Truth in Lending Act (Regulation Z) Adjustment to Asset-Size Exemption Threshold, 83411-83415 [2020-28231]

Download as PDF jbell on DSKJLSW7X2PROD with RULES Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Rules and Regulations if it, considering the combined assets, location, and lending activity of the surviving or newly formed institution and the merged or acquired institutions or acquired branches, satisfies the criteria included in § 1003.2(g). For example, A and B merge. The surviving or newly formed institution meets the loan threshold described in § 1003.2(g)(1)(v)(B) if the surviving or newly formed institution, A, and B originated a combined total of at least 500 open-end lines of credit in each of the two preceding calendar years. Likewise, the surviving or newly formed institution meets the asset-size threshold in § 1003.2(g)(1)(i) if its assets and the combined assets of A and B on December 31 of the preceding calendar year exceeded the threshold described in § 1003.2(g)(1)(i). Comment 2(g)–4 discusses a financial institution’s responsibilities during the calendar year of a merger. 4. Merger or acquisition—coverage for calendar year of merger or acquisition. The scenarios described below illustrate a financial institution’s responsibilities for the calendar year of a merger or acquisition. For purposes of these illustrations, a ‘‘covered institution’’ means a financial institution, as defined in § 1003.2(g), that is not exempt from reporting under § 1003.3(a), and ‘‘an institution that is not covered’’ means either an institution that is not a financial institution, as defined in § 1003.2(g), or an institution that is exempt from reporting under § 1003.3(a). i. Two institutions that are not covered merge. The surviving or newly formed institution meets all of the requirements necessary to be a covered institution. No data collection is required for the calendar year of the merger (even though the merger creates an institution that meets all of the requirements necessary to be a covered institution). When a branch office of an institution that is not covered is acquired by another institution that is not covered, and the acquisition results in a covered institution, no data collection is required for the calendar year of the acquisition. ii. A covered institution and an institution that is not covered merge. The covered institution is the surviving institution, or a new covered institution is formed. For the calendar year of the merger, data collection is required for covered loans and applications handled in the offices of the merged institution that was previously covered and is optional for covered loans and applications handled in offices of the merged institution that was previously not covered. When a covered institution VerDate Sep<11>2014 16:23 Dec 21, 2020 Jkt 253001 acquires a branch office of an institution that is not covered, data collection is optional for covered loans and applications handled by the acquired branch office for the calendar year of the acquisition. iii. A covered institution and an institution that is not covered merge. The institution that is not covered is the surviving institution, or a new institution that is not covered is formed. For the calendar year of the merger, data collection is required for covered loans and applications handled in offices of the previously covered institution that took place prior to the merger. After the merger date, data collection is optional for covered loans and applications handled in the offices of the institution that was previously covered. When an institution remains not covered after acquiring a branch office of a covered institution, data collection is required for transactions of the acquired branch office that take place prior to the acquisition. Data collection by the acquired branch office is optional for transactions taking place in the remainder of the calendar year after the acquisition. iv. Two covered institutions merge. The surviving or newly formed institution is a covered institution. Data collection is required for the entire calendar year of the merger. The surviving or newly formed institution files either a consolidated submission or separate submissions for that calendar year. When a covered institution acquires a branch office of a covered institution, data collection is required for the entire calendar year of the merger. Data for the acquired branch office may be submitted by either institution. 5. Originations. Whether an institution is a financial institution depends in part on whether the institution originated at least 100 closed-end mortgage loans in each of the two preceding calendar years or at least 500 open-end lines of credit in each of the two preceding calendar years. Comments 4(a)–2 through –4 discuss whether activities with respect to a particular closed-end mortgage loan or open-end line of credit constitute an origination for purposes of § 1003.2(g). 6. Branches of foreign banks—treated as banks. A Federal branch or a Statelicensed or insured branch of a foreign bank that meets the definition of a ‘‘bank’’ under section 3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1813(a)) is a bank for the purposes of § 1003.2(g). 7. Branches and offices of foreign banks and other entities—treated as nondepository financial institutions. A PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 83411 Federal agency, State-licensed agency, State-licensed uninsured branch of a foreign bank, commercial lending company owned or controlled by a foreign bank, or entity operating under section 25 or 25A of the Federal Reserve Act, 12 U.S.C. 601 and 611 (Edge Act and agreement corporations) may not meet the definition of ‘‘bank’’ under the Federal Deposit Insurance Act and may thereby fail to satisfy the definition of a depository financial institution under § 1003.2(g)(1). An entity is nonetheless a financial institution if it meets the definition of nondepository financial institution under § 1003.2(g)(2). * * * * * Dated: December 17, 2020. Grace Feola, Federal Register Liaison, Bureau of Consumer Financial Protection. [FR Doc. 2020–28230 Filed 12–21–20; 8:45 am] BILLING CODE 4810–AM–P BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1026 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. This amendment is 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 1.3 percent increase in the average of the CPI–W for the 12-month period ending in November 2020, the exemption threshold is adjusted to $2.230 billion from $2.202 billion. Therefore, creditors with assets of less than $2.230 billion (including assets of certain affiliates) as of December 31, 2020, are exempt, if other requirements of Regulation Z also are met, from establishing escrow accounts for higher-priced mortgage loans in 2021. DATES: This rule is effective on January 1, 2021. SUMMARY: E:\FR\FM\22DER1.SGM 22DER1 83412 Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Rules and Regulations FOR FURTHER INFORMATION CONTACT: Willie Williams, Paralegal Specialist; Rachel Ross, Attorney-Advisor, 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 2020, the threshold was $2.202 billion. During the 12-month period ending in November 2020, the average of the CPI– W increased by 1.3 percent. As a result, the exemption threshold is increased to $2.230 billion for 2021. Thus, if the creditor’s assets together with the assets of its affiliates that regularly extended first-lien covered transactions during 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). jbell on DSKJLSW7X2PROD with RULES 2 See VerDate Sep<11>2014 16:23 Dec 21, 2020 Jkt 253001 calendar year 2020 are less than $2.230 billion on December 31, 2020, 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 2021 and will also be exempt from the escrow-accounts requirement for higherpriced mortgage loans for purposes of any loan consummated in 2022 with applications received before April 1, 2022. 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, PO 00000 Frm 00008 Fmt 4700 Sfmt 4700 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 January 1, 2020. The amendment in this final rule is technical and non-discretionary, and it applies the method previously established in the agency’s regulations 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 The Bureau has determined that this final rule does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring approval by the Office of Management and Budget under the Paperwork Reduction Act.5 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). III. Signing Authority The Acting Associate Director for Research, Markets and Regulations, Dan S. Sokolov, having reviewed and approved this document, is delegating the authority to electronically sign this document to Grace Feola, a Bureau Federal Register Liaison, for purposes of publication in the Federal Register. List of Subjects in 12 CFR Part 1026 Advertising, Banks, banking, 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: 45 U.S.C. 603(a), 604(a). U.S.C. 3501–3521. 5 44 E:\FR\FM\22DER1.SGM 22DER1 Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Rules and Regulations 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: ■ 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 * * * * * jbell on DSKJLSW7X2PROD with RULES 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-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 § 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 VerDate Sep<11>2014 16:23 Dec 21, 2020 Jkt 253001 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-orunderserved 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 firstlien 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 firstlien 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 PO 00000 Frm 00009 Fmt 4700 Sfmt 4700 83413 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. Under the Bank Holding Company Act, a company has 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 E:\FR\FM\22DER1.SGM 22DER1 jbell on DSKJLSW7X2PROD with RULES 83414 Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Rules and Regulations 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 12-month 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 firstlien 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 VerDate Sep<11>2014 16:23 Dec 21, 2020 Jkt 253001 in § 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 coowner 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 § 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 higherpriced 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 firstlien 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-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 2021, the asset threshold is $2,230,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2019 has total assets of less than $2,230,000,000 on December 31, 2020, satisfies this criterion for purposes of any loan consummated in 2021 and for purposes of any loan consummated in 2022 for which the PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 application was received before April 1, 2022. 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. 7. For calendar year 2019, the asset threshold was $2,167,000,000. A E:\FR\FM\22DER1.SGM 22DER1 jbell on DSKJLSW7X2PROD with RULES Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Rules and Regulations creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2018 had total assets of less than $2,167,000,000 on December 31, 2018, satisfied 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. 8. For calendar year 2020, the asset threshold was $2,202,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2019 had total assets of less than $2,202,000,000 on December 31, 2019, satisfied this criterion for purposes of any loan consummated in 2020 and for purposes of any loan consummated in 2010 for which the application was received before April 1, 2021. 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. * * * * * VerDate Sep<11>2014 16:23 Dec 21, 2020 Jkt 253001 Dated: December 17, 2020. Grace Feola, Federal Register Liaison, Bureau of Consumer Financial Protection. [FR Doc. 2020–28231 Filed 12–21–20; 8:45 am] BILLING CODE 4810–AM–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 27 [Docket No. FAA–2020–1102; Notice No. 27– 052–SC] Special Conditions: Garmin International, Inc., Bell Textron Canada Limited Model 505 Helicopter, Visual Flight Rules Autopilot and Stability Augmentation System Federal Aviation Administration (FAA), DOT. ACTION: Final special conditions; request for comments; correction. AGENCY: The FAA is correcting special conditions, which published in the Federal Register on December 11, 2020. The special conditions issued for the Bell Textron Canada Limited Model 505 helicopter did not include an effective date. This correction adds an effective date for the special conditions. DATES: The effective date for the special conditions published December 11, 2020, at 85 FR 79826, is December 22, 2020. Comments will continue to be received until January 11, 2021. ADDRESSES: Send comments identified by Docket No. FAA–2020–1102 using any of the following methods: • Federal eRegulations Portal: Go to https://www.regulations.gov/ and follow the online instructions for sending your comments electronically. • Mail: Send comments to Docket Operations, M–30, U.S. Department of Transportation (DOT), 1200 New Jersey Avenue SE, Room W12–140, West Building Ground Floor, Washington, DC 20590–0001. • Hand Delivery or Courier: Take comments to Docket Operations in Room W12–140 of the West Building Ground Floor at 1200 New Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. • Fax: Fax comments to Docket Operations at 202–493–2251. Privacy: Except for Confidential Business Information (CBI) as described in the following paragraph, and other information as described in 14 CFR 11.35, the FAA will post all comments it receives, without change, to https:// SUMMARY: PO 00000 Frm 00011 Fmt 4700 Sfmt 4700 83415 www.regulations.gov/, including any personal information the commenter provides. Using the search function of the docket website, anyone can find and read the electronic form of all comments received into any FAA docket, including the name of the individual sending the comment (or signing the comment for an association, business, labor union, etc.). DOT’s complete Privacy Act Statement can be found in the Federal Register published on April 11, 2000 (65 FR 19477–19478). Confidential Business Information: CBI is commercial or financial information that is both customarily and actually treated as private by its owner. Under the Freedom of Information Act (FOIA) (5 U.S.C. 552), CBI is exempt from public disclosure. If your comments responsive to these special conditions contain commercial or financial information that is customarily treated as private, that you actually treat as private, and that is relevant or responsive to these special conditions, it is important that you clearly designate the submitted comments as CBI. Please mark each page of your submission containing CBI as ‘‘PROPIN.’’ The FAA will treat such marked submissions as confidential under the FOIA, and they will not be placed in the public docket of these special conditions. Submissions containing CBI should be sent to Andy Shaw, Continued Operational Safety Section, AIR–682, Rotorcraft Standards Branch, Policy and Innovation Division, Aircraft Certification Service, Federal Aviation Administration, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone (817) 222–5384. Any commentary that the FAA receives which is not specifically designated as CBI will be placed in the public docket for this rulemaking. Docket: Background documents or comments received may be read at https://www.regulations.gov/ at any time. Follow the online instructions for accessing the docket or go to Docket Operations in Room W12–140 of the West Building Ground Floor at 1200 New Jersey Avenue SE, Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Andy Shaw, Continued Operational Safety Section, AIR–682, Rotorcraft Standards Branch, Policy and Innovation Division, Aircraft Certification Service, Federal Aviation Administration, 10101 Hillwood Pkwy., Fort Worth, TX 76177; telephone (817) 222–5384; email Andy.Shaw@faa.gov. SUPPLEMENTARY INFORMATION: On December 11, 2020, the FAA issued Special Conditions No. 27–052–SC, E:\FR\FM\22DER1.SGM 22DER1

Agencies

[Federal Register Volume 85, Number 246 (Tuesday, December 22, 2020)]
[Rules and Regulations]
[Pages 83411-83415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28231]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1026


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. This amendment is 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 1.3 percent increase in the 
average of the CPI-W for the 12-month period ending in November 2020, 
the exemption threshold is adjusted to $2.230 billion from $2.202 
billion. Therefore, creditors with assets of less than $2.230 billion 
(including assets of certain affiliates) as of December 31, 2020, are 
exempt, if other requirements of Regulation Z also are met, from 
establishing escrow accounts for higher-priced mortgage loans in 2021.

DATES: This rule is effective on January 1, 2021.

[[Page 83412]]


FOR FURTHER INFORMATION CONTACT: Willie Williams, Paralegal Specialist; 
Rachel Ross, Attorney-Advisor, Office of Regulations, at (202) 435-
7700. If you require this document in an alternative electronic format, 
please contact [email protected].

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 2020, the threshold was $2.202 
billion.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    During the 12-month period ending in November 2020, the average of 
the CPI-W increased by 1.3 percent. As a result, the exemption 
threshold is increased to $2.230 billion for 2021. Thus, if the 
creditor's assets together with the assets of its affiliates that 
regularly extended first-lien covered transactions during calendar year 
2020 are less than $2.230 billion on December 31, 2020, 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 2021 and will also be exempt from the escrow-accounts requirement 
for higher-priced mortgage loans for purposes of any loan consummated 
in 2022 with applications received before April 1, 2022. 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 
January 1, 2020. The amendment in this final rule is technical and non-
discretionary, and it applies the method previously established in the 
agency's regulations 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

    The Bureau has determined that this final rule does not impose any 
new or revise any existing recordkeeping, reporting, or disclosure 
requirements on covered entities or members of the public that would be 
collections of information requiring approval by the Office of 
Management and Budget under the Paperwork Reduction Act.\5\
---------------------------------------------------------------------------

    \5\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

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).

III. Signing Authority

    The Acting Associate Director for Research, Markets and 
Regulations, Dan S. Sokolov, having reviewed and approved this 
document, is delegating the authority to electronically sign this 
document to Grace Feola, a Bureau Federal Register Liaison, for 
purposes of publication in the Federal Register.

List of Subjects in 12 CFR Part 1026

    Advertising, Banks, banking, 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:

[[Page 83413]]

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. Under 
the Bank Holding Company Act, a company has 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

[[Page 83414]]

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 2021, the asset 
threshold is $2,230,000,000. A creditor that together with the assets 
of its affiliates that regularly extended first-lien covered 
transactions during calendar year 2019 has total assets of less than 
$2,230,000,000 on December 31, 2020, satisfies this criterion for 
purposes of any loan consummated in 2021 and for purposes of any loan 
consummated in 2022 for which the application was received before April 
1, 2022. 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.
    7. For calendar year 2019, the asset threshold was $2,167,000,000. 
A

[[Page 83415]]

creditor that together with the assets of its affiliates that regularly 
extended first-lien covered transactions during calendar year 2018 had 
total assets of less than $2,167,000,000 on December 31, 2018, 
satisfied 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.
    8. For calendar year 2020, the asset threshold was $2,202,000,000. 
A creditor that together with the assets of its affiliates that 
regularly extended first-lien covered transactions during calendar year 
2019 had total assets of less than $2,202,000,000 on December 31, 2019, 
satisfied this criterion for purposes of any loan consummated in 2020 
and for purposes of any loan consummated in 2010 for which the 
application was received before April 1, 2021.
    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.
* * * * *

    Dated: December 17, 2020.
Grace Feola,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2020-28231 Filed 12-21-20; 8:45 am]
BILLING CODE 4810-AM-P
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