Truth in Lending Act (Regulation Z) Adjustment to Asset-Size Exemption Threshold, 1356-1359 [2018-28374]

Download as PDF 1356 Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations 4012a(f) is $2,187 for each violation that occurs on or after January 15, 2019, with no cap on the total amount of penalties that can be assessed against any single institution during any calendar year. Dated: January 29, 2019. Dale Aultman, Secretary, Farm Credit Administration Board. [FR Doc. 2019–00789 Filed 2–1–19; 8:45 am] BILLING CODE 6705–01–P BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1026 RIN 3170–AA93 Truth in Lending Act (Regulation Z) Adjustment to Asset-Size Exemption Threshold Bureau of Consumer Financial Protection. ACTION: Final rule; official interpretation. AGENCY: The Bureau of Consumer Financial Protection (Bureau) is amending the official commentary that interprets the requirements of the Bureau’s Regulation Z (Truth in Lending) to reflect a change in the assetsize threshold for certain creditors to qualify for an exemption to the requirement to establish an escrow account for a higher-priced mortgage loan based on the annual percentage change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI–W). Based on the 2.6 percent increase in the average of the CPI–W for the 12-month period ending in November 2018, the exemption threshold is adjusted to increase to $2.167 billion from $2.112 billion. Therefore, creditors with assets of less than $2.167 billion (including assets of certain affiliates) as of December 31, 2018, are exempt, if other requirements of Regulation Z also are met, from establishing escrow accounts for higher-priced mortgage loans in 2019. SUMMARY: Effective date: This rule is effective February 4, 2019. Applicability date: This rule is applicable on January 1, 2019, consistent with relevant statutory or regulatory provisions. FOR FURTHER INFORMATION CONTACT: Monique Chenault, Paralegal Specialist, Office of Regulations, at (202) 435–7700. If you require this document in an alternative electronic format, please contact CFPB_Accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: I. Background Section 129D of the Truth in Lending Act (TILA) contains a general requirement that an escrow account be established by a creditor to pay for property taxes and insurance premiums for certain first-lien higher-priced mortgage loan transactions. TILA section 129D also generally permits an exemption from the higher-priced mortgage loan escrow requirement for a creditor that meets certain requirements, including any asset-size threshold the Bureau may establish. In the 2013 Escrows Final Rule,1 the Bureau established such an asset-size threshold of $2 billion, which would adjust automatically each year, based on the year-to-year change in the average of the CPI–W for each 12-month period ending in November, with rounding to the nearest million dollars.2 In 2015, the Bureau revised the asset-size threshold for small creditors and how it applies. The Bureau included in the calculation of the asset-size threshold the assets of the creditor’s affiliates that regularly extended covered transactions secured by first liens during the applicable period and added a grace period to allow an otherwise eligible creditor that exceeded the asset limit in the preceding calendar year (but not in the calendar year before the preceding year) to continue to operate as a small creditor with respect to transactions with applications received before April 1 of the current calendar year.3 For 2018, the threshold was $2.112 billion. During the 12-month period ending in November 2018, the average of the CPI– W increased by 2.6 percent. As a result, the exemption threshold is increased to $2.167 billion for 2019. Thus, if the creditor’s assets together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2018 are less than $2.167 billion on December 31, 2018, and it meets the other requirements of § 1026.35(b)(2)(iii), it will be exempt from the escrow-accounts requirement for higher-priced mortgage loans in 2019 and will also be exempt from the escrow-accounts requirement for higherpriced mortgage loans for purposes of amozie on DSK3GDR082PROD with RULES DATES: VerDate Sep<11>2014 16:02 Feb 01, 2019 Jkt 247001 1 78 FR 4726 (Jan. 22, 2013). 12 CFR 1026.35(b)(2)(iii)(C). 3 See 80 FR 59943, 59951 (Oct. 2, 2015). The Bureau also issued an interim final rule in March 2016 to revise certain provisions in Regulation Z to effectuate the Helping Expand Lending Practices in Rural Communities Act’s amendments to TILA (Pub. L. 114–94, section 89003, 129 Stat. 1312, 1800–01 (2015)). The rule broadened the cohort of creditors that may be eligible under TILA for the special provisions allowing origination of balloonpayment qualified mortgages and balloon-payment high-cost mortgages, as well as for the escrow exemption. See 81 FR 16074 (Mar. 25, 2016). 2 See PO 00000 Frm 00014 Fmt 4700 Sfmt 4700 any loan consummated in 2020 with applications received before April 1, 2020. The adjustment to the escrows asset-size exemption threshold will also increase the threshold for small-creditor portfolio and balloon-payment qualified mortgages under Regulation Z. The requirements for small-creditor portfolio qualified mortgages at § 1026.43(e)(5)(i)(D) reference the asset threshold in § 1026.35(b)(2)(iii)(C). Likewise, the requirements for balloonpayment qualified mortgages at § 1026.43(f)(1)(vi) reference the asset threshold in § 1026.35(b)(2)(iii)(C). Under § 1026.32(d)(1)(ii)(C), balloonpayment qualified mortgages that satisfy all applicable criteria in § 1026.43(f)(1)(i) through (vi) and (f)(2), including being made by creditors that have (together with certain affiliates) total assets below the threshold in § 1026.35(b)(2)(iii)(C), are also excepted from the prohibition on balloon payments for high-cost mortgages. II. Procedural Requirements A. Administrative Procedure Act Under the Administrative Procedure Act (APA), notice and opportunity for public comment are not required if the Bureau finds that notice and public comment are impracticable, unnecessary, or contrary to the public interest. 5 U.S.C. 553(b)(B). Pursuant to this final rule, comment 35(b)(2)(iii)–1 in Regulation Z is amended to update the exemption threshold. The amendment in this final rule is technical and merely applies the formula previously established in Regulation Z for determining any adjustments to the exemption threshold. For these reasons, the Bureau has determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendment is adopted in final form. Section 553(d) of the APA generally requires publication of a final rule not less than 30 days before its effective date, except (1) a substantive rule which grants or recognizes an exemption or relieves a restriction; (2) interpretive rules and statements of policy; or (3) as otherwise provided by the agency for good cause found and published with the rule. 5 U.S.C. 553(d). At a minimum, the Bureau believes the amendments fall under the third exception to section 553(d). The Bureau finds that there is good cause to make the amendments effective on February 4, 2019. The amendment in this final rule is technical and non-discretionary, and it applies the method previously established in the agency’s regulations E:\FR\FM\04FER1.SGM 04FER1 Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations Section 1026.35—Requirements for HigherPriced Mortgage Loans for automatic adjustments to the threshold. * B. Regulatory Flexibility Act Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis.4 C. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995,5 the agency reviewed this final rule. No collections of information pursuant to the Paperwork Reduction Act are contained in the final rule. D. Congressional Review Act Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the Bureau will submit a report containing this rule and other required information to the United States Senate, the United States House of Representatives, and the Comptroller General of the United States prior to the rule taking effect. The Office of Information and Regulatory Affairs (OIRA) has designated this rule as not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). List of Subjects in 12 CFR Part 1026 Advertising, Appraisal, Appraiser, Banking, Banks, Consumer protection, Credit, Credit unions, Mortgages, National banks, Reporting and recordkeeping requirements, Savings associations, Truth in lending. Authority and Issuance For the reasons set forth above, the Bureau amends Regulation Z, 12 CFR part 1026, as set forth below: PART 1026—TRUTH IN LENDING (REGULATION Z) 1. The authority citation for part 1026 continues to read as follows: ■ Authority: 12 U.S.C. 2601, 2603–2605, 2607, 2609, 2617, 3353, 5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq. 2. In supplement I to part 1026, under Section 1026.35—Requirements for Higher-Priced Mortgage Loans, 35(b)(2) Exemptions, Paragraph 35(b)(2)(iii) is revised to read as follows: ■ amozie on DSK3GDR082PROD with RULES Supplement I to Part 1026—Official Interpretations * * * * * Subpart E—Special Rules for Certain Home Mortgage Transactions * * 45 * * * U.S.C. 603(a), 604(a). U.S.C. 3506; 5 CFR part 1320. 5 44 VerDate Sep<11>2014 16:02 Feb 01, 2019 * * * * 35(b)(2) Exemptions. Jkt 247001 * * * * * Paragraph 35(b)(2)(iii). 1. Requirements for exemption. Under § 1026.35(b)(2)(iii), except as provided in § 1026.35(b)(2)(v), a creditor need not establish an escrow account for taxes and insurance for a higher-priced mortgage loan, provided the following four conditions are satisfied when the higher-priced mortgage loan is consummated: i. During the preceding calendar year, or during either of the two preceding calendar years if the application for the loan was received before April 1 of the current calendar year, a creditor extended a first-lien covered transaction, as defined in § 1026.43(b)(1), secured by a property located in an area that is either ‘‘rural’’ or ‘‘underserved,’’ as set forth in § 1026.35(b)(2)(iv). A. In general, whether the rural-orunderserved test is satisfied depends on the creditor’s activity during the preceding calendar year. However, if the application for the loan in question was received before April 1 of the current calendar year, the creditor may instead meet the rural-orunderserved test based on its activity during the next-to-last calendar year. This provides creditors with a grace period if their activity meets the rural-or-underserved test (in § 1026.35(b)(2)(iii)(A)) in one calendar year but fails to meet it in the next calendar year. B. A creditor meets the rural-orunderserved test for any higher-priced mortgage loan consummated during a calendar year if it extended a first-lien covered transaction in the preceding calendar year secured by a property located in a ruralor-underserved area. If the creditor does not meet the rural-or-underserved test in the preceding calendar year, the creditor meets this condition for a higher-priced mortgage loan consummated during the current calendar year only if the application for the loan was received before April 1 of the current calendar year and the creditor extended a first-lien covered transaction during the next-to-last calendar year that is secured by a property located in a rural or underserved area. The following examples are illustrative: 1. Assume that a creditor extended during 2016 a first-lien covered transaction that is secured by a property located in a rural or underserved area. Because the creditor extended a first-lien covered transaction during 2016 that is secured by a property located in a rural or underserved area, the creditor can meet this condition for exemption for any higher-priced mortgage loan consummated during 2017. 2. Assume that a creditor did not extend during 2016 a first-lien covered transaction secured by a property that is located in a rural or underserved area. Assume further that the same creditor extended during 2015 a first-lien covered transaction that is located in a rural or underserved area. Assume further that the creditor consummates a higher-priced mortgage loan in 2017 for which the application was received in PO 00000 Frm 00015 Fmt 4700 Sfmt 4700 1357 November 2017. Because the creditor did not extend during 2016 a first-lien covered transaction secured by a property that is located in a rural or underserved area, and the application was received on or after April 1, 2017, the creditor does not meet this condition for exemption. However, assume instead that the creditor consummates a higher-priced mortgage loan in 2017 based on an application received in February 2017. The creditor meets this condition for exemption for this loan because the application was received before April 1, 2017, and the creditor extended during 2015 a first-lien covered transaction that is located in a rural or underserved area. ii. The creditor and its affiliates together extended no more than 2,000 covered transactions, as defined in § 1026.43(b)(1), secured by first liens, that were sold, assigned, or otherwise transferred by the creditor or its affiliates to another person, or that were subject at the time of consummation to a commitment to be acquired by another person, during the preceding calendar year or during either of the two preceding calendar years if the application for the loan was received before April 1 of the current calendar year. For purposes of § 1026.35(b)(2)(iii)(B), a transfer of a first-lien covered transaction to ‘‘another person’’ includes a transfer by a creditor to its affiliate. A. In general, whether this condition is satisfied depends on the creditor’s activity during the preceding calendar year. However, if the application for the loan in question is received before April 1 of the current calendar year, the creditor may instead meet this condition based on activity during the next-to-last calendar year. This provides creditors with a grace period if their activity falls at or below the threshold in one calendar year but exceeds it in the next calendar year. B. For example, assume that in 2015 a creditor and its affiliates together extended 1,500 loans that were sold, assigned, or otherwise transferred by the creditor or its affiliates to another person, or that were subject at the time of consummation to a commitment to be acquired by another person, and 2,500 such loans in 2016. Because the 2016 transaction activity exceeds the threshold but the 2015 transaction activity does not, the creditor satisfies this condition for exemption for a higher-priced mortgage loan consummated during 2017 if the creditor received the application for the loan before April 1, 2017, but does not satisfy this condition for a higher-priced mortgage loan consummated during 2017 if the application for the loan was received on or after April 1, 2017. C. For purposes of § 1026.35(b)(2)(iii)(B), extensions of first-lien covered transactions, during the applicable time period, by all of a creditor’s affiliates, as ‘‘affiliate’’ is defined in § 1026.32(b)(5), are counted toward the threshold in this section. ‘‘Affiliate’’ is defined in § 1026.32(b)(5) as any company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.). Under the Bank Holding Company Act, a company has E:\FR\FM\04FER1.SGM 04FER1 amozie on DSK3GDR082PROD with RULES 1358 Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations control over a bank or another company if it directly or indirectly or acting through one or more persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the bank or company; it controls in any manner the election of a majority of the directors or trustees of the bank or company; or the Federal Reserve Board determines, after notice and opportunity for hearing, that the company directly or indirectly exercises a controlling influence over the management or policies of the bank or company. 12 U.S.C. 1841(a)(2). iii. As of the end of the preceding calendar year, or as of the end of either of the two preceding calendar years if the application for the loan was received before April 1 of the current calendar year, the creditor and its affiliates that regularly extended covered transactions secured by first liens, together, had total assets that are less than the applicable annual asset threshold. A. For purposes of § 1026.35(b)(2)(iii)(C), in addition to the creditor’s assets, only the assets of a creditor’s ‘‘affiliate’’ (as defined by § 1026.32(b)(5)) that regularly extended covered transactions (as defined by § 1026.43(b)(1)) secured by first liens, are counted toward the applicable annual asset threshold. See comment 35(b)(2)(iii)–1.ii.C for discussion of definition of ‘‘affiliate.’’ B. Only the assets of a creditor’s affiliate that regularly extended first-lien covered transactions during the applicable period are included in calculating the creditor’s assets. The meaning of ‘‘regularly extended’’ is based on the number of times a person extends consumer credit for purposes of the definition of ‘‘creditor’’ in § 1026.2(a)(17). Because covered transactions are ‘‘transactions secured by a dwelling,’’ consistent with § 1026.2(a)(17)(v), an affiliate regularly extended covered transactions if it extended more than five covered transactions in a calendar year. Also consistent with § 1026.2(a)(17)(v), because a covered transaction may be a high-cost mortgage subject to § 1026.32, an affiliate regularly extends covered transactions if, in any 12month period, it extends more than one covered transaction that is subject to the requirements of § 1026.32 or one or more such transactions through a mortgage broker. Thus, if a creditor’s affiliate regularly extended first-lien covered transactions during the preceding calendar year, the creditor’s assets as of the end of the preceding calendar year, for purposes of the asset limit, take into account the assets of that affiliate. If the creditor, together with its affiliates that regularly extended first-lien covered transactions, exceeded the asset limit in the preceding calendar year—to be eligible to operate as a small creditor for transactions with applications received before April 1 of the current calendar year—the assets of the creditor’s affiliates that regularly extended covered transactions in the year before the preceding calendar year are included in calculating the creditor’s assets. C. If multiple creditors share ownership of a company that regularly extended first-lien covered transactions, the assets of the company count toward the asset limit for a co-owner creditor if the company is an ‘‘affiliate,’’ as defined in § 1026.32(b)(5), of VerDate Sep<11>2014 16:02 Feb 01, 2019 Jkt 247001 the co-owner creditor. Assuming the company is not an affiliate of the co-owner creditor by virtue of any other aspect of the definition (such as by the company and coowner creditor being under common control), the company’s assets are included toward the asset limit of the co-owner creditor only if the company is controlled by the co-owner creditor, ‘‘as set forth in the Bank Holding Company Act.’’ If the co-owner creditor and the company are affiliates (by virtue of any aspect of the definition), the co-owner creditor counts all of the company’s assets toward the asset limit, regardless of the coowner creditor’s ownership share. Further, because the co-owner and the company are mutual affiliates the company also would count all of the co-owner’s assets towards its own asset limit. See comment 35(b)(2)(iii)– 1.ii.C for discussion of the definition of ‘‘affiliate.’’ D. A creditor satisfies the criterion in § 1026.35(b)(2)(iii)(C) for purposes of any higher-priced mortgage loan consummated during 2016, for example, if the creditor (together with its affiliates that regularly extended first-lien covered transactions) had total assets of less than the applicable asset threshold on December 31, 2015. A creditor that (together with its affiliates that regularly extended first-lien covered transactions) did not meet the applicable asset threshold on December 31, 2015 satisfies this criterion for a higher-priced mortgage loan consummated during 2016 if the application for the loan was received before April 1, 2016 and the creditor (together with its affiliates that regularly extended first-lien covered transactions) had total assets of less than the applicable asset threshold on December 31, 2014. E. Under § 1026.35(b)(2)(iii)(C), the $2,000,000,000 asset threshold adjusts automatically each year based on the year-toyear change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers, not seasonally adjusted, for each 12-month period ending in November, with rounding to the nearest million dollars. The Bureau will publish notice of the asset threshold each year by amending this comment. For calendar year 2019, the asset threshold is $2,167,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2018 has total assets of less than $2,167,000,000 on December 31, 2018, satisfies this criterion for purposes of any loan consummated in 2019 and for purposes of any loan consummated in 2020 for which the application was received before April 1, 2020. For historical purposes: 1. For calendar year 2013, the asset threshold was $2,000,000,000. Creditors that had total assets of less than $2,000,000,000 on December 31, 2012, satisfied this criterion for purposes of the exemption during 2013. 2. For calendar year 2014, the asset threshold was $2,028,000,000. Creditors that had total assets of less than $2,028,000,000 on December 31, 2013, satisfied this criterion for purposes of the exemption during 2014. 3. For calendar year 2015, the asset threshold was $2,060,000,000. Creditors that had total assets of less than $2,060,000,000 PO 00000 Frm 00016 Fmt 4700 Sfmt 4700 on December 31, 2014, satisfied this criterion for purposes of any loan consummated in 2015 and, if the creditor’s assets together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2014 were less than that amount, for purposes of any loan consummated in 2016 for which the application was received before April 1, 2016. 4. For calendar year 2016, the asset threshold was $2,052,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2015 had total assets of less than $2,052,000,000 on December 31, 2015, satisfied this criterion for purposes of any loan consummated in 2016 and for purposes of any loan consummated in 2017 for which the application was received before April 1, 2017. 5. For calendar year 2017, the asset threshold was $2,069,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2016 had total assets of less than $2,069,000,000 on December 31, 2016, satisfied this criterion for purposes of any loan consummated in 2017 and for purposes of any loan consummated in 2018 for which the application was received before April 1, 2018. 6. For calendar year 2018, the asset threshold was $2,112,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2017 had total assets of less than $2,112,000,000 on December 31, 2017, satisfied this criterion for purposes of any loan consummated in 2018 and for purposes of any loan consummated in 2019 for which the application was received before April 1, 2019. iv. The creditor and its affiliates do not maintain an escrow account for any mortgage transaction being serviced by the creditor or its affiliate at the time the transaction is consummated, except as provided in § 1026.35(b)(2)(iii)(D)(1) and (2). Thus, the exemption applies, provided the other conditions of § 1026.35(b)(2)(iii) are satisfied, even if the creditor previously maintained escrow accounts for mortgage loans, provided it no longer maintains any such accounts except as provided in § 1026.35(b)(2)(iii)(D)(1) and (2). Once a creditor or its affiliate begins escrowing for loans currently serviced other than those addressed in § 1026.35(b)(2)(iii)(D)(1) and (2), however, the creditor and its affiliate become ineligible for the exemption in § 1026.35(b)(2)(iii) on higher-priced mortgage loans they make while such escrowing continues. Thus, as long as a creditor (or its affiliate) services and maintains escrow accounts for any mortgage loans, other than as provided in § 1026.35(b)(2)(iii)(D)(1) and (2), the creditor will not be eligible for the exemption for any higher-priced mortgage loan it may make. For purposes of § 1026.35(b)(2)(iii), a creditor or its affiliate ‘‘maintains’’ an escrow account only if it services a mortgage loan for which an escrow account has been established at least through the due date of the second periodic payment under the terms of the legal obligation. * E:\FR\FM\04FER1.SGM * * 04FER1 * * 1359 Federal Register / Vol. 84, No. 23 / Monday, February 4, 2019 / Rules and Regulations Dated: December 20, 2018. Kathleen Kraninger, Director, Bureau of Consumer Financial Protection. Federal Energy Regulatory Commission rental fees by county (or other geographic area) from October 1, 2018, through September 30, 2019 (Fiscal Year 2019). FOR FURTHER INFORMATION CONTACT: Norman Richardson, Financial Management Division, Office of the Executive Director, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502– 6219, Norman.Richardson@ferc.gov. SUPPLEMENTARY INFORMATION: 18 CFR Part 11 Annual Update to Fee Schedule [Docket No. RM11–6–000] (Issued January 18, 2019) [FR Doc. 2018–28374 Filed 1–31–19; 4:15 pm] BILLING CODE 4810–AM–P DEPARTMENT OF ENERGY Annual Update to Fee Schedule for the Use of Government Lands by Hydropower Licensees Federal Energy Regulatory Commission. ACTION: Final rule. AGENCY: In accordance with the Commission’s regulations, the Commission, by its designee, the Executive Director, issues this document of the annual update to the fee schedule, which lists per-acre rental fees by county (or other geographic area) for use of government lands by hydropower licensees. DATES: This rule is effective February 4, 2019 and updates Appendix A to Part 11 with the fee schedule of per-acre amozie on DSK3GDR082PROD with RULES SUMMARY: regarding Congressional review of final rules, do not apply to this Final Rule because the rule concerns agency procedure and practice and will not substantially affect the rights or obligations of non-agency parties. This Final Rule merely updates the fee schedule published in the Code of Federal Regulations to reflect scheduled adjustments, as provided for in section 11.2 of the Commission’s regulations. List of Subjects in 18 CFR Part 11 Public lands. Section 11.2 of the Commission’s regulations provides a method for computing reasonable annual charges for recompensing the United States for the use, occupancy, and enjoyment of its lands by hydropower licensees.1 Annual charges for the use of government lands are payable in advance, and are based on an annual schedule of per-acre rental fees published in Appendix A to Part 11 of the Commission’s regulations.2 This document updates the fee schedule in Appendix A to Part 11 for fiscal year 2019 (October 1, 2018, through September 30, 2019). By the Executive Director. Issued: January 18, 2019. Anton C. Porter, Executive Director, Office of the Executive Director. In consideration of the foregoing, the Commission amends part 11, chapter I, title 18, Code of Federal Regulations, as follows. PART 11—[AMENDED] 1. The authority citation for part 11 continues to read as follows: ■ Authority: 16 U.S.C. 792–828c; 42 U.S.C. 7101–7352. Effective Date 2. Appendix A to part 11 is revised to read as follows: This Final Rule is effective February 4, 2019. The provisions of 5 U.S.C. 804, Appendix A to Part 11—Fee Schedule for FY 2019 ■ State County Alabama ...................................................................................... Autauga ...................................................................................... Baldwin ....................................................................................... Barbour ...................................................................................... Bibb ............................................................................................ Blount ......................................................................................... Bullock ........................................................................................ Butler .......................................................................................... Calhoun ...................................................................................... Chambers ................................................................................... Cherokee .................................................................................... Chilton ........................................................................................ Choctaw ..................................................................................... Clarke ......................................................................................... Clay ............................................................................................ Cleburne ..................................................................................... Coffee ......................................................................................... Colbert ........................................................................................ Conecuh ..................................................................................... Coosa ......................................................................................... Covington ................................................................................... Crenshaw ................................................................................... Cullman ...................................................................................... Dale ............................................................................................ Dallas ......................................................................................... DeKalb ....................................................................................... Elmore ........................................................................................ Escambia ................................................................................... Etowah ....................................................................................... Fayette ....................................................................................... 1 Annual Charges for the Use of Government Lands, Order No. 774, 78 FR 5256 (January 25, 2013), FERC Stats. & Regs. ¶ 31,341 (2013). VerDate Sep<11>2014 16:02 Feb 01, 2019 Jkt 247001 2 18 PO 00000 Fee/acre/yr. CFR part 11 (2018). Frm 00017 Fmt 4700 Sfmt 4700 E:\FR\FM\04FER1.SGM 04FER1 $64.31 112.02 63.64 59.03 102.24 61.29 68.36 85.74 73.25 96.22 82.54 52.70 57.56 69.62 77.26 74.20 79.37 56.04 58.33 63.47 57.10 117.54 70.64 51.65 106.67 89.36 63.92 100.16 59.77

Agencies

[Federal Register Volume 84, Number 23 (Monday, February 4, 2019)]
[Rules and Regulations]
[Pages 1356-1359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28374]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026

RIN 3170-AA93


Truth in Lending Act (Regulation Z) Adjustment to Asset-Size 
Exemption Threshold

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
amending the official commentary that interprets the requirements of 
the Bureau's Regulation Z (Truth in Lending) to reflect a change in the 
asset-size threshold for certain creditors to qualify for an exemption 
to the requirement to establish an escrow account for a higher-priced 
mortgage loan based on the annual percentage change in the average of 
the Consumer Price Index for Urban Wage Earners and Clerical Workers 
(CPI-W). Based on the 2.6 percent increase in the average of the CPI-W 
for the 12-month period ending in November 2018, the exemption 
threshold is adjusted to increase to $2.167 billion from $2.112 
billion. Therefore, creditors with assets of less than $2.167 billion 
(including assets of certain affiliates) as of December 31, 2018, are 
exempt, if other requirements of Regulation Z also are met, from 
establishing escrow accounts for higher-priced mortgage loans in 2019.

DATES: Effective date: This rule is effective February 4, 2019. 
Applicability date: This rule is applicable on January 1, 2019, 
consistent with relevant statutory or regulatory provisions.

FOR FURTHER INFORMATION CONTACT: Monique Chenault, Paralegal 
Specialist, Office of Regulations, at (202) 435-7700. If you require 
this document in an alternative electronic format, please contact 
CFPB_Accessibility@cfpb.gov.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 129D of the Truth in Lending Act (TILA) contains a general 
requirement that an escrow account be established by a creditor to pay 
for property taxes and insurance premiums for certain first-lien 
higher-priced mortgage loan transactions. TILA section 129D also 
generally permits an exemption from the higher-priced mortgage loan 
escrow requirement for a creditor that meets certain requirements, 
including any asset-size threshold the Bureau may establish.
    In the 2013 Escrows Final Rule,\1\ the Bureau established such an 
asset-size threshold of $2 billion, which would adjust automatically 
each year, based on the year-to-year change in the average of the CPI-W 
for each 12-month period ending in November, with rounding to the 
nearest million dollars.\2\ In 2015, the Bureau revised the asset-size 
threshold for small creditors and how it applies. The Bureau included 
in the calculation of the asset-size threshold the assets of the 
creditor's affiliates that regularly extended covered transactions 
secured by first liens during the applicable period and added a grace 
period to allow an otherwise eligible creditor that exceeded the asset 
limit in the preceding calendar year (but not in the calendar year 
before the preceding year) to continue to operate as a small creditor 
with respect to transactions with applications received before April 1 
of the current calendar year.\3\ For 2018, the threshold was $2.112 
billion.
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    \1\ 78 FR 4726 (Jan. 22, 2013).
    \2\ See 12 CFR 1026.35(b)(2)(iii)(C).
    \3\ See 80 FR 59943, 59951 (Oct. 2, 2015). The Bureau also 
issued an interim final rule in March 2016 to revise certain 
provisions in Regulation Z to effectuate the Helping Expand Lending 
Practices in Rural Communities Act's amendments to TILA (Pub. L. 
114-94, section 89003, 129 Stat. 1312, 1800-01 (2015)). The rule 
broadened the cohort of creditors that may be eligible under TILA 
for the special provisions allowing origination of balloon-payment 
qualified mortgages and balloon-payment high-cost mortgages, as well 
as for the escrow exemption. See 81 FR 16074 (Mar. 25, 2016).
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    During the 12-month period ending in November 2018, the average of 
the CPI-W increased by 2.6 percent. As a result, the exemption 
threshold is increased to $2.167 billion for 2019. Thus, if the 
creditor's assets together with the assets of its affiliates that 
regularly extended first-lien covered transactions during calendar year 
2018 are less than $2.167 billion on December 31, 2018, and it meets 
the other requirements of Sec.  1026.35(b)(2)(iii), it will be exempt 
from the escrow-accounts requirement for higher-priced mortgage loans 
in 2019 and will also be exempt from the escrow-accounts requirement 
for higher-priced mortgage loans for purposes of any loan consummated 
in 2020 with applications received before April 1, 2020. The adjustment 
to the escrows asset-size exemption threshold will also increase the 
threshold for small-creditor portfolio and balloon-payment qualified 
mortgages under Regulation Z. The requirements for small-creditor 
portfolio qualified mortgages at Sec.  1026.43(e)(5)(i)(D) reference 
the asset threshold in Sec.  1026.35(b)(2)(iii)(C). Likewise, the 
requirements for balloon-payment qualified mortgages at Sec.  
1026.43(f)(1)(vi) reference the asset threshold in Sec.  
1026.35(b)(2)(iii)(C). Under Sec.  1026.32(d)(1)(ii)(C), balloon-
payment qualified mortgages that satisfy all applicable criteria in 
Sec.  1026.43(f)(1)(i) through (vi) and (f)(2), including being made by 
creditors that have (together with certain affiliates) total assets 
below the threshold in Sec.  1026.35(b)(2)(iii)(C), are also excepted 
from the prohibition on balloon payments for high-cost mortgages.

II. Procedural Requirements

A. Administrative Procedure Act

    Under the Administrative Procedure Act (APA), notice and 
opportunity for public comment are not required if the Bureau finds 
that notice and public comment are impracticable, unnecessary, or 
contrary to the public interest. 5 U.S.C. 553(b)(B). Pursuant to this 
final rule, comment 35(b)(2)(iii)-1 in Regulation Z is amended to 
update the exemption threshold. The amendment in this final rule is 
technical and merely applies the formula previously established in 
Regulation Z for determining any adjustments to the exemption 
threshold. For these reasons, the Bureau has determined that publishing 
a notice of proposed rulemaking and providing opportunity for public 
comment are unnecessary. Therefore, the amendment is adopted in final 
form.
    Section 553(d) of the APA generally requires publication of a final 
rule not less than 30 days before its effective date, except (1) a 
substantive rule which grants or recognizes an exemption or relieves a 
restriction; (2) interpretive rules and statements of policy; or (3) as 
otherwise provided by the agency for good cause found and published 
with the rule. 5 U.S.C. 553(d). At a minimum, the Bureau believes the 
amendments fall under the third exception to section 553(d). The Bureau 
finds that there is good cause to make the amendments effective on 
February 4, 2019. The amendment in this final rule is technical and 
non-discretionary, and it applies the method previously established in 
the agency's regulations

[[Page 1357]]

for automatic adjustments to the threshold.

B. Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required, the 
Regulatory Flexibility Act does not require an initial or final 
regulatory flexibility analysis.\4\
---------------------------------------------------------------------------

    \4\ 5 U.S.C. 603(a), 604(a).
---------------------------------------------------------------------------

C. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\5\ the 
agency reviewed this final rule. No collections of information pursuant 
to the Paperwork Reduction Act are contained in the final rule.
---------------------------------------------------------------------------

    \5\ 44 U.S.C. 3506; 5 CFR part 1320.
---------------------------------------------------------------------------

D. Congressional Review Act

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Bureau will submit a report containing this rule and other required 
information to the United States Senate, the United States House of 
Representatives, and the Comptroller General of the United States prior 
to the rule taking effect. The Office of Information and Regulatory 
Affairs (OIRA) has designated this rule as not a ``major rule'' as 
defined by 5 U.S.C. 804(2).

List of Subjects in 12 CFR Part 1026

    Advertising, Appraisal, Appraiser, Banking, Banks, Consumer 
protection, Credit, Credit unions, Mortgages, National banks, Reporting 
and recordkeeping requirements, Savings associations, Truth in lending.

Authority and Issuance

    For the reasons set forth above, the Bureau amends Regulation Z, 12 
CFR part 1026, as set forth below:

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
1. The authority citation for part 1026 continues to read as follows:

    Authority:  12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.

0
2. In supplement I to part 1026, under Section 1026.35--Requirements 
for Higher-Priced Mortgage Loans, 35(b)(2) Exemptions, Paragraph 
35(b)(2)(iii) is revised to read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Subpart E--Special Rules for Certain Home Mortgage Transactions

* * * * *

Section 1026.35--Requirements for Higher-Priced Mortgage Loans

* * * * *
    35(b)(2) Exemptions.
* * * * *
    Paragraph 35(b)(2)(iii).
    1. Requirements for exemption. Under Sec.  1026.35(b)(2)(iii), 
except as provided in Sec.  1026.35(b)(2)(v), a creditor need not 
establish an escrow account for taxes and insurance for a higher-
priced mortgage loan, provided the following four conditions are 
satisfied when the higher-priced mortgage loan is consummated:
    i. During the preceding calendar year, or during either of the 
two preceding calendar years if the application for the loan was 
received before April 1 of the current calendar year, a creditor 
extended a first-lien covered transaction, as defined in Sec.  
1026.43(b)(1), secured by a property located in an area that is 
either ``rural'' or ``underserved,'' as set forth in Sec.  
1026.35(b)(2)(iv).
    A. In general, whether the rural-or-underserved test is 
satisfied depends on the creditor's activity during the preceding 
calendar year. However, if the application for the loan in question 
was received before April 1 of the current calendar year, the 
creditor may instead meet the rural-or-underserved test based on its 
activity during the next-to-last calendar year. This provides 
creditors with a grace period if their activity meets the rural-or-
underserved test (in Sec.  1026.35(b)(2)(iii)(A)) in one calendar 
year but fails to meet it in the next calendar year.
    B. A creditor meets the rural-or-underserved test for any 
higher-priced mortgage loan consummated during a calendar year if it 
extended a first-lien covered transaction in the preceding calendar 
year secured by a property located in a rural-or-underserved area. 
If the creditor does not meet the rural-or-underserved test in the 
preceding calendar year, the creditor meets this condition for a 
higher-priced mortgage loan consummated during the current calendar 
year only if the application for the loan was received before April 
1 of the current calendar year and the creditor extended a first-
lien covered transaction during the next-to-last calendar year that 
is secured by a property located in a rural or underserved area. The 
following examples are illustrative:
    1. Assume that a creditor extended during 2016 a first-lien 
covered transaction that is secured by a property located in a rural 
or underserved area. Because the creditor extended a first-lien 
covered transaction during 2016 that is secured by a property 
located in a rural or underserved area, the creditor can meet this 
condition for exemption for any higher-priced mortgage loan 
consummated during 2017.
    2. Assume that a creditor did not extend during 2016 a first-
lien covered transaction secured by a property that is located in a 
rural or underserved area. Assume further that the same creditor 
extended during 2015 a first-lien covered transaction that is 
located in a rural or underserved area. Assume further that the 
creditor consummates a higher-priced mortgage loan in 2017 for which 
the application was received in November 2017. Because the creditor 
did not extend during 2016 a first-lien covered transaction secured 
by a property that is located in a rural or underserved area, and 
the application was received on or after April 1, 2017, the creditor 
does not meet this condition for exemption. However, assume instead 
that the creditor consummates a higher-priced mortgage loan in 2017 
based on an application received in February 2017. The creditor 
meets this condition for exemption for this loan because the 
application was received before April 1, 2017, and the creditor 
extended during 2015 a first-lien covered transaction that is 
located in a rural or underserved area.
    ii. The creditor and its affiliates together extended no more 
than 2,000 covered transactions, as defined in Sec.  1026.43(b)(1), 
secured by first liens, that were sold, assigned, or otherwise 
transferred by the creditor or its affiliates to another person, or 
that were subject at the time of consummation to a commitment to be 
acquired by another person, during the preceding calendar year or 
during either of the two preceding calendar years if the application 
for the loan was received before April 1 of the current calendar 
year. For purposes of Sec.  1026.35(b)(2)(iii)(B), a transfer of a 
first-lien covered transaction to ``another person'' includes a 
transfer by a creditor to its affiliate.
    A. In general, whether this condition is satisfied depends on 
the creditor's activity during the preceding calendar year. However, 
if the application for the loan in question is received before April 
1 of the current calendar year, the creditor may instead meet this 
condition based on activity during the next-to-last calendar year. 
This provides creditors with a grace period if their activity falls 
at or below the threshold in one calendar year but exceeds it in the 
next calendar year.
    B. For example, assume that in 2015 a creditor and its 
affiliates together extended 1,500 loans that were sold, assigned, 
or otherwise transferred by the creditor or its affiliates to 
another person, or that were subject at the time of consummation to 
a commitment to be acquired by another person, and 2,500 such loans 
in 2016. Because the 2016 transaction activity exceeds the threshold 
but the 2015 transaction activity does not, the creditor satisfies 
this condition for exemption for a higher-priced mortgage loan 
consummated during 2017 if the creditor received the application for 
the loan before April 1, 2017, but does not satisfy this condition 
for a higher-priced mortgage loan consummated during 2017 if the 
application for the loan was received on or after April 1, 2017.
    C. For purposes of Sec.  1026.35(b)(2)(iii)(B), extensions of 
first-lien covered transactions, during the applicable time period, 
by all of a creditor's affiliates, as ``affiliate'' is defined in 
Sec.  1026.32(b)(5), are counted toward the threshold in this 
section. ``Affiliate'' is defined in Sec.  1026.32(b)(5) as any 
company that controls, is controlled by, or is under common control 
with another company, as set forth in the Bank Holding Company Act 
of 1956 (12 U.S.C. 1841 et seq.). Under the Bank Holding Company 
Act, a company has

[[Page 1358]]

control over a bank or another company if it directly or indirectly 
or acting through one or more persons owns, controls, or has power 
to vote 25 per centum or more of any class of voting securities of 
the bank or company; it controls in any manner the election of a 
majority of the directors or trustees of the bank or company; or the 
Federal Reserve Board determines, after notice and opportunity for 
hearing, that the company directly or indirectly exercises a 
controlling influence over the management or policies of the bank or 
company. 12 U.S.C. 1841(a)(2).
    iii. As of the end of the preceding calendar year, or as of the 
end of either of the two preceding calendar years if the application 
for the loan was received before April 1 of the current calendar 
year, the creditor and its affiliates that regularly extended 
covered transactions secured by first liens, together, had total 
assets that are less than the applicable annual asset threshold.
    A. For purposes of Sec.  1026.35(b)(2)(iii)(C), in addition to 
the creditor's assets, only the assets of a creditor's ``affiliate'' 
(as defined by Sec.  1026.32(b)(5)) that regularly extended covered 
transactions (as defined by Sec.  1026.43(b)(1)) secured by first 
liens, are counted toward the applicable annual asset threshold. See 
comment 35(b)(2)(iii)-1.ii.C for discussion of definition of 
``affiliate.''
    B. Only the assets of a creditor's affiliate that regularly 
extended first-lien covered transactions during the applicable 
period are included in calculating the creditor's assets. The 
meaning of ``regularly extended'' is based on the number of times a 
person extends consumer credit for purposes of the definition of 
``creditor'' in Sec.  1026.2(a)(17). Because covered transactions 
are ``transactions secured by a dwelling,'' consistent with Sec.  
1026.2(a)(17)(v), an affiliate regularly extended covered 
transactions if it extended more than five covered transactions in a 
calendar year. Also consistent with Sec.  1026.2(a)(17)(v), because 
a covered transaction may be a high-cost mortgage subject to Sec.  
1026.32, an affiliate regularly extends covered transactions if, in 
any 12-month period, it extends more than one covered transaction 
that is subject to the requirements of Sec.  1026.32 or one or more 
such transactions through a mortgage broker. Thus, if a creditor's 
affiliate regularly extended first-lien covered transactions during 
the preceding calendar year, the creditor's assets as of the end of 
the preceding calendar year, for purposes of the asset limit, take 
into account the assets of that affiliate. If the creditor, together 
with its affiliates that regularly extended first-lien covered 
transactions, exceeded the asset limit in the preceding calendar 
year--to be eligible to operate as a small creditor for transactions 
with applications received before April 1 of the current calendar 
year--the assets of the creditor's affiliates that regularly 
extended covered transactions in the year before the preceding 
calendar year are included in calculating the creditor's assets.
    C. If multiple creditors share ownership of a company that 
regularly extended first-lien covered transactions, the assets of 
the company count toward the asset limit for a co-owner creditor if 
the company is an ``affiliate,'' as defined in Sec.  1026.32(b)(5), 
of the co-owner creditor. Assuming the company is not an affiliate 
of the co-owner creditor by virtue of any other aspect of the 
definition (such as by the company and co-owner creditor being under 
common control), the company's assets are included toward the asset 
limit of the co-owner creditor only if the company is controlled by 
the co-owner creditor, ``as set forth in the Bank Holding Company 
Act.'' If the co-owner creditor and the company are affiliates (by 
virtue of any aspect of the definition), the co-owner creditor 
counts all of the company's assets toward the asset limit, 
regardless of the co-owner creditor's ownership share. Further, 
because the co-owner and the company are mutual affiliates the 
company also would count all of the co-owner's assets towards its 
own asset limit. See comment 35(b)(2)(iii)-1.ii.C for discussion of 
the definition of ``affiliate.''
    D. A creditor satisfies the criterion in Sec.  
1026.35(b)(2)(iii)(C) for purposes of any higher-priced mortgage 
loan consummated during 2016, for example, if the creditor (together 
with its affiliates that regularly extended first-lien covered 
transactions) had total assets of less than the applicable asset 
threshold on December 31, 2015. A creditor that (together with its 
affiliates that regularly extended first-lien covered transactions) 
did not meet the applicable asset threshold on December 31, 2015 
satisfies this criterion for a higher-priced mortgage loan 
consummated during 2016 if the application for the loan was received 
before April 1, 2016 and the creditor (together with its affiliates 
that regularly extended first-lien covered transactions) had total 
assets of less than the applicable asset threshold on December 31, 
2014.
    E. Under Sec.  1026.35(b)(2)(iii)(C), the $2,000,000,000 asset 
threshold adjusts automatically each year based on the year-to-year 
change in the average of the Consumer Price Index for Urban Wage 
Earners and Clerical Workers, not seasonally adjusted, for each 12-
month period ending in November, with rounding to the nearest 
million dollars. The Bureau will publish notice of the asset 
threshold each year by amending this comment. For calendar year 
2019, the asset threshold is $2,167,000,000. A creditor that 
together with the assets of its affiliates that regularly extended 
first-lien covered transactions during calendar year 2018 has total 
assets of less than $2,167,000,000 on December 31, 2018, satisfies 
this criterion for purposes of any loan consummated in 2019 and for 
purposes of any loan consummated in 2020 for which the application 
was received before April 1, 2020. For historical purposes:
    1. For calendar year 2013, the asset threshold was 
$2,000,000,000. Creditors that had total assets of less than 
$2,000,000,000 on December 31, 2012, satisfied this criterion for 
purposes of the exemption during 2013.
    2. For calendar year 2014, the asset threshold was 
$2,028,000,000. Creditors that had total assets of less than 
$2,028,000,000 on December 31, 2013, satisfied this criterion for 
purposes of the exemption during 2014.
    3. For calendar year 2015, the asset threshold was 
$2,060,000,000. Creditors that had total assets of less than 
$2,060,000,000 on December 31, 2014, satisfied this criterion for 
purposes of any loan consummated in 2015 and, if the creditor's 
assets together with the assets of its affiliates that regularly 
extended first-lien covered transactions during calendar year 2014 
were less than that amount, for purposes of any loan consummated in 
2016 for which the application was received before April 1, 2016.
    4. For calendar year 2016, the asset threshold was 
$2,052,000,000. A creditor that together with the assets of its 
affiliates that regularly extended first-lien covered transactions 
during calendar year 2015 had total assets of less than 
$2,052,000,000 on December 31, 2015, satisfied this criterion for 
purposes of any loan consummated in 2016 and for purposes of any 
loan consummated in 2017 for which the application was received 
before April 1, 2017.
    5. For calendar year 2017, the asset threshold was 
$2,069,000,000. A creditor that together with the assets of its 
affiliates that regularly extended first-lien covered transactions 
during calendar year 2016 had total assets of less than 
$2,069,000,000 on December 31, 2016, satisfied this criterion for 
purposes of any loan consummated in 2017 and for purposes of any 
loan consummated in 2018 for which the application was received 
before April 1, 2018.
    6. For calendar year 2018, the asset threshold was 
$2,112,000,000. A creditor that together with the assets of its 
affiliates that regularly extended first-lien covered transactions 
during calendar year 2017 had total assets of less than 
$2,112,000,000 on December 31, 2017, satisfied this criterion for 
purposes of any loan consummated in 2018 and for purposes of any 
loan consummated in 2019 for which the application was received 
before April 1, 2019.
    iv. The creditor and its affiliates do not maintain an escrow 
account for any mortgage transaction being serviced by the creditor 
or its affiliate at the time the transaction is consummated, except 
as provided in Sec.  1026.35(b)(2)(iii)(D)(1) and (2). Thus, the 
exemption applies, provided the other conditions of Sec.  
1026.35(b)(2)(iii) are satisfied, even if the creditor previously 
maintained escrow accounts for mortgage loans, provided it no longer 
maintains any such accounts except as provided in Sec.  
1026.35(b)(2)(iii)(D)(1) and (2). Once a creditor or its affiliate 
begins escrowing for loans currently serviced other than those 
addressed in Sec.  1026.35(b)(2)(iii)(D)(1) and (2), however, the 
creditor and its affiliate become ineligible for the exemption in 
Sec.  1026.35(b)(2)(iii) on higher-priced mortgage loans they make 
while such escrowing continues. Thus, as long as a creditor (or its 
affiliate) services and maintains escrow accounts for any mortgage 
loans, other than as provided in Sec.  1026.35(b)(2)(iii)(D)(1) and 
(2), the creditor will not be eligible for the exemption for any 
higher-priced mortgage loan it may make. For purposes of Sec.  
1026.35(b)(2)(iii), a creditor or its affiliate ``maintains'' an 
escrow account only if it services a mortgage loan for which an 
escrow account has been established at least through the due date of 
the second periodic payment under the terms of the legal obligation.
* * * * *


[[Page 1359]]


    Dated: December 20, 2018.
Kathleen Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2018-28374 Filed 1-31-19; 4:15 pm]
 BILLING CODE 4810-AM-P