Federal Housing Administration (FHA): Adjustable Rate Mortgage Notification Requirements and Look-Back Period for FHA-Insured Single Family Mortgages, 50838-50840 [2014-20215]

Download as PDF 50838 tkelley on DSK3SPTVN1PROD with RULES § 203.558 Federal Register / Vol. 79, No. 165 / Tuesday, August 26, 2014 / Rules and Regulations Handling prepayments. (a) Handling prepayments for FHAinsured mortgages closed on or after January 21, 2015. With respect to FHAinsured mortgages closed on or after January 21, 2015, notwithstanding the terms of the mortgage, the mortgagee shall accept a prepayment at any time and in any amount. The mortgagee shall not require 30 days’ advance notice of prepayment, even if the mortgage instrument purports to require such notice. Monthly interest on the debt must be calculated on the actual unpaid principal balance of the loan as of the date the prepayment is received, and not as of the next installment due date. (b) Handling prepayments for FHAinsured mortgages closed before January 21, 2015. (1) With respect to FHA mortgages insured before August 2, 1985, if a prepayment is offered on other than an installment due date, the mortgagee may refuse to accept the prepayment until the first day of the month following expiration of the 30day notice period as provided in the mortgage, or may require payment of interest to that date, but only if the mortgagee so advises the mortgagor, in a form approved by the Commissioner, in response to the mortgagor’s inquiry, request for payoff figures, or tender of prepayment. If the installment due date (the first day of the month) falls on a nonbusiness day, the mortgagor’s notice of intention to prepay or the prepayment shall be timely if received on the next business day. (2) With respect to FHA mortgages insured on or after August 2, 1985, but closed before January 21, 2015, the mortgagee shall not require 30 days’ advance notice of prepayment, even if the mortgage instrument purports to require such notice. If the prepayment is offered on other than an installment due date, the mortgagee may refuse to accept the prepayment until the next installment due date (the first day of the month), or may require payment of interest to that date, but only if the mortgagee so advises the mortgagor, in a form approved by the Commissioner, in response to the mortgagor’s inquiry, request for payoff figures, or tender of prepayment. (3) If the mortgagee fails to meet the full disclosure requirements of paragraphs (b)(1) and (b)(2) of this section, the mortgagee may be subject to forfeiture of that portion of the interest collected for the period beyond the date that prepayment in full was received and to such other actions as are provided in part 25 of this title. (c) Mortgagee annual notice to mortgagors. Each mortgagee, with respect to a mortgage under this part, VerDate Mar<15>2010 16:05 Aug 25, 2014 Jkt 232001 shall provide to each of its mortgagors not less frequently than annually a written notice, in a form approved by the Commissioner, containing a statement of the amount outstanding for prepayment of the principal amount of the mortgage. With respect to FHAinsured mortgages closed before January 21, 2015, the notice shall describe any requirements the mortgagor must fulfill to prevent the accrual of any interest on the principal amount after the date of any prepayment. This paragraph shall apply to any outstanding mortgage insured on or after August 22, 1991. Dated: August 20, 2014. Carol J. Galante, Assistant Secretary for Housing—Federal Housing Commissioner. [FR Doc. 2014–20214 Filed 8–25–14; 8:45 am] BILLING CODE 4210–67–P DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 24 CFR Part 203 [Docket No. FR–5744–F–02] RIN 2502–AJ20 Federal Housing Administration (FHA): Adjustable Rate Mortgage Notification Requirements and Look-Back Period for FHA-Insured Single Family Mortgages Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD. ACTION: Final rule. AGENCY: This rule revises FHA’s regulations governing its single family adjustable rate mortgage (ARM) program to align FHA interest rate adjustment and notification regulations with the requirements for notifying mortgagors of ARM adjustments, as required by the regulations implementing the Truth in Lending Act (TILA), as recently revised by the Consumer Financial Protection Bureau (CFPB). The final rule requires that an interest rate adjustment resulting in a corresponding change to the mortgagor’s monthly payment for an ARM have a 45-day look-back period. The final rule also requires that the mortgagee of an FHA-insured ARM comply with the disclosure and notification requirements of the 2013 TILA Servicing Rule, including at least a 60-day but no more than 120 day advance notice of an adjustment to a mortgagor’s monthly payment. DATES: Effective Date: January 10, 2015. FOR FURTHER INFORMATION CONTACT: Patricia J. McClung, Acting Director, Office of Single Family Program SUMMARY: PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 Development, Office of Housing, Department of Housing and Urban Development, 451 7th Street SW., Room 9278, Washington, DC 20410; telephone number 202–708–3175 (this is not a tollfree number). Persons with hearing or speech impairments may access this number through TTY by calling the tollfree Federal Relay Service at 800–877– 8339. SUPPLEMENTARY INFORMATION: I. Background—the May 8, 2014 Proposed Rule On May 8, 2014, HUD published a proposed rule in the Federal Register, at 79 FR 26376, to revise the look-back period for an FHA-insured ARM from 30 to 45 days, and to require that the mortgagee of an FHA-insured ARM provide at least a 60-day, but no more than 120 day, advance notice of an adjustment to a mortgagor’s monthly payment. This change was in response to the final rule of the ‘‘Mortgage Servicing Rules Under the Truth in Lending Act (Regulation Z)’’ 1 published as a final rule on February 14, 2013 in the Federal Register at 78 FR 10902. This February 2013 final rule, referred to in this preamble as the 2013 TILA Servicing Rule, set the ARM adjustment notice requirement to a period of between 60 days (minimum) and 120 days (maximum) before the newly adjusted payment is due. Additionally, the 2013 TILA Servicing Rule established 45 days as the minimum ARM look-back period. HUD’s May 8, 2014, rule proposed to revise the regulations in 24 CFR 203.49 to establish a 45-day look-back period for an FHA-insured ARM, and to require that the mortgagee of an FHA-insured ARM provide at least a 60-day, but no more than 120 day, advance notice of an adjustment to a mortgagor’s monthly payment, in conformance with the CFPB’s regulations. In the preamble to the 2013 TILA Servicing Rule, the CFPB stated that FHA’s current 30-day lookback period did not provide sufficient time to notify the mortgagor of an interest rate and monthly payment adjustment. To allow HUD sufficient time to comply with the notification requirements of the 2013 TILA Servicing Rule, the CFPB delayed the effective date of the notification requirements in the 2013 TILA Servicing Rule to January 10, 2015, for ARMs insured by FHA with a 30-day look-back period. Therefore, FHA1 The CFPB initially published the rule on its Web site: http://www.consumerfinance.gov/regulations/ 2013-real-estate-settlement-procedures-actregulation-x-and-truth-in-lending-act-regulation-zmortgage-servicing-final-rules/. E:\FR\FM\26AUR1.SGM 26AUR1 Federal Register / Vol. 79, No. 165 / Tuesday, August 26, 2014 / Rules and Regulations insured ARMs originated on or after January 10, 2015, must comply with the new notification requirements of the 2013 TILA Servicing Rule. II. This Final Rule This final rule follows publication of the May 8, 2014, proposed rule and adopts that proposed rule without change. The public comment period for the proposed rule closed on June 9, 2014, and HUD received 9 public comments. While HUD received 9 public comments on this rule, only 6 of the comments pertained to HUD’s rule. With respect to the other 3 comments, two were general comments on the state of the housing market. The remaining comment pertains to another agency’s rule and was inadvertently submitted to the rulemaking docket for HUD’s rule. Section III of this preamble discusses the comments received on the proposed rule. tkelley on DSK3SPTVN1PROD with RULES III. Discussion of Public Comments Received on May 8, 2014, Proposed Rule The public commenters included mortgage lenders, industry trade associations, and individuals. Commenters were generally supportive of HUD’s proposal to change the lookback period and notification requirements on FHA-insured ARMs. Comment: Change effective date of proposed rule and implement as soon as possible. A commenter requested that HUD implement the rule as soon as practicable to better provide clarity and certainty to the mortgage industry. The commenter stated that it will need to implement the proposed change ahead of a possible effective date due to the technological and procedural changes necessary for implementation. HUD Response: HUD appreciates the industry’s support of this rule and desire for a quick implementation. FHA’s policy change regarding the lookback period must be in effect by January 10, 2015 in order to be in compliance with the 2013 TILA Servicing Rule. To ensure uniformity for Ginnie Mae issuers, HUD is using the CFPB end date of January 10, 2015. Comment: Final rule should explicitly state it applies only to forward mortgages. A commenter requested that the rule be amended to clearly document that this change is only applicable to ‘‘forward’’ FHA single family mortgages. HUD Response: HUD appreciates the commenters point, and notes that the proposed regulatory text in § 203.49(d)(2) explicitly referred to ‘‘forward mortgages’’ in reference to the VerDate Mar<15>2010 16:05 Aug 25, 2014 Jkt 232001 45 day look-back period. HUD is adopting the proposed regulatory text. Comment: Proposed rule is silent on borrower initiated rate reset. A commenter identified that FHA’s proposed rule, as well as the CFPB’s 2013 TILA Servicing Rule, are both silent on the potential for a borrower initiated rate reset, which the commenter stated is a feature currently offered in the market and gaining market acceptance. The commenter recommended that language be included in the final rule that the rule only applies to lender/servicer/creditor initiated rate resets and carves out borrower initiated rate resets from being subject to the proposed 60–120 day advanced notice of adjustment. HUD Response: HUD appreciates the commenter providing information about this mortgage product. However, HUD does not have the authority to exempt lenders offering this mortgage product from the minimum ARM notification requirements set forth in the CFPB’s 2013 TILA Servicing Rule. HUD defers to the CFPB to make a determination on this issue. At this time, FHA insures ARMs that are adjusted at a set fixed interval by the mortgagee. Comment: Against any type of regulatory change to FHA. A commenter expressed opposition to any type of change to FHA. In the commenter’s opinion, the old rules related to Real Estate Settlement Procedures Act (RESPA) and TILA were fine, and the new CFPB regulation is ‘‘backward and confusing’’ compared to the old good faith estimate that had all the charges detailed. HUD Response: The passage of The Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111–203, approved July 21, 2010) (Dodd-Frank), transferred oversight and responsibility of RESPA and TILA to the CFPB. Following passage of DoddFrank, the CFPB revised Regulation Z in the 2013 TILA Servicing Rule, and changed the periods for advance notice of rate adjustments. Since FHA’s lookback period notification requirement were inconsistent with the 2013 TILA Servicing Rule requirements as published in January of 2013, mortgagees originating loans insured by FHA and VA had until January 10, 2015 to comply the 2013 TILA Servicing Rule requirements. Therefore, this final rule is necessary to ensure that FHA-insured mortgages are in compliance with the 2013 TILA Servicing Rule. PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 50839 IV. Findings and Certifications Regulatory Review—Executive Orders 12866 and 13563 Under Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and, therefore, subject to review by the Office of Management and Budget (OMB) in accordance with the requirements of the order. Executive Order 13563 (Improving Regulations and Regulatory Review) directs executive agencies to analyze regulations that are ‘‘outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.’’ Executive Order 13563 also directs that, where relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, agencies are to identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. As discussed above in this preamble, this final rule aligns the look-back requirements for FHA-insured ARMs to the revised TILA notification requirements established in the 2013 TILA Servicing Rule. Since this final rule adopts without amendment the proposed rule, which was determined to not be a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, there is no further review by OMB. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. As discussed in this preamble, this final rule aligns the look-back requirements for FHA-insured ARMs to the revised TILA notification requirements established in the 2013 TILA Servicing Rule. HUD does not have the discretion not to align its ARM notification requirements with new TILA requirements established by the CFPB as implemented by the CFPB in its 2013 TILA Servicing Rule. The revised look-back period and disclosure requirements would apply to FHAapproved mortgagees originating ARMs in January 2015, whether or not HUD takes action. It is HUD’s position that it is important for FHA regulations to be in compliance with TILA, and therefore HUD has initiated this rulemaking. In E:\FR\FM\26AUR1.SGM 26AUR1 50840 Federal Register / Vol. 79, No. 165 / Tuesday, August 26, 2014 / Rules and Regulations this rule, HUD adopted the minimum look-back period, 45 days, which would allow FHA-approved mortgagees to meet the TILA minimum requirements governing notification to borrowers. As the CFPB noted in its rulemaking, that the majority of ARMs in the conventional market have look-back periods of 45 days or longer. With the 2013 TILA Servicing Rule having taken effect on January 10, 2014, any lenders originating in the conventional market ARMs that did not have a minimum look-back period of 45 days, have now adjusted to the new TILA requirements. As with the amendments to the lookback period, the revisions to the disclosure requirements simply conform HUD requirements to the 2013 TILA Servicing Rule and the procedures currently followed in the conventional mortgage lending market. For the reasons presented, the undersigned certifies that this rule will not have a significant economic impact on a substantial number of small entities. tkelley on DSK3SPTVN1PROD with RULES Environmental Impact The final rule does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern or regulate, real property acquisition, disposition, leasing, rehabilitation, alteration, demolition, or new construction, or establish, revise or provide for standards for construction or construction materials, manufactured housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this final rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321). Executive Order 13132, Federalism Executive Order 13132 (entitled ‘‘Federalism’’) prohibits an agency from publishing any rule that has federalism implications if the rule either (i) imposes substantial direct compliance costs on state and local governments and is not required by statute, or (ii) preempts state law, unless the agency meets the consultation and funding requirements of section 6 of the Executive order. This final rule would not have federalism implications and would not impose substantial direct compliance costs on state and local governments or preempt state law within the meaning of the Executive order. Unfunded Mandates Reform Act Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531– 1538) (UMRA) establishes requirements for Federal agencies to assess the effects VerDate Mar<15>2010 16:05 Aug 25, 2014 Jkt 232001 of their regulatory actions on state, local, and tribal governments, and on the private sector. This final rule would not impose any Federal mandates on any state, local, or tribal governments, or on the private sector, within the meaning of the UMRA. ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA–R08–OAR–2013–0006; FRL–9915–75– Region 8] The Catalog of Federal Domestic Assistance number for Mortgage Insurance-Homes is 14.117. Approval and Promulgation of Air Quality Implementation Plans; Wyoming; Revisions to the Wyoming Air Quality Standards and Regulations; Ambient Standards for Particulate Matter and for Lead List of Subjects in 24 CFR Part 203 AGENCY: Hawaiian Natives, Home improvement, Indians-lands, Loan programs-housing and community development, Mortgage insurance, Reporting and recordkeeping requirements, Solar energy. SUMMARY: Catalog of Federal Domestic Assistance Accordingly, for the reasons discussed in this preamble, HUD amends 24 CFR part 203 as follows: PART 203—SINGLE FAMILY MORTGAGE INSURANCE 1. The authority citation for 24 CFR part 203 continues to read as follows: ■ Authority: 12 U.S.C. 1709, 1710, 1715b, 1715z–16, 1715u, and 1717z–21; 42 U.S.C. 3535(d). 2. In § 203.49, revise the third sentence of paragraph (d)(2) and paragraph (h) to read as follows: ■ § 203.49 Eligibility of adjustable rate mortgages. * * * * * (d) * * * (2) * * * The current index figure shall be the most recent index figure available 30 days before the date of each interest rate adjustment, except that for forward mortgages originated on or after January 10, 2015, 30 days shall mean 45 days. * * * * * (h) Disclosures. The mortgagee of an adjustable rate mortgage shall provide mortgagors with the disclosures in the timing, content, and format required by the regulations implementing the Truth in Lending Act (15 U.S.C. 1601 et seq.) at 12 CFR 1026.20(c) and (d). * * * * * Dated: August 20, 2014. Carol J. Galante, Assistant Secretary for Housing—Federal Housing Commissioner. [FR Doc. 2014–20215 Filed 8–25–14; 8:45 am] BILLING CODE 4210–67–P PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 Environmental Protection Agency (EPA). ACTION: Direct final rule. The Environmental Protection Agency (EPA) is taking direct final action to approve a State Implementation Plan (SIP) revision submitted by the State of Wyoming. The revision affects Wyoming’s Air Quality Standards and Regulations (WAQSR) regarding ambient standards for particulate matter and for lead (Pb). This action is being taken under section 110 of the Clean Air Act (CAA). DATES: This rule is effective October 27, 2014 without further notice, unless EPA receives adverse comment by September 25, 2014. If adverse comment is received, EPA will publish a timely withdrawal of the direct final rule in the Federal Register informing the public that the rule will not take effect. ADDRESSES: Submit your comments, identified by Docket ID No. EPA–R08– OAR–2013–0006, by one of the following methods: • http://www.regulations.gov. Follow the on-line instructions for submitting comments. • Email: pratt.steven@epa.gov. • Fax: (303) 312–6064 (please alert the individual listed in the FOR FURTHER INFORMATION CONTACT if you are faxing comments). • Mail: Director, Air Program, EPA, Region 8, Mailcode 8P–AR, 1595 Wynkoop Street, Denver, Colorado 80202–1129. • Hand Delivery: Director, Air Program, EPA, Region 8, Mailcode 8P– AR, 1595 Wynkoop, Denver, Colorado 80202–1129. Such deliveries are only accepted Monday through Friday, 8:00 a.m. to 4:30 p.m., excluding federal holidays. Special arrangements should be made for deliveries of boxed information. Instructions: Direct your comments to Docket ID No. EPA–R08–OAR–2013– 0006. EPA’s policy is that all comments received will be included in the public docket without change and may be made available online at http:// www.regulations.gov, including any E:\FR\FM\26AUR1.SGM 26AUR1

Agencies

[Federal Register Volume 79, Number 165 (Tuesday, August 26, 2014)]
[Rules and Regulations]
[Pages 50838-50840]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-20215]


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

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 203

[Docket No. FR-5744-F-02]
RIN 2502-AJ20


Federal Housing Administration (FHA): Adjustable Rate Mortgage 
Notification Requirements and Look-Back Period for FHA-Insured Single 
Family Mortgages

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Final rule.

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

SUMMARY: This rule revises FHA's regulations governing its single 
family adjustable rate mortgage (ARM) program to align FHA interest 
rate adjustment and notification regulations with the requirements for 
notifying mortgagors of ARM adjustments, as required by the regulations 
implementing the Truth in Lending Act (TILA), as recently revised by 
the Consumer Financial Protection Bureau (CFPB). The final rule 
requires that an interest rate adjustment resulting in a corresponding 
change to the mortgagor's monthly payment for an ARM have a 45-day 
look-back period. The final rule also requires that the mortgagee of an 
FHA-insured ARM comply with the disclosure and notification 
requirements of the 2013 TILA Servicing Rule, including at least a 60-
day but no more than 120 day advance notice of an adjustment to a 
mortgagor's monthly payment.

DATES: Effective Date: January 10, 2015.

FOR FURTHER INFORMATION CONTACT: Patricia J. McClung, Acting Director, 
Office of Single Family Program Development, Office of Housing, 
Department of Housing and Urban Development, 451 7th Street SW., Room 
9278, Washington, DC 20410; telephone number 202-708-3175 (this is not 
a toll-free number). Persons with hearing or speech impairments may 
access this number through TTY by calling the toll-free Federal Relay 
Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background--the May 8, 2014 Proposed Rule

    On May 8, 2014, HUD published a proposed rule in the Federal 
Register, at 79 FR 26376, to revise the look-back period for an FHA-
insured ARM from 30 to 45 days, and to require that the mortgagee of an 
FHA-insured ARM provide at least a 60-day, but no more than 120 day, 
advance notice of an adjustment to a mortgagor's monthly payment. This 
change was in response to the final rule of the ``Mortgage Servicing 
Rules Under the Truth in Lending Act (Regulation Z)'' \1\ published as 
a final rule on February 14, 2013 in the Federal Register at 78 FR 
10902. This February 2013 final rule, referred to in this preamble as 
the 2013 TILA Servicing Rule, set the ARM adjustment notice requirement 
to a period of between 60 days (minimum) and 120 days (maximum) before 
the newly adjusted payment is due. Additionally, the 2013 TILA 
Servicing Rule established 45 days as the minimum ARM look-back period.
---------------------------------------------------------------------------

    \1\ The CFPB initially published the rule on its Web site: 
http://www.consumerfinance.gov/regulations/2013-real-estate-settlement-procedures-act-regulation-x-and-truth-in-lending-act-regulation-z-mortgage-servicing-final-rules/.
---------------------------------------------------------------------------

    HUD's May 8, 2014, rule proposed to revise the regulations in 24 
CFR 203.49 to establish a 45-day look-back period for an FHA-insured 
ARM, and to require that the mortgagee of an FHA-insured ARM provide at 
least a 60-day, but no more than 120 day, advance notice of an 
adjustment to a mortgagor's monthly payment, in conformance with the 
CFPB's regulations. In the preamble to the 2013 TILA Servicing Rule, 
the CFPB stated that FHA's current 30-day look-back period did not 
provide sufficient time to notify the mortgagor of an interest rate and 
monthly payment adjustment. To allow HUD sufficient time to comply with 
the notification requirements of the 2013 TILA Servicing Rule, the CFPB 
delayed the effective date of the notification requirements in the 2013 
TILA Servicing Rule to January 10, 2015, for ARMs insured by FHA with a 
30-day look-back period. Therefore, FHA-

[[Page 50839]]

insured ARMs originated on or after January 10, 2015, must comply with 
the new notification requirements of the 2013 TILA Servicing Rule.

II. This Final Rule

    This final rule follows publication of the May 8, 2014, proposed 
rule and adopts that proposed rule without change. The public comment 
period for the proposed rule closed on June 9, 2014, and HUD received 9 
public comments. While HUD received 9 public comments on this rule, 
only 6 of the comments pertained to HUD's rule. With respect to the 
other 3 comments, two were general comments on the state of the housing 
market. The remaining comment pertains to another agency's rule and was 
inadvertently submitted to the rulemaking docket for HUD's rule. 
Section III of this preamble discusses the comments received on the 
proposed rule.

III. Discussion of Public Comments Received on May 8, 2014, Proposed 
Rule

    The public commenters included mortgage lenders, industry trade 
associations, and individuals. Commenters were generally supportive of 
HUD's proposal to change the look-back period and notification 
requirements on FHA-insured ARMs.
    Comment: Change effective date of proposed rule and implement as 
soon as possible. A commenter requested that HUD implement the rule as 
soon as practicable to better provide clarity and certainty to the 
mortgage industry. The commenter stated that it will need to implement 
the proposed change ahead of a possible effective date due to the 
technological and procedural changes necessary for implementation.
    HUD Response: HUD appreciates the industry's support of this rule 
and desire for a quick implementation. FHA's policy change regarding 
the look-back period must be in effect by January 10, 2015 in order to 
be in compliance with the 2013 TILA Servicing Rule. To ensure 
uniformity for Ginnie Mae issuers, HUD is using the CFPB end date of 
January 10, 2015.
    Comment: Final rule should explicitly state it applies only to 
forward mortgages. A commenter requested that the rule be amended to 
clearly document that this change is only applicable to ``forward'' FHA 
single family mortgages.
    HUD Response: HUD appreciates the commenters point, and notes that 
the proposed regulatory text in Sec.  203.49(d)(2) explicitly referred 
to ``forward mortgages'' in reference to the 45 day look-back period. 
HUD is adopting the proposed regulatory text.
    Comment: Proposed rule is silent on borrower initiated rate reset. 
A commenter identified that FHA's proposed rule, as well as the CFPB's 
2013 TILA Servicing Rule, are both silent on the potential for a 
borrower initiated rate reset, which the commenter stated is a feature 
currently offered in the market and gaining market acceptance. The 
commenter recommended that language be included in the final rule that 
the rule only applies to lender/servicer/creditor initiated rate resets 
and carves out borrower initiated rate resets from being subject to the 
proposed 60-120 day advanced notice of adjustment.
    HUD Response: HUD appreciates the commenter providing information 
about this mortgage product. However, HUD does not have the authority 
to exempt lenders offering this mortgage product from the minimum ARM 
notification requirements set forth in the CFPB's 2013 TILA Servicing 
Rule. HUD defers to the CFPB to make a determination on this issue. At 
this time, FHA insures ARMs that are adjusted at a set fixed interval 
by the mortgagee.
    Comment: Against any type of regulatory change to FHA. A commenter 
expressed opposition to any type of change to FHA. In the commenter's 
opinion, the old rules related to Real Estate Settlement Procedures Act 
(RESPA) and TILA were fine, and the new CFPB regulation is ``backward 
and confusing'' compared to the old good faith estimate that had all 
the charges detailed.
    HUD Response: The passage of The Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Public Law 111-203, approved July 21, 2010) 
(Dodd-Frank), transferred oversight and responsibility of RESPA and 
TILA to the CFPB. Following passage of Dodd-Frank, the CFPB revised 
Regulation Z in the 2013 TILA Servicing Rule, and changed the periods 
for advance notice of rate adjustments. Since FHA's look-back period 
notification requirement were inconsistent with the 2013 TILA Servicing 
Rule requirements as published in January of 2013, mortgagees 
originating loans insured by FHA and VA had until January 10, 2015 to 
comply the 2013 TILA Servicing Rule requirements. Therefore, this final 
rule is necessary to ensure that FHA-insured mortgages are in 
compliance with the 2013 TILA Servicing Rule.

IV. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the Office of Management and 
Budget (OMB) in accordance with the requirements of the order. 
Executive Order 13563 (Improving Regulations and Regulatory Review) 
directs executive agencies to analyze regulations that are ``outmoded, 
ineffective, insufficient, or excessively burdensome, and to modify, 
streamline, expand, or repeal them in accordance with what has been 
learned.'' Executive Order 13563 also directs that, where relevant, 
feasible, and consistent with regulatory objectives, and to the extent 
permitted by law, agencies are to identify and consider regulatory 
approaches that reduce burdens and maintain flexibility and freedom of 
choice for the public.
    As discussed above in this preamble, this final rule aligns the 
look-back requirements for FHA-insured ARMs to the revised TILA 
notification requirements established in the 2013 TILA Servicing Rule. 
Since this final rule adopts without amendment the proposed rule, which 
was determined to not be a significant regulatory action under section 
3(f) of Executive Order 12866, Regulatory Planning and Review, there is 
no further review by OMB.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities.
    As discussed in this preamble, this final rule aligns the look-back 
requirements for FHA-insured ARMs to the revised TILA notification 
requirements established in the 2013 TILA Servicing Rule. HUD does not 
have the discretion not to align its ARM notification requirements with 
new TILA requirements established by the CFPB as implemented by the 
CFPB in its 2013 TILA Servicing Rule. The revised look-back period and 
disclosure requirements would apply to FHA-approved mortgagees 
originating ARMs in January 2015, whether or not HUD takes action. It 
is HUD's position that it is important for FHA regulations to be in 
compliance with TILA, and therefore HUD has initiated this rulemaking. 
In

[[Page 50840]]

this rule, HUD adopted the minimum look-back period, 45 days, which 
would allow FHA-approved mortgagees to meet the TILA minimum 
requirements governing notification to borrowers.
    As the CFPB noted in its rulemaking, that the majority of ARMs in 
the conventional market have look-back periods of 45 days or longer. 
With the 2013 TILA Servicing Rule having taken effect on January 10, 
2014, any lenders originating in the conventional market ARMs that did 
not have a minimum look-back period of 45 days, have now adjusted to 
the new TILA requirements.
    As with the amendments to the look-back period, the revisions to 
the disclosure requirements simply conform HUD requirements to the 2013 
TILA Servicing Rule and the procedures currently followed in the 
conventional mortgage lending market.
    For the reasons presented, the undersigned certifies that this rule 
will not have a significant economic impact on a substantial number of 
small entities.

Environmental Impact

    The final rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate, real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, revise or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
final rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either (i) imposes substantial direct compliance costs on state and 
local governments and is not required by statute, or (ii) preempts 
state law, unless the agency meets the consultation and funding 
requirements of section 6 of the Executive order. This final rule would 
not have federalism implications and would not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the Executive order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments, and on the private sector. This final rule would 
not impose any Federal mandates on any state, local, or tribal 
governments, or on the private sector, within the meaning of the UMRA.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for Mortgage 
Insurance-Homes is 14.117.

List of Subjects in 24 CFR Part 203

    Hawaiian Natives, Home improvement, Indians-lands, Loan programs-
housing and community development, Mortgage insurance, Reporting and 
recordkeeping requirements, Solar energy.

    Accordingly, for the reasons discussed in this preamble, HUD amends 
24 CFR part 203 as follows:

PART 203--SINGLE FAMILY MORTGAGE INSURANCE

0
1. The authority citation for 24 CFR part 203 continues to read as 
follows:

    Authority:  12 U.S.C. 1709, 1710, 1715b, 1715z-16, 1715u, and 
1717z-21; 42 U.S.C. 3535(d).


0
2. In Sec.  203.49, revise the third sentence of paragraph (d)(2) and 
paragraph (h) to read as follows:


Sec.  203.49  Eligibility of adjustable rate mortgages.

* * * * *
    (d) * * *
    (2) * * * The current index figure shall be the most recent index 
figure available 30 days before the date of each interest rate 
adjustment, except that for forward mortgages originated on or after 
January 10, 2015, 30 days shall mean 45 days.
* * * * *
    (h) Disclosures. The mortgagee of an adjustable rate mortgage shall 
provide mortgagors with the disclosures in the timing, content, and 
format required by the regulations implementing the Truth in Lending 
Act (15 U.S.C. 1601 et seq.) at 12 CFR 1026.20(c) and (d).
* * * * *

    Dated: August 20, 2014.
Carol J. Galante,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2014-20215 Filed 8-25-14; 8:45 am]
BILLING CODE 4210-67-P