 
Economic Stabilization Act of 2008, Public Law 110-343, enacted on 
October 3, 2008.
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    Like the July 2008 final rule, the MDIA requires creditors to make 
the early disclosures even when the loan is not for the purpose of 
financing the purchase or initial construction of the consumer's 
principal dwelling and prohibits the collection of fees before the 
consumer receives the disclosures, other than a fee for obtaining a 
consumer's credit report. However, the MDIA applies these provisions to 
loans secured by a dwelling even when it is not the consumer's 
principal dwelling. Moreover, the MDIA imposes additional requirements 
not contained in the July 2008 final rule. Under the MDIA, for loans 
secured by a consumer's dwelling, creditors must deliver or mail the 
early disclosures at least seven business days before consummation. If 
the APR contained in the early disclosures becomes inaccurate (for 
example, due to a change in the loan terms), creditors must 
``redisclose'' and provide corrected disclosures that the consumer must 
receive at least three business days before consummation. The 
disclosures also must inform consumers that they are not obligated to 
complete the transaction simply because disclosures were provided or 
because a consumer has applied for a loan. The MDIA imposes different 
requirements for early disclosure in closed-end mortgage transactions 
that are secured by a consumer's interest in a timeshare plan. These 
provisions of the MDIA, including the fee collection restriction, will 
become effective on July 30, 2009, which is about two months earlier 
than the effective date of the July 2008 final rule.
    At this time, the Board is only conforming Regulation Z, as amended 
on July 30, 2008, to the MDIA provisions that become effective on July 
30, 2009. The MDIA also contains additional disclosure requirements for 
variable-rate transactions that are not addressed in this rulemaking. 
Those provisions of the MDIA will not become effective until January 
30, 2011, or any earlier compliance date ultimately established by the 
Board. This final rule does not address those disclosures. The Board 
anticipates issuing proposed amendments to Regulation Z to implement 
those provisions of the MDIA later during 2009, in connection with the 
Board's comprehensive review of closed-end mortgage disclosures that is 
currently underway.
    As discussed above, the MDIA contains several provisions that 
mirror the July 2008 final rule. These provisions are not discussed 
below because they are explained in detail in the supplementary 
information portion of the July 2008 final rule. (See 73 FR at 44590-
44594; July 30, 2008). To conform to the MDIA, certain regulatory 
changes that the Board adopted in July 2008 will become effective on 
July 30, 2009 (and not on October 1, 2009 as originally provided in the 
July 2008 final rule). These regulatory changes are: the requirement 
that early disclosures be given for all dwelling-secured mortgage loans 
rather than only for ``residential mortgage transactions'' to finance 
the purchase or initial construction of the dwelling (in Sec. Sec.  
226.17(f) and 226.19(a)(1)(i) and associated commentary) and that early 
disclosures be given before consumers pay any fee except a fee for 
obtaining the consumer's credit history (in Sec.  226.19(a)(1)(ii) and 
(iii) and associated commentary). The final rule the Board is 
publishing today further revises Regulation Z, also effective July 30, 
2009. These revisions will apply only if a consumer's application for a 
covered transaction is received on or after July 30, 2009.
    Minor conforming and technical amendments to Regulation Z also are 
made in this final rule.

II. Overview of Comments Received

    On December 10, 2008, the Board published a proposed rule that 
would amend Regulation Z's rules for the timing and content of 
disclosures for dwelling-secured mortgage loans. 73 FR 74989. The Board 
received fifty-one public comment letters. Several financial 
institutions and financial services trade associations stated that they 
support efforts to improve the disclosure of credit terms to consumers 
and recognize that the Board's proposal is intended to conform 
Regulation Z to TILA, as amended by the MDIA. These commenters 
generally stated that the Board should make timing requirements as 
flexible as is possible. Several other financial institutions stated 
that the costs of the new waiting periods required by the MDIA outweigh 
any benefits and that consumers would object to delays in consummating 
a mortgage transaction. By contrast, consumer advocacy organizations 
generally supported the MDIA's goal of providing accurate disclosure of 
credit to consumers terms in a timely manner. Consumer advocates 
further stated that the MDIA provisions allowing consumers to waive the 
waiting period between disclosure and consummation should be narrowly 
circumscribed. Comments are discussed in detail below in part III of 
the SUPPLEMENTARY INFORMATION.

III. The Board's Final Rule

A. Coverage of Sec.  226.19(a)

Proposed Rule
    TILA Section 128(a), 15 U.S.C. 1638(a), requires creditors to 
disclose certain information for closed-end consumer credit 
transactions, including, for example, the amount financed and the APR. 
TILA Section 128(b)(2), 15 U.S.C. 1638(b)(2), requires creditors to 
make good faith estimates of these disclosures within three business 
days of receiving the consumer's application, or before consummation if 
that occurs earlier. Until the recent enactment of the MDIA, TILA 
Section 128(b)(2) applied only to a ``residential mortgage 
transaction'' subject to the Real Estate Settlement Procedures Act 
(RESPA). See 15 U.S.C. 1602(w). A residential mortgage transaction is 
defined in TILA as a loan to finance the purchase or initial 
construction of a consumer's dwelling. Regulation Z limits the 
definition to transactions secured by the consumer's principal 
dwelling. See Sec.  226.2(a)(24).
    The MDIA extends the early disclosure requirement in TILA Section 
128(b)(2), 15 U.S.C. 1638(b)(2), to additional types of loans. Under 
the MDIA, early disclosures are required for ``any extension of credit 
secured by the dwelling of a consumer.'' Thus, as amended, the statute 
requires early disclosures for home refinance loans and home equity 
loans. This is consistent with revisions made by the Board's July 2008 
final rule. To implement the MDIA, the Board proposed to also apply the 
early disclosure requirements to loans secured by dwellings other than 
the consumer's principal dwelling. Accordingly, the Board proposed, 
under Sec.  226.19(a)(1)(i), to require creditors to give consumers 
early disclosures in connection with a dwelling-secured mortgage loan 
(if also subject to RESPA), whether or not the loan is for the purpose 
of financing the purchase or initial construction of the consumer's

[[Page 23291]]

principal dwelling. The Board's proposal did not apply to home equity 
lines of credit (HELOCs), which are subject to the rules for open-end 
credit in Sec.  226.5b. The July 2008 final rule also did not apply to 
HELOCs.
    TILA Section 128(b)(2), 15 U.S.C. 1638(b)(2), as amended by the 
MDIA, applies to dwelling-secured mortgage loans if they also are 
subject to RESPA. The U.S. Department of Housing and Urban 
Development's (HUD) Regulation X implements RESPA. See 12 U.S.C. 2601 
et seq.; 24 CFR 3500.1 et seq. In March 2008, HUD published a proposal 
to revise Regulation X. (See 73 FR 14030; Mar. 14, 2008). In November 
2008, HUD published final rules amending Regulation X. (See 73 FR 
68204; Nov. 17, 2008). The Board believes that Regulation Z's timing 
requirements for early disclosures, as amended by this final rule, 
remain consistent with timing requirements for the initial good faith 
estimates of settlement costs required under Regulation X, as recently 
amended by HUD. Consistency between Regulation Z and Regulation X are 
discussed in detail below.
Public Comment
    The Board received few comments that addressed the coverage of 
proposed Sec.  226.19(a). A few financial institutions and financial 
services trade associations stated that the early disclosure 
requirements should only apply to loans secured by a consumer's 
principal dwelling. A financial institution stated that consumers who 
own more than one dwelling usually are more sophisticated financially 
and will not benefit from the early disclosures. One financial services 
trade association supported the extension of coverage to mortgage 
transactions that are secured by dwellings that are not a consumer's 
principal dwelling. A few commenters stated that the Board should 
clarify whether the MDIA's timing requirements apply when the person 
obligated on the loan does not occupy the dwelling that secures the 
loan.
Final Rule
    As proposed, the final rule applies the early disclosure 
requirements to loans secured by dwellings other than the consumer's 
principal dwelling. Under Sec.  226.19(a)(1)(i), creditors must give 
consumers early disclosures in connection with a dwelling-secured 
mortgage loan that is subject to RESPA, whether or not the loan is for 
the purpose of financing the purchase or initial construction of the 
consumer's principal dwelling. The final rule does not revise the 
disclosure requirements for home equity lines of credit (HELOCs). The 
Board is currently reviewing the disclosure rules for real estate-
secured loans, including HELOCs, and will consider the need for earlier 
disclosures in connection with that proposed rulemaking.
    A few commenters requested guidance on whether the early disclosure 
rules apply to a loan secured by a dwelling that is not occupied by the 
person who is obligated on the loan. If the transaction is a dwelling-
secured extension of consumer credit, early disclosures would be 
required regardless of who occupies the dwelling. However, TILA and 
Regulation Z do not apply to credit extensions that are primarily for 
business purposes. 15 U.S.C. 1603(l); 12 CFR 226.3(a)(1). Existing 
guidance in comment 3(a)-2 provides that creditors should determine 
whether a credit extension is business or consumer credit based on the 
factors stated in the comment. Further, comment 3(a)-3 states that 
credit extended to acquire, improve, or maintain rental property that 
is not owner-occupied (that is, in which the owner does not expect to 
live for more than fourteen days during the coming year) is deemed to 
be for business purposes. The Board believes this guidance is 
sufficient to determine whether a transaction is subject to TILA.

B. Timing of Delivery of Early Disclosures--Sec.  226.19(a)(1)(i)

Proposed Rule
    Currently under Regulation Z, creditors must provide the early 
disclosures within three business days after receiving the consumer's 
written application or before consummation, whichever is earlier. The 
MDIA amends TILA to require creditors to deliver or mail the early 
disclosures at least seven business days before consummation. The Board 
proposed to further amend Sec.  226.19(a)(1)(i), as published in the 
July 2008 final rule, to reflect this change. The Board proposed to add 
comment 19(a)(1)(i)-6 to clarify that consummation may occur any time 
on the seventh business day following delivery or mailing; the proposed 
comment provided examples to facilitate compliance. The proposal would 
have required creditors to calculate the seven-business-day waiting 
period using the general definition of ``business day'' (a calendar day 
on which the creditor's offices are open to the public for carrying on 
substantially all of its business functions).
Public Comment
    Many of the comments the Board received on the requirements for 
early disclosures discussed the definition of ``business day'' that 
should apply for purposes of those requirements. Those comments are 
discussed in detail below, in part III.D of this SUPPLEMENTARY 
INFORMATION.
Final Rule
    Consistent with the MDIA, the final rule adopts the requirement 
that a creditor deliver or mail the early disclosures for all dwelling-
secured mortgage loans no later than three business days after the 
creditor receives a consumer's application. Also as proposed, the 
general definition of ``business day'' (days on which a creditor's 
offices are open to the public for carrying on substantially all of its 
business functions) applies for this purpose.
    Under the July 2008 final rule, the early disclosures also must be 
provided for non-purchase closed-end loans secured by the consumer's 
principal dwelling (such as a refinance loan). The July 2008 final rule 
also required these disclosures to be given before the consumer pays 
any fee, other than a bona fide and reasonable fee for obtaining the 
consumer's credit history. This final rule expands these requirements 
to apply to mortgage transactions secured by a dwelling other than the 
consumer's principal dwelling (such as a second home) and makes them 
effective for covered loans for which the creditor receives an 
application on or after July 30, 2009, consistent with the MDIA.
    The requirement for a creditor to deliver or place in the mail the 
early disclosures no later than the seventh business day before 
consummation has been moved to Sec.  226.19(a)(2) and modified, as 
discussed below in part III.C of the SUPPLEMENTARY INFORMATION. In 
addition, under the final rule, the more precise definition of 
``business day'' will apply for purposes of calculating the seven-
business-day waiting period, as discussed in detail in part III.D of 
the SUPPLEMENTARY INFORMATION. The Board is revising comment 
19(a)(1)(i)-4 to clarify that if a consumer withdraws a loan 
application within three business days after a creditor receives it, 
the creditor need not make the early disclosures. This is consistent 
with comment 5b(b)-5, regarding denial or withdrawal of an application 
for an open-end home equity plan.

[[Page 23292]]

C. Waiting Periods After Early Disclosures and Corrected Disclosures--
Sec.  226.19(a)(2)

Proposed Rule
    Currently, when a creditor provides early TILA disclosures and the 
APR subsequently changes beyond the specified tolerance, the creditor 
must redisclose the APR and other changed terms no later than 
consummation or settlement. The MDIA amends TILA Section 128(b)(2), 15 
U.S.C. 1638(b)(2), to require that in such cases creditors make 
corrected disclosures so that consumers receive them not later than the 
third business day before consummation. The MDIA removes the reference 
to ``settlement'' for purposes of this requirement. The Board proposed 
to amend Sec.  226.19(a)(2) to reflect these changes to TILA. The Board 
also proposed that consummation could occur any time on the third 
business day after the consumer receives the corrected disclosure.
    In addition, under the proposed rule, if the corrected disclosures 
are mailed, the consumer is considered to receive the disclosures three 
business days after mailing. This is consistent with the presumption 
the Board adopted in the July 2008 final rule in Sec.  226.19(a)(1)(ii) 
for determining when fees may be imposed on the consumer. The MDIA 
subsequently codified that presumption. In this rulemaking, the Board 
proposed to apply the same presumption for purposes of the rule that a 
consumer must receive corrected disclosures no later than the third 
business day before consummation. The Board also proposed to revise 
comment 19(a)(2)-1 to provide examples illustrating the effect of the 
three-business-day waiting period and when consummation may occur.
    The Board proposed to revise comment 19(a)(2)-3 to clarify that the 
three-business-day waiting period before consummation begins when the 
disclosures are received by the consumer and not when they are mailed. 
This is consistent with the MDIA and is also consistent with the rules 
for certain high-cost loans and reverse mortgage transactions, which 
also require a creditor to make disclosures at least three business 
days before consummation. See Sec.  226.31(c) and comment 31(c)-1.
Public Comment
    Several financial institutions and financial services trade 
associations stated that the Board's rules should specifically address 
the timing requirements for the early disclosures when a creditor 
provides electronic disclosures or uses overnight courier or other 
delivery methods. Also, many financial institutions and financial 
services trade associations stated that a three-business-day waiting 
period before consummation is not warranted if corrected disclosures 
state an APR that is lower than the APR stated in the early 
disclosures, because the change benefits consumers. One financial 
institution stated that there should be no three-business-day waiting 
period before consummation when corrected disclosures are provided if 
the consumer has three business days to rescind the loan after 
consummation under Sec.  226.23(a).
    A financial services trade association and a financial institution 
requested guidance for situations where a creditor makes corrected 
disclosures and thereafter the APR becomes inaccurate again. These 
commenters stated that, to determine whether the new APR is within the 
tolerance specified in Sec.  226.22, creditors should be permitted to 
compare what the APR will be at consummation to the APR stated in the 
most recent corrected disclosures, not the initial early disclosures. 
One financial institution stated that the three-business-day waiting 
period should begin on the date the corrected disclosures are delivered 
or placed in the mail and not when received.
Final Rule
    The Board is adopting Sec.  226.19(a)(2) as proposed; however, the 
requirement to deliver or mail the early disclosures to the consumer 
not later than the seventh business day before consummation has been 
moved to Sec.  226.19(a)(2). (In the proposal, the seven-business-day 
waiting period was in Sec.  226.19(a)(1)(i).) Under the final rule, 
when creditors provide corrected disclosures under Sec.  226.19(a)(2), 
the disclosures must state an accurate APR and all changed terms. 
Existing comment 19(a)(2)-2 has been redesignated as comment 
19(a)(2)(ii)-2.
    The final rule also applies the more precise definition of 
``business day'' (all calendar days except Sundays and specified legal 
public holidays) to the seven-business-day waiting period. This is a 
change from the proposal, which would have applied the general 
definition of ``business day'' to this provision. This change has been 
made so that the same ``business day'' definition will be used for 
purposes of both the seven-business-day waiting period and the three-
business-day waiting period, which will make compliance easier, as 
discussed in detail in part III.D of the SUPPLEMENTARY INFORMATION. The 
final rule also applies the more precise definition to the three-
business-day waiting period, as proposed. Under the proposal, 
commentary on the applicable ``business day'' definition was contained 
in proposed comment 19(a)(2)-3; under the final rule, commentary on the 
applicable ``business day'' definition appears in comment 19(a)(2)-1. 
Further, a new comment 19(a)(2)-2 clarifies that where corrected 
disclosures are required consummation may not occur until both the 
seven-business-day waiting period and the three-business-day waiting 
period have expired.
    Seven-business-day waiting period for early disclosures. The final 
rule (like the proposal) provides that the seven-business-day waiting 
period begins when the creditor delivers or places the early 
disclosures in the mail--not when the consumer receives or is deemed to 
receive the early disclosures. See comment 19(a)(2)(i)-1. This is 
consistent with the statutory language of the MDIA. The final rule 
applies the more precise definition of ``business day'' to the seven-
business-day waiting period. Proposed comment 19(a)(1)(i)-6 clarified 
that consummation may occur any time on the seventh business day 
following delivery or mailing and provided examples to facilitate 
compliance. That commentary has been revised to reflect the use of the 
more precise definition of ``business day'' and redesignated as new 
comment 19(a)(2)(i)-1.
    Three-business-day waiting period for corrected disclosures. As 
proposed, the final rule provides that consummation may not occur until 
three business days after the consumer receives corrected disclosures 
required by Sec.  226.19(a)(2)(ii). This is consistent with the MDIA 
and is also consistent with the three-business-day waiting period in 
Sec.  226.31(c)(1) for high-cost mortgages described in Sec.  226.32(a) 
(HOEPA loans). The final rule applies the more precise definition of 
``business day'' (all calendar days except Sundays and specified legal 
public holidays) to the three-business-day waiting period, as discussed 
below in part III.D of the SUPPLEMENTARY INFORMATION.
    Also as proposed, the final rule provides that if a creditor places 
corrected disclosures in the mail, the consumer is deemed to receive 
the corrected disclosures three business days after they are mailed. 
Comment 19(a)(2)(ii)-3 clarifies that if the creditor provides the 
corrected disclosures by mail, the consumer is considered to have 
received them three business days after they are placed in the mail, 
for purposes of determining when the

[[Page 23293]]

three-business-day waiting period required under Sec.  226.19(a)(2)(ii) 
begins. The comment also clarifies that creditors that use e-mail or a 
courier other than the postal service may also follow this approach. 
For example, if a creditor provides disclosures through a courier 
service, the creditor may presume that the consumer receives the 
disclosures three business days after they are deposited with the 
courier service, for purposes of determining when the three-business-
day waiting period required by Sec.  226.19(a)(2)(ii) begins. The Board 
is not adopting separate rules or presumptions regarding the delivery 
of disclosures by overnight courier, electronic transmission, or other 
means. Although these methods may be faster than delivery by regular 
mail, the Board believes that, in light of the variety of delivery 
methods and options offered by service providers, it is not feasible to 
define with sufficient clarity what may be considered acceptable 
``overnight delivery'' or to delineate a separate time period for 
presumption of receipt for each available delivery method, as 
previously stated in the supplementary information to the Board's July 
2008 final rule (see 73 FR at 44593; July 30, 2008).
    A creditor is not required to use the presumption of receipt to 
determine when the waiting period required by Sec.  226.19(a)(2)(ii) 
begins. Thus, if a creditor delivers corrected disclosures 
electronically consistent with the E-Sign Act or delivers disclosures 
by overnight courier, the creditor may rely on evidence of actual 
delivery (such as documentation that the mortgage loan disclosure was 
delivered by certified mail or overnight delivery or e-mail (if similar 
documentation is available)) to determine when the three-business-day 
waiting period begins.
    The rules for corrected disclosures are contained in new Sec.  
226.19(a)(2)(ii). Therefore, comments 19(a)(2)-1 through 19(a)(2)-4 
have been redesignated (as revised) as comments 19(a)(2)(ii)-1 through 
19(a)(2)(ii)-4.
    APR accuracy for corrected disclosures. New comment 19(a)(2)-4 has 
been added to address commenters' request for guidance in cases where 
corrected disclosures have been given and the APR subsequently changes. 
The new comment clarifies that in such cases, the creditor should 
compare the APR at consummation with the APR in the most recently 
provided corrected disclosures (not the first set of disclosures 
provided) to determine whether the creditor must provide another set of 
corrected disclosures.
    Commenters requested guidance on whether corrected disclosures are 
required if the APR initially disclosed under Sec.  226.19(a)(1)(i) 
overstates the actual APR. Comment 19(a)(2)(ii)-1 provides that 
corrected disclosures are not required when the APR previously 
disclosed is considered accurate under the tolerances in Sec.  226.22.

D. Definition of ``Business Day''--Sec.  226.2(a)(6)

Proposed Rule
    The MDIA provides that if the early disclosures are mailed to the 
consumer, the consumer is considered to have received them three 
business days after they are mailed for purposes of the prohibition on 
collecting fees before the consumer receives the early disclosures. 
This is consistent with the July 2008 final rule (see 73 FR at 44600-
44601; July 30, 2008). In the rulemaking to implement the MDIA, the 
Board proposed to adopt that same presumption for purposes of the 
requirement that consumers receive corrected disclosures, if necessary, 
not later than the third business day before consummation, as discussed 
above in part III.C of the SUPPLEMENTARY INFORMATION. In the July 2008 
final rule, the Board also clarified how creditors should count 
weekends and Federal legal public holidays in determining when mailed 
disclosures are presumed to be received and how long the restriction on 
fees applies under Sec.  226.19(a)(1)(ii) (see 73 FR at 44599; July 30, 
2008). In this rulemaking, the Board proposed to further clarify that 
creditors should count ``business days'' the same way for purposes of 
the presumption in Sec.  226.19(a)(2) that consumers receive corrected 
disclosures three business days after they are mailed.
    Currently, Sec.  226.2(a)(6) contains two definitions of ``business 
day.'' Under the general definition, a ``business day'' is a day on 
which the creditor's offices are open to the public for carrying on 
substantially all of its business functions. However, for some purposes 
a more precise definition applies; ``business day'' means all calendar 
days except Sundays and specified Federal legal public holidays, for 
purposes of Sec. Sec.  226.15(a), 226.23(a), and 226.31(c)(1) and (2). 
The July 2008 final rule adopted the more precise definition for use in 
determining when mailed disclosures are presumed to be received under 
Sec.  226.19(a)(1)(ii). The Board also proposed to apply this 
definition for purposes of determining when disclosures are presumed to 
be received for purposes of the three-business-day waiting period in 
Sec.  226.19(a)(2). As explained below, this approach is being adopted 
in this final rule.
    Under the MDIA, creditors must deliver the early disclosures, or 
place them in the mail, no later than three business days after 
receiving a consumer's application for a dwelling-secured mortgage 
loan; the delivery or mailing also must occur not later than the 
seventh business day before consummation. The Board proposed to use the 
general definition of ``business day'' for purposes of satisfying these 
timing requirements, both of which were contained in proposed Sec.  
226.19(a)(1)(i). This approach was consistent with RESPA's requirement 
that creditors provide good faith estimates of settlement costs not 
later than three business days after the creditor receives the 
consumer's application for a Federally related mortgage loan. See 24 
CFR 3500.2(b) and 3500.7. To simplify the rule, the Board proposed that 
the general definition of ``business day'' also would be used for 
determining when the seven-business-day waiting period expires and 
consummation may occur. The Board requested comment, however, on 
whether the more precise definition of business day should be used to 
facilitate compliance with the seven-business-day waiting period 
requirement.
Public Comment
    Many commenters addressed which definition of ``business day'' 
should apply for purposes of determining when the seven-business-day 
waiting period expires and consummation may occur. Most of these 
commenters stated that the more precise definition of ``business day'' 
under Sec.  226.2(a)(6)--all calendar days except Sunday and specified 
legal public holidays--should be used for this purpose.
    Several consumer advocacy organizations stated that using the more 
precise definition for all purposes under Sec.  226.19(a) would allow 
creditors and supervisory agencies to determine easily whether timing 
requirements have been satisfied. A financial services trade 
association and a financial institution stated that the general 
definition creates uncertainty for a creditor if it has many offices, 
branches, and operation centers and only some of them are open on 
Saturdays.
    Several commenters supported using the general definition of 
``business day'' for purposes of the requirement that creditors deliver 
or mail the early disclosures within three business days after 
receiving the consumer's application, to maintain consistency

[[Page 23294]]

with the RESPA rules. However, these commenters supported using the 
more precise definition for all other timing requirements.
    A financial services trade association supported using the more 
precise definition of ``business day'' for purposes of the seven-
business-day waiting period so that the timing requirement would apply 
uniformly to all creditors, regardless of when their offices are open. 
A few commenters stated that using the general definition would 
disadvantage institutions whose offices are open only five days per 
week, including many community banks.
    One financial institution and a realtors' trade association 
asserted, however, that the general definition of ``business day'' 
should be used for purposes of the seven-business-day waiting period. 
The realtors' trade association stated that the general definition 
should be used for all timing requirements to ensure consistency with 
RESPA, facilitate compliance, and reduce confusion for consumers. Two 
credit union trade associations and a financial institution stated that 
a single definition should be used for all timing requirements, but 
these commenters did not state a preference for one definition over the 
other.
Final Rule
    As the Board proposed, the final rule requires that creditors use 
the general definition of ``business day'' to calculate the three-
business-day period for providing the early disclosures. Both TILA and 
RESPA require creditors to provide disclosures within three business 
days after the creditor receives the consumer's application. Using the 
general definition of ``business day'' (a day on which the creditor's 
offices are open to the public for carrying on substantially all of its 
business functions) will maintain consistency between the TILA and 
RESPA requirements.
    Under the final rule, the more precise definition of ``business 
day'' (all calendar days except Sundays and specified Federal legal 
public holidays) is used for purposes of the requirements that 
creditors deliver or mail the early disclosures no later than the 
seventh business day before consummation and that consumers receive 
corrected disclosures (if applicable) no later than the third business 
day before consummation. The more precise definition of ``business 
day'' also is used for purposes of the rule prohibiting the collection 
of a fee (other than a fee for obtaining a consumer's credit history) 
before the consumer receives the early disclosures, under the final 
rule published on July 30, 2008. This is consistent with HUD's 
Regulation X (24 CFR 3500.7(a)(4) and 3500.7(b)(4)), which provides 
that if a creditor or broker mails good faith estimates of settlement 
costs, a consumer is considered to receive them three calendar days 
after they are mailed, not including Sundays and specified legal public 
holidays.
    The Board believes that it is appropriate to use the more precise 
definition of ``business day'' for purposes of both the seven-business-
day waiting period and the three-business-day waiting period, for 
several reasons. It is easier for a creditor to determine how to meet 
timing requirements using the more precise definition, especially a 
creditor with multiple offices that are not open on the same days. 
Using the more precise definition also will mean that the standard for 
determining when a waiting period ends is the same for all creditors. 
Moreover, whether a creditor's offices are open or closed does not 
affect the time that a consumer has to receive and review disclosures.

E. Consumer's Waiver of Waiting Period Before Consummation--Sec.  
226.19(a)(3)

Proposed Rule
    Under the MDIA, to expedite consummation of a mortgage transaction, 
a consumer may modify or waive the timing requirements for the early 
disclosures when the consumer determines that the credit extension is 
needed to meet a bona fide personal financial emergency. However, the 
consumer must receive the disclosures required by TILA Section 128(a), 
15 U.S.C. 1638(a), at or before the time of the consumer's modification 
or waiver.
    To implement this provision, the Board proposed to permit a 
consumer to shorten or waive either the seven-business-day period 
required by Sec.  226.19(a)(1)(i) or the three-business-day waiting 
period required by Sec.  226.19(a)(2), provided the consumer has 
received accurate TILA disclosures reflecting the mortgage 
transaction's final costs and terms. Thus, under the proposed rule, if 
the consumer waives the seven-business-day waiting period after 
receiving the early disclosures and a change occurs that makes the APR 
inaccurate (as determined under Sec.  226.22), the consumer would have 
to receive corrected disclosures with all changed terms not later than 
the third business day before consummation. In such cases, the consumer 
could waive the three-business-day waiting period in Sec.  226.19(a)(2) 
after receiving the corrected disclosures. Proposed comment 19(a)(3)-2 
provided examples to facilitate compliance.
    Under proposed Sec.  226.19(a)(3), the consumer would have to give 
the creditor a dated written statement describing the emergency and 
specifically modifying or waiving the waiting period(s). The use of 
pre-printed forms for this purpose would be prohibited and all 
consumers entitled to receive the disclosures would have to sign the 
statement. The proposal's procedures for waiving the waiting periods 
were substantially similar to the existing rules for waiving the three-
business-day rescission period for certain home-secured loans and the 
three-business-day waiting period before consummating certain high-cost 
mortgage loans. See Sec. Sec.  226.15(e), 226.23(e), and 
226.31(c)(1)(iii). The Board solicited comment on whether the proposed 
rule should be more or less flexible than the existing procedures.
    The Board proposed comment 19(a)(3)-1 to clarify that a consumer 
may modify or waive the required waiting period(s) only if the consumer 
has a bona fide personal financial emergency that must be met before 
the end of the waiting period(s). This proposed comment was designed to 
be consistent with the commentary on waiving the rescission period and 
the pre-consummation waiting period required for certain high-cost 
mortgage loans. See comments 15(e)-1, 23(e)-1, and 31(c)(1)(iii)-1. The 
proposed comment explained that whether a bona fide personal financial 
emergency exists would be determined by the facts surrounding 
individual situations. The imminent sale of the consumer's home at 
foreclosure during the three-business-day waiting period was provided 
as an example, and the Board solicited comment on whether there are 
other circumstances that should be expressly recognized in the final 
rule.
Public Comment
    Consumer advocacy organizations generally stated that modification 
or waiver of a waiting period should be permitted only in narrow 
circumstances, such as an imminent foreclosure, tax, or condemnation 
sale. Many financial institutions and financial services trade 
associations stated that much flexibility is needed to accommodate 
consumers who want to expedite consummation. A credit union association 
stated that the ``financial emergency'' exception should be available 
only in unusual and unforeseeable financial circumstances, however.

[[Page 23295]]

    Waiver of either waiting period. Consumer advocacy organizations 
stated that the final rule should permit consumers to waive or modify 
only the seven-business-day waiting period and asserted that the MDIA 
does not allow consumers to waive or modify the three-business-day 
waiting period. They asserted that a bona fide personal financial 
emergency seldom would arise unexpectedly after the creditor makes 
early disclosures and before consummation. Consumer advocates also 
stated that even if waiver of the three-business-day waiting period is 
permitted in some circumstances, it should not be permitted when the 
consumer already has waived the seven-business-day waiting period. They 
noted that consumers must receive ``final disclosures'' before waiving 
the seven-business-day waiting period and stated that the Board should 
interpret the MDIA to prohibit changes in APR after a creditor provides 
these disclosures and obtains the consumer's signed waiver. Thus, under 
their interpretation of the statute, corrected disclosures and a new 
three-business-day waiting period would be unnecessary.
    Few of the financial institutions and financial services trade 
associations specifically discussed waiver of the three-business-day 
waiting period after a consumer receives corrected disclosures, but 
those that did address the issue supported allowing such waiver. A 
financial institution stated that, in cases where the creditor provides 
corrected disclosures, the consumer's previous waiver of the seven-
business-day waiting period under Sec.  226.19(a)(3) automatically 
should waive the three-business-day waiting period as well.
    Waiver procedures and conditions. Consumer advocacy organizations 
supported the waiver procedures as proposed and stated that the waiver 
should be handwritten, to prevent consumers from unwittingly signing a 
creditor's pre-printed waiver forms. On the other hand, two financial 
institutions stated that waiver using pre-printed forms should be 
permitted. One financial institution recommended clarifying whether 
each consumer primarily liable on the obligation should sign the 
written waiver, even though under Sec.  226.17(d) a creditor need only 
provide the disclosures to one of the consumers who is primarily liable 
on the obligation. A consumer advocacy organization urged the Board to 
require creditors to give early disclosures to all of the consumers who 
will be obligated on a mortgage transaction. By contrast, a financial 
services trade association stated that creditors should be allowed to 
accept a waiver from one consumer, even where multiple consumers will 
be obligated on the loan.
    Most financial institutions and financial services trade 
associations stated that the final rule should specify that creditors 
do not have to investigate a consumer's determination that the credit 
extension is needed to meet a bona fide personal financial emergency. 
Two financial institutions stated that the Board should allow consumers 
to waive a waiting period even when a bona fide personal financial 
emergency does not have to be met during the waiting period. A credit 
union stated that the Board should allow consumers to waive a waiting 
period where a bona fide personal financial emergency must be satisfied 
within a few days after the waiting period, for example, where a 
consumer facing imminent foreclosure must make payments before the 
actual date of a foreclosure sale. Most consumer advocacy organizations 
opposed allowing waiver unless a bona fide personal financial emergency 
must be met during the waiting period.
    Examples of a bona fide personal financial emergency. Proposed 
comment 19(a)(3)-1 states that the imminent sale of a consumer's home 
at foreclosure during the waiting period is an example of a bona fide 
personal financial emergency. This example is consistent with 
commentary on waiving a pre-consummation waiting period that is 
required for HOEPA loans under Sec.  226.31(c)(1)(iii). Most of the 
financial institutions and financial services trade associations that 
discussed this commentary stated that the Board should provide 
additional guidance on when waiver is permitted and how it may be 
accomplished. Several of these commenters stated that without such 
guidance, creditors will rarely, if ever, allow a consumer to waive a 
waiting period. Most of these commenters stated that the final rule 
should provide additional examples of circumstances that are considered 
to be a bona fide personal financial emergency. Two financial services 
trade associations stated that the Board should clarify that any 
examples are merely illustrative and that a bona fide personal 
financial emergency may exist in other circumstances. Two financial 
services trade associations stated that the final rule should permit a 
consumer to waive a waiting period to avoid a foreclosure on a dwelling 
occupied by tenants.
    Several financial institutions and financial services trade 
associations stated that consumers should be able to waive a waiting 
period if they plan to use the loan proceeds to pay a tuition expense. 
On the other hand, a credit union association stated that tuition 
expenses should not be considered to be a bona fide personal financial 
emergency, especially if the payment deadline was known well in 
advance. Other circumstances that commenters stated should be 
considered as a bona fide personal financial emergency included cases 
where a borrower needs to: pay an emergency medical expense; consummate 
a transaction before an upcoming increase in a land transfer tax; make 
repairs after a natural disaster to prevent additional property damage; 
obtain a refinance loan before a payment increase on an adjustable-rate 
mortgage; and avoid paying a late charge on an existing obligation.
Final Rule
    The Board is adopting Sec.  226.19(a)(3) substantially as proposed, 
which is consistent with Regulation Z's existing provisions for waiving 
the three-business-day right of rescission for certain mortgage 
transactions. Under the final rule, if a consumer determines that an 
extension of credit is needed to meet a bona fide personal financial 
emergency, the consumer may shorten or waive the seven business-day 
waiting period or the three-business-day waiting period required by 
Sec.  226.19(a)(2) after the consumer receives accurate TILA 
disclosures that reflect the final costs and terms. To shorten or waive 
a waiting period, the consumer must give the creditor a dated written 
statement that describes the emergency, specifically modifies or waives 
the waiting period, and bears the signature of all the consumers who 
will be primarily liable on the legal obligation. Creditors may not use 
pre-printed forms for this purpose.
    Waiver of either waiting period. The final rule permits consumers 
to waive either the seven-business-day or the three-business-day 
waiting period and thus recognizes that a bona fide personal financial 
emergency could occur at any time, including after the consumer 
receives the initial early disclosures. For example, a consumer might 
receive the initial early disclosures with the expectation of closing 
the loan within 60 days. However, the consumer's financial 
circumstances might change in the interim, creating a need to 
consummate the loan immediately. Under the final rule, if the APR 
stated in the early disclosures is no longer accurate, after receiving 
a corrected disclosure the consumer can provide a signed statement 
describing the financial emergency in order to waive the three-
business-day waiting period and close

[[Page 23296]]

the loan. New comment 19(a)(3)-3 illustrates the case where a consumer 
does not modify or waive the seven-business-day waiting period but 
modifies the three-business-day waiting period, after receiving a 
corrected disclosure.
    Consumer advocates asserted that the MDIA does not provide for 
waiver of the three-business-day waiting period. The Board disagrees 
with that interpretation of the statute. Under the MDIA, consumers may 
waive or modify the timing requirements (and thus the waiting periods) 
for the disclosures required under TILA Section 128(b)(2)(A). The Board 
interprets this provision in the MDIA to apply to the ``good faith 
estimates'' provided under section 128(b)(2)(A)--whether they are the 
creditor's initial early disclosures or a corrected version provided 
subsequently. The requirement in TILA Section 128(b)(2)(D) for a 
creditor to provide a corrected disclosure is essentially a requirement 
for the creditor to provide an additional set of the early disclosures 
required by TILA Section 128(b)(2)(A).
    Consumer advocates further asserted that even if the Board 
determines that the three-business-day waiting period can be waived in 
some circumstances, consumers should not be permitted to waive the 
three-business-day waiting period if they have previously waived the 
seven-business-day waiting period. In their view, once a consumer 
receives the initial early disclosures and waives the seven-business-
day waiting period, the APR may not be changed, even though the 
transaction has not been consummated. The consumer advocates note that 
under the MDIA consumers can waive the seven-business-day waiting 
period only after they receive ``final'' TILA disclosures. The Board 
does not agree with the consumer advocates' interpretation of the 
statute. The MDIA seeks to ensure that a consumer's decision to waive 
the waiting period and immediately consummate the loan is informed by 
an accurate ``final'' TILA disclosure. There is no indication, however, 
that the Congress intended to make the rate or other terms stated in 
the disclosures binding on the parties. Although creditors must provide 
an accurate ``final'' disclosure before the consumer waives the seven-
business-day waiting period and consummates the loan, providing such a 
disclosure by itself does not assure that the APR (or other loan terms) 
cannot change. Thus, if the APR subsequently increases by more that the 
specified tolerance, the consumer's previous waiver is no longer 
effective and a new ``final'' disclosure must be given. After receiving 
the new ``final'' disclosure, a consumer may decide whether to provide 
another signed waiver statement.
    Waiver procedures and conditions. The final rule requires that 
waivers be written, not pre-printed, consistent with regulatory 
requirements for waiver of a rescission period or of the waiting period 
before consummation of a HOEPA loan. The Board is revising comment 
19(a)(3)-1 to clarify that each consumer who will be primarily liable 
on the legal obligation must sign the written statement, in order for a 
waiver to be effective. The MDIA states that a waiver statement ``shall 
bear the signature of all consumers entitled to receive the disclosures 
required by'' TILA Section 128(b), 15 U.S.C. 1638(b), and proposed 
comment 19(a)(3)-1 contained similar language. However, in a 
transaction where multiple consumers are primarily liable on the legal 
obligation, a creditor may provide disclosures to one of those 
consumers rather than to all of them. TILA Section 121(a), 15 U.S.C. 
1631(a); 12 CFR 226.17(d). To avoid confusion, the Board has revised 
comment 19(a)(3)-1 to provide that a statement that shortens or waives 
a pre-consummation waiting period must be signed by each consumer who 
is primarily liable on the legal obligation. This is consistent with, 
yet more specific than, comment 23(e), which states that a waiver 
statement must be signed by each consumer entitled to rescind, and 
comment 31(c)(iii)-1, which states that a waiver statement must be 
signed by each consumer entitled to the waiting period for HOEPA loans.
    Some commenters requested that the Board adopt a comment stating 
that the existence of a consumer's waiver insulates a creditor from 
liability in connection with such waiver. The Board is not adopting 
such commentary. Comments 15(e)-1 and 23(e)-1 state that the existence 
of a consumer's waiver will not, of itself, automatically insulate the 
creditor from liability for failing to provide the right of rescission. 
The Board expects to consider Regulation Z's modification and waiver 
rules for the MDIA, rescission, and HOEPA in connection with its 
broader review of regulations for closed-end consumer credit.
    Some commenters suggested that consumers may need to obtain the 
loan proceeds during the waiting period to prevent an emergency, such 
as foreclosure, that will not occur until after the waiting period. For 
example, if a foreclosure sale is scheduled to occur a few days after a 
waiting period ends, a consumer may need to obtain funds within the 
waiting period to reinstate the mortgage before the date of the 
scheduled foreclosure sale. However, the longer the period before an 
adverse event will occur, the less likely it is that consummation 
actually needs to occur during the waiting period to avoid the adverse 
event.
    Example of a bona fide personal financial emergency. Comment 
19(a)(3)-1 has been revised to clarify that consumers who need to 
obtain the funds during the waiting period may execute the waiver in 
such cases. The example stated in comment 19(a)(3)-1 is merely 
illustrative; a consumer may determine that a credit extension is 
necessary to meet a bona fide personal financial emergency in 
circumstances other than foreclosure. The Board believes that it is not 
necessary to state additional examples of a bona fide personal 
financial emergency at this time. Whether credit must be extended 
before a waiting period expires, in order to meet a bona fide personal 
financial emergency, is determined based on the facts associated with 
individual situations, as comment 19(a)(3)-1 states. The Board believes 
waivers should not be used routinely to expedite consummation for 
reasons of convenience. As the MDIA requires, under the final rule a 
waiver statement must be written by the consumer. As proposed, the 
final rule prohibits the use of pre-printed forms to further protect 
against routine modification or waiver of the waiting periods.

F. Notice--Sec.  226.19(a)(4)

Proposed Rule
    The MDIA requires that the early disclosures contain a clear and 
conspicuous notice containing the following statement: ``You are not 
required to complete this agreement merely because you have received 
these disclosures or signed a loan application.'' The Board proposed to 
implement this requirement in a new Sec.  226.19(a)(4), for the early 
disclosures required by Sec.  226.19(a)(1)(i), as well as any corrected 
disclosures required by Sec.  226.19(a)(2). The Board solicited comment 
on the costs and benefits of the proposed rule. The Board also 
solicited comment on the language used in the disclosures and whether 
other language might be easier for consumers to understand.
Public Comment
    Consumer advocacy organizations stated that the Board should not 
alter the statutory language without a compelling reason. These 
commenters noted that the statutory text for the

[[Page 23297]]

notice is almost identical to the statutory text for the notice 
required for HOEPA loans. Two financial services trade associations and 
a financial institution stated that using the phrase ``this agreement'' 
in the required statement would mislead consumers, because the 
disclosures are not in fact an agreement. Several industry commenters 
recommended that the Board publish model forms or clarify how creditors 
can make the disclosure in ``conspicuous type size and format.'' A 
credit union trade association stated that the MDIA's notice 
requirements would not benefit consumers but would increase financial 
institutions' costs considerably.
    A financial institution stated that many creditors routinely 
provide new disclosures under Sec.  226.18 to the consumer on the day 
of consummation, even where the creditor is not required to provide 
corrected disclosures. The bank stated that such ``final'' disclosures 
should be permitted to contain the statement required by Sec.  
226.19(a)(4) so that creditors may use a single form.
Final Rule
    The Board is adopting Sec.  226.19(a)(4) as proposed using the text 
contained in the statute. The statement required by Sec.  226.19(a)(4) 
must be grouped together with the other disclosures required by Sec.  
226.19(a)(1) and Sec.  226.19(a)(2). Most creditors provide TILA 
disclosures at consummation, even if the early disclosures remain 
accurate and corrected disclosures are not required. To facilitate 
compliance for creditors that use the same form for the initial 
disclosures and final disclosures, new comment 17(a)(1)-5(xvi) 
clarifies that creditors may also include the notice described in Sec.  
226.19(a)(4) on the disclosures provided at consummation and may group 
the notice together with the disclosures required by Sec.  226.18.
    The Board believes that the reference to an ``agreement'' is 
sufficiently clear as a reference to the loan agreement that the 
disclosures summarize. The Board is not proposing new model disclosures 
at this time because the Board anticipates proposing new model 
disclosure forms and clauses during 2009, in connection with consumer 
testing and the comprehensive review of closed-end mortgage disclosures 
that currently is underway.

G. Timeshare Transactions--Sec.  226.19(a)(5)

Proposed Rule
    The Board proposed a new Sec.  226.19(a)(5) containing the early 
disclosure requirements for mortgage loans secured by a consumer's 
interest in a ``timeshare plan'' (timeshare transactions), as defined 
in the bankruptcy laws (see 11 U.S.C. 101(53D)). Pursuant to amendments 
in the Stabilization Act, the disclosure timing requirements and the 
fee restriction added by the MDIA are not applicable to timeshare 
transactions, which instead are subject to the same disclosure timing 
requirements that applied to ``residential mortgage transactions'' 
under TILA Section 128(b)(2), 15 U.S.C. 1638(b), before the MDIA was 
enacted. Accordingly, for timeshare transactions, proposed Sec.  
226.19(a)(5) required that creditors make good faith estimates of the 
disclosures required by Sec.  226.18 that must be delivered or placed 
in the mail within three business days after the creditor receives the 
consumer's application or before the credit is extended, whichever is 
earlier. The seven-business-day waiting period and three-business-day 
waiting period before consummation contained in Sec.  226.19(a)(2) do 
not apply to timeshare transactions.
    For timeshare transactions, if the APR stated in the early 
disclosures changes beyond the specified tolerance, under proposed 
Sec.  226.19(a)(5)(iii), creditors would have to disclose all the 
changed terms no later than consummation or settlement of the 
transaction, consistent with the existing rules for residential 
mortgage transactions in Sec.  226.19(a)(2). Currently, comment 
19(a)(2)-3 states that ``consummation'' is defined in Sec.  226.2(a), 
and ``date of settlement'' is defined in HUD's Regulation X (24 CFR 
3500.2(a)). As discussed above, for transactions other than timeshare 
transactions, the MDIA amends TILA to remove reference to 
``settlement'' from TILA's provisions requiring creditors to make 
corrected disclosures.
    The Board solicited comment on the costs and benefits of basing the 
timing for corrected disclosures on the time of consummation or 
settlement for timeshare transactions but solely on the time of 
consummation for other mortgage loans. The Board asked whether 
Regulation Z's timing requirements for corrected disclosures should be 
made consistent for all closed-end mortgage transactions by requiring 
creditors to make corrected disclosures at the time of consummation for 
timeshare transactions. The Board also asked, in the alternative, 
whether Regulation Z should require creditors to make corrected 
disclosures three business days before consummation or settlement, 
whichever is later, for closed-end mortgage loans other than timeshare 
transactions.
Public Comment
    Most consumer advocacy organizations stated that corrected 
disclosures for all mortgage loans other than timeshare transactions 
should be provided before consummation, which marks the time when the 
consumer's legal obligation begins. These commenters stated that 
allowing corrected disclosures to be given at the time of settlement 
would be less advantageous for consumers, because they would be 
obligated on the transaction before they received the corrected 
disclosures. They recommended that the same rules should apply to 
timeshare transactions as well. A community bank trade association 
stated that the disclosure timing requirements for timeshare 
transactions should be the same as for other closed-end mortgage 
transa