Truth in Lending Act (Regulation Z) Adjustment to Asset-Size Exemption Threshold, 72820-72824 [2021-27900]

Download as PDF jspears on DSK121TN23PROD with RULES1 72820 Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Rules and Regulations 3. Merger or acquisition—coverage of surviving or newly formed institution. After a merger or acquisition, the surviving or newly formed institution is a financial institution under § 1003.2(g) 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 200 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 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 VerDate Sep<11>2014 19:16 Dec 22, 2021 Jkt 256001 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 200 openend 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 State-licensed 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 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). * * * * * Laura Galban, Federal Register Liaison, Bureau of Consumer Financial Protection. [FR Doc. 2021–27899 Filed 12–22–21; 8:45 am] BILLING CODE 4810–AM–P PO 00000 Frm 00042 Fmt 4700 Sfmt 4700 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 changes in the assetsize thresholds for certain creditors to qualify for an exemption to the requirement to establish an escrow account for a higher-priced mortgage loan. These changes reflect updates to the exemption from TILA’s escrow requirement of creditors that, together with affiliates that regularly extended covered transactions secured by first liens, had total assets of less than $2 billion (adjusted annually for inflation) and the exemption the Bureau added, by implementing section 108 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), for certain insured depository institutions and insured credit unions with assets of $10 billion or less (adjusted annually for inflation). These amendments are 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 4.7 percent increase in the average of the CPI–W for the 12-month period ending in November 2021, the exemption threshold for creditors and their affiliates that regularly extended covered transactions secured by first liens is adjusted to $2.336 billion from $2.230 billion. The exemption threshold for certain insured depository institutions and insured credit unions with assets of $10 billion or less (adjusted annually for inflation) is adjusted to $10.473 billion from $10 billion. DATES: This rule is effective on January 1, 2022. FOR FURTHER INFORMATION CONTACT: Willie Williams, Paralegal Specialist; Lanique Eubanks, Thomas Dowell, Senior Counsels, 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: SUMMARY: E:\FR\FM\23DER1.SGM 23DER1 Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Rules and Regulations 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 2021, the threshold was $2.230 billion. During the 12-month period ending in November 2021, the average of the CPI– W increased by 4.7 percent. As a result, the exemption threshold is increased to $2.336 billion for 2022. Thus, if the creditor’s assets together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2021 are less than $2.336 billion on December 31, 2021, and it meets the other requirements of § 1026.35(b)(2)(iii), the creditor will be exempt from the escrow-accounts requirement for higher-priced mortgage loans in 2022 and will also be exempt from the escrow-accounts requirement for higher-priced mortgage loans for 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). jspears on DSK121TN23PROD with RULES1 2 See VerDate Sep<11>2014 19:16 Dec 22, 2021 Jkt 256001 purposes of any loan consummated in 2023 with applications received before April 1, 2023. The adjustment to the escrows asset-size exemption threshold will also increase the threshold for small-creditor portfolio and balloonpayment 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 balloon-payment 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), balloon-payment 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. In the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA),4 Congress directed the Bureau to issue regulations to add a new exemption from TILA’s escrow requirement that exempts transactions by certain insured depository institutions and insured credit unions.5 In 2021, the Bureau issued a final rule implementing this exemption in § 1026.35(b)(2)(vi) (2021 Escrows Rule).6 The final rule exempted from the Regulation Z HPML escrow requirement any loan made by an insured depository institution or insured credit union and secured by a first lien on the principal dwelling of a consumer if: (1) The institution has assets of $10 billion or less; (2) the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year; and (3) certain of the existing HPML escrow exemption criteria are met. In the 2021 Escrows Rule, the Bureau established such an asset-size threshold of $10 billion or less in § 1026.35(b)(2)(vi)(A), which will adjust automatically each year, based on the year-to-year change in the average of the CPI–W, not seasonally adjusted, for each 12-month period ending in November, with rounding to the nearest million dollars. Unlike the asset threshold in § 1026.35(b)(2)(iii) and the other thresholds in § 1026.35(b)(2)(vi), affiliates are not considered in calculating compliance with this 4 Public Law 115–174, 132 Stat. 1296 (2018). section 108, 132 Stat. 1304–05; 15 U.S.C. 1639d(c)(2). 6 86 FR 9840 (Feb. 17, 2021). 5 EGRRCPA PO 00000 Frm 00043 Fmt 4700 Sfmt 4700 72821 threshold. For calendar year 2021, the asset threshold was $10 billion. During the 12-month period ending in November 2021, the average of the CPI– W increased by 4.7 percent. As a result, the exemption threshold is increased to $10.473 billion for 2022. Thus, a creditor that is an insured depository institution or insured credit union that during calendar year 2021 had assets of $10.473 billion or less on December 31, 2021, satisfies this criterion for purposes of any loan consummated in 2022 and for purposes of any loan secured by a first lien on a principal dwelling of a consumer consummated in 2023 for which the application was received before April 1, 2023. 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 in § 1026.35(b)(2)(iii) and comment 35(b)(2)(vi)(A)–1 in Regulation Z is amended to update the exemption threshold in § 1026.35(b)(2)(vi). The amendments in this final rule are technical and merely apply the formulae previously established in Regulation Z for determining any adjustments to the exemption thresholds. For these reasons, the Bureau has determined that publishing a notice of proposed rulemaking and providing opportunity for public comment are unnecessary. Therefore, the amendments are 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, 2022. The amendment in this final rule is technical and non-discretionary, and it merely applies the method previously established in the agency’s regulations for automatic adjustments to the threshold. E:\FR\FM\23DER1.SGM 23DER1 72822 Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Rules and Regulations 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.7 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.8 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). E. Signing Authority The Associate Director for Research, Markets and Regulations, Janis K. Pappalardo having reviewed and approved this document, is delegating the authority to electronically sign this document to Laura Galban, 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: PART 1026—TRUTH IN LENDING (REGULATION Z) 1. The authority citation for part 1026 continues to read as follows: jspears on DSK121TN23PROD with RULES1 ■ 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) ■ 75 U.S.C. 603(a), 604(a). U.S.C. 3501–3521. 8 44 VerDate Sep<11>2014 19:16 Dec 22, 2021 Jkt 256001 Exemptions, Paragraphs 35(b)(2)(iii) and (vi)(A)–1 are 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 HigherPriced Mortgage Loans * * * * * 35(b)(2) Exemptions. * * * * * 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 PO 00000 Frm 00044 Fmt 4700 Sfmt 4700 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 § 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. E:\FR\FM\23DER1.SGM 23DER1 jspears on DSK121TN23PROD with RULES1 Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Rules and Regulations 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 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 VerDate Sep<11>2014 19:16 Dec 22, 2021 Jkt 256001 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 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 2022, the asset threshold is $2,336,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2021 has total assets of less than $2,336,000,000 on December 31, 2021, satisfies this criterion for purposes of any loan consummated in 2022 and for purposes of any loan consummated in 2023 for which the application was received before April 1, 2023. For historical purposes: 1. For calendar year 2013, the asset threshold was $2,000,000,000. Creditors that PO 00000 Frm 00045 Fmt 4700 Sfmt 4700 72823 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 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 2021 for which the application was received before April 1, 2021. E:\FR\FM\23DER1.SGM 23DER1 72824 Federal Register / Vol. 86, No. 244 / Thursday, December 23, 2021 / Rules and Regulations 9. For calendar year 2021, the asset threshold was $2,230,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2020 had total assets of less than $2,230,000,000 on December 31, 2020, satisfied 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, 2022iv. 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) (or, if applicable, the conditions for the exemption in § 1026.35(b)(2)(vi)) 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) and (vi) 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) and (vi), 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. jspears on DSK121TN23PROD with RULES1 * * * * * Paragraph 35(b)(2)(vi)(A). 1. The asset threshold in § 1026.35(b)(2)(vi)(A) will adjust automatically each year, based on the yearto-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. Unlike the asset threshold in § 1026.35(b)(2)(iii) and the other thresholds in § 1026.35(b)(2)(vi), affiliates are not considered in calculating compliance with this threshold. The Bureau will publish notice of the asset threshold each year by amending this comment. For calendar year 2022, the asset threshold is $10,473,000,000. A creditor that is an insured depository institution or insured credit union that during calendar year 2021 had assets of $10,473,000,000 or less on December 31, 2021, satisfies this criterion for purposes of any loan consummated in 2022 and for purposes of any loan secured by a first lien on a principal dwelling of a consumer consummated in 2023 for which the application was received before April 1, 2023. For historical purposes: 1. For calendar year 2021, the asset threshold was $10,000,000,000. Creditors VerDate Sep<11>2014 19:16 Dec 22, 2021 Jkt 256001 that had total assets of 10,000,000,000 or less on December 31, 2020, satisfied this criterion for purposes of any loan consummated in 2021 and for purposes of any loan secured by a first lien on a principal dwelling of a consumer consummated in 2022 for which the application was received before April 1, 2022. * * * * * Laura Galban, Federal Register Liaison, Bureau of Consumer Financial Protection. [FR Doc. 2021–27900 Filed 12–22–21; 8:45 am] BILLING CODE 4810–AM–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2020–0904; Product Identifier 2019–SW–041–AD; Amendment 39–21864; AD 2021–05–03] RIN 2120–AA64 Airworthiness Directives; Airbus Helicopters Federal Aviation Administration (FAA), DOT. ACTION: Final rule. AGENCY: The FAA is adopting a new airworthiness directive (AD) for certain Airbus Helicopters Model EC225LP helicopters. This AD requires various inspections of the left-hand side (LH) engine fuel supply (fuel supply) hose and depending on the inspection results, reinstalling the fuel supply hose or removing the fuel supply hose from service. Additionally, this AD requires installing an improved part and prohibits installing a certain partnumbered LH fuel supply hose on any helicopter unless it is installed by following certain procedures. This AD was prompted by a report of an incorrect installation of the LH fuel supply hose causing restricted fuel flow to the LH engine. The FAA is issuing this AD to address the unsafe condition on these products. DATES: This AD is effective January 27, 2022. The Director of the Federal Register approved the incorporation by reference of a certain document listed in this AD as of January 27, 2022. ADDRESSES: For service information identified in this final rule, contact Airbus Helicopters, 2701 N Forum Drive, Grand Prairie, TX 75052; telephone (972) 641–0000 or 800–232– 0323; fax (972) 641–3775; or at https:// www.airbus.com/helicopters/services/ technical-support.html. You may view SUMMARY: PO 00000 Frm 00046 Fmt 4700 Sfmt 4700 the referenced service information at the FAA, Office of the Regional Counsel, Southwest Region, 10101 Hillwood Pkwy., Room 6N–321, Fort Worth, TX 76177. It is also available at https:// www.regulations.gov by searching for and locating Docket No. FAA–2020– 0904. Examining the AD Docket You may examine the AD docket at https://www.regulations.gov by searching for and locating Docket No. FAA–2020–0904; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this final rule, the European Union Aviation Safety Agency (EASA) AD, any comments received, and other information. The street address for Docket Operations is U.S. Department of Transportation, Docket Operations, M–30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE, Washington, DC 20590. FOR FURTHER INFORMATION CONTACT: Hal Jensen, Aerospace Engineer, Operational Safety Branch, Compliance & Airworthiness Division, FAA, 950 L’Enfant Plaza N SW, Washington, DC 20024; telephone (202) 267–9167; email hal.jensen@faa.gov. SUPPLEMENTARY INFORMATION: Background The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to Airbus Helicopters Model EC225LP helicopters with a LH fuel supply hose part number (P/N) 704A34416087 installed. The NPRM published in the Federal Register on October 7, 2020 (85 FR 63235, October 7, 2020). For helicopters delivered to the first operator before November 30, 2018, and for helicopters delivered to the first operator on or after November 30, 2018, that have had the LH fuel supply hose replaced or reinstalled before May 10, 2019, the NPRM proposed to require visually inspecting the LH fuel supply hose for twisting, and if needed, borescope inspecting the entire length of the inside of the fuel supply hose for twisting. Depending on the inspection results, the NPRM proposed to require reinstalling or removing the fuel supply hose from service. Additionally, the NPRM proposed to prohibit installing a certain part-numbered LH fuel supply hose on any helicopter unless that LH fuel supply hose is installed by following certain procedures specified in the manufacturer’s service bulletin. The proposed requirements were intended to prevent a decrease of the LH E:\FR\FM\23DER1.SGM 23DER1

Agencies

BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 86, Number 244 (Thursday, December 23, 2021)]
[Rules and Regulations]
[Pages 72820-72824]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27900]


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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.

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

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 changes in the 
asset-size thresholds for certain creditors to qualify for an exemption 
to the requirement to establish an escrow account for a higher-priced 
mortgage loan. These changes reflect updates to the exemption from 
TILA's escrow requirement of creditors that, together with affiliates 
that regularly extended covered transactions secured by first liens, 
had total assets of less than $2 billion (adjusted annually for 
inflation) and the exemption the Bureau added, by implementing section 
108 of the Economic Growth, Regulatory Relief, and Consumer Protection 
Act (EGRRCPA), for certain insured depository institutions and insured 
credit unions with assets of $10 billion or less (adjusted annually for 
inflation). These amendments are 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 4.7 percent increase in the 
average of the CPI-W for the 12-month period ending in November 2021, 
the exemption threshold for creditors and their affiliates that 
regularly extended covered transactions secured by first liens is 
adjusted to $2.336 billion from $2.230 billion. The exemption threshold 
for certain insured depository institutions and insured credit unions 
with assets of $10 billion or less (adjusted annually for inflation) is 
adjusted to $10.473 billion from $10 billion.

DATES: This rule is effective on January 1, 2022.

FOR FURTHER INFORMATION CONTACT: Willie Williams, Paralegal Specialist; 
Lanique Eubanks, Thomas Dowell, Senior Counsels, Office of Regulations, 
at (202) 435-7700. If you require this document in an alternative 
electronic format, please contact [email protected].

SUPPLEMENTARY INFORMATION:

[[Page 72821]]

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 2021, the threshold was $2.230 
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 2021, the average of 
the CPI-W increased by 4.7 percent. As a result, the exemption 
threshold is increased to $2.336 billion for 2022. Thus, if the 
creditor's assets together with the assets of its affiliates that 
regularly extended first-lien covered transactions during calendar year 
2021 are less than $2.336 billion on December 31, 2021, and it meets 
the other requirements of Sec.  1026.35(b)(2)(iii), the creditor will 
be exempt from the escrow-accounts requirement for higher-priced 
mortgage loans in 2022 and will also be exempt from the escrow-accounts 
requirement for higher-priced mortgage loans for purposes of any loan 
consummated in 2023 with applications received before April 1, 2023. 
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.
    In the 2018 Economic Growth, Regulatory Relief, and Consumer 
Protection Act (EGRRCPA),\4\ Congress directed the Bureau to issue 
regulations to add a new exemption from TILA's escrow requirement that 
exempts transactions by certain insured depository institutions and 
insured credit unions.\5\ In 2021, the Bureau issued a final rule 
implementing this exemption in Sec.  1026.35(b)(2)(vi) (2021 Escrows 
Rule).\6\ The final rule exempted from the Regulation Z HPML escrow 
requirement any loan made by an insured depository institution or 
insured credit union and secured by a first lien on the principal 
dwelling of a consumer if: (1) The institution has assets of $10 
billion or less; (2) the institution and its affiliates originated 
1,000 or fewer loans secured by a first lien on a principal dwelling 
during the preceding calendar year; and (3) certain of the existing 
HPML escrow exemption criteria are met. In the 2021 Escrows Rule, the 
Bureau established such an asset-size threshold of $10 billion or less 
in Sec.  1026.35(b)(2)(vi)(A), which will adjust automatically each 
year, based on the year-to-year change in the average of the CPI-W, not 
seasonally adjusted, for each 12-month period ending in November, with 
rounding to the nearest million dollars. Unlike the asset threshold in 
Sec.  1026.35(b)(2)(iii) and the other thresholds in Sec.  
1026.35(b)(2)(vi), affiliates are not considered in calculating 
compliance with this threshold. For calendar year 2021, the asset 
threshold was $10 billion.
---------------------------------------------------------------------------

    \4\ Public Law 115-174, 132 Stat. 1296 (2018).
    \5\ EGRRCPA section 108, 132 Stat. 1304-05; 15 U.S.C. 
1639d(c)(2).
    \6\ 86 FR 9840 (Feb. 17, 2021).
---------------------------------------------------------------------------

    During the 12-month period ending in November 2021, the average of 
the CPI-W increased by 4.7 percent. As a result, the exemption 
threshold is increased to $10.473 billion for 2022. Thus, a creditor 
that is an insured depository institution or insured credit union that 
during calendar year 2021 had assets of $10.473 billion or less on 
December 31, 2021, satisfies this criterion for purposes of any loan 
consummated in 2022 and for purposes of any loan secured by a first 
lien on a principal dwelling of a consumer consummated in 2023 for 
which the application was received before April 1, 2023.

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 in Sec.  1026.35(b)(2)(iii) and comment 
35(b)(2)(vi)(A)-1 in Regulation Z is amended to update the exemption 
threshold in Sec.  1026.35(b)(2)(vi). The amendments in this final rule 
are technical and merely apply the formulae previously established in 
Regulation Z for determining any adjustments to the exemption 
thresholds. For these reasons, the Bureau has determined that 
publishing a notice of proposed rulemaking and providing opportunity 
for public comment are unnecessary. Therefore, the amendments are 
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, 2022. The amendment in this final rule is technical and non-
discretionary, and it merely applies the method previously established 
in the agency's regulations for automatic adjustments to the threshold.

[[Page 72822]]

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.\7\
---------------------------------------------------------------------------

    \7\ 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.\8\
---------------------------------------------------------------------------

    \8\ 44 U.S.C. 3501-3521.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED]
---------------------------------------------------------------------------

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).

E. Signing Authority

    The Associate Director for Research, Markets and Regulations, Janis 
K. Pappalardo having reviewed and approved this document, is delegating 
the authority to electronically sign this document to Laura Galban, 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:

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, Paragraphs 
35(b)(2)(iii) and (vi)(A)-1 are 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.[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED]

[[Page 72823]]

    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 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 
2022, the asset threshold is $2,336,000,000. A creditor that 
together with the assets of its affiliates that regularly extended 
first-lien covered transactions during calendar year 2021 has total 
assets of less than $2,336,000,000 on December 31, 2021, satisfies 
this criterion for purposes of any loan consummated in 2022 and for 
purposes of any loan consummated in 2023 for which the application 
was received before April 1, 2023. For historical 
purposes:[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES][RULE][PREAMB][AGENCY]*[/AGENCY][SUBJECT]*[/SUBJECT][/
PREAMB][SUPLINF][HED]*[/HED]
    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 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 2021 for which the application was received 
before April 1, 2021.

[[Page 72824]]

    9. For calendar year 2021, the asset threshold was 
$2,230,000,000. A creditor that together with the assets of its 
affiliates that regularly extended first-lien covered transactions 
during calendar year 2020 had total assets of less than 
$2,230,000,000 on December 31, 2020, satisfied 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, 2022iv. 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) (or, if 
applicable, the conditions for the exemption in Sec.  
1026.35(b)(2)(vi)) 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) and (vi) 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) and (vi), 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.
* * * * *
    Paragraph 35(b)(2)(vi)(A).
    1. The asset threshold in Sec.  1026.35(b)(2)(vi)(A) will adjust 
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. 
Unlike the asset threshold in Sec.  1026.35(b)(2)(iii) and the other 
thresholds in Sec.  1026.35(b)(2)(vi), affiliates are not considered 
in calculating compliance with this threshold. The Bureau will 
publish notice of the asset threshold each year by amending this 
comment. For calendar year 2022, the asset threshold is 
$10,473,000,000. A creditor that is an insured depository 
institution or insured credit union that during calendar year 2021 
had assets of $10,473,000,000 or less on December 31, 2021, 
satisfies this criterion for purposes of any loan consummated in 
2022 and for purposes of any loan secured by a first lien on a 
principal dwelling of a consumer consummated in 2023 for which the 
application was received before April 1, 2023. For historical 
purposes:
    1. For calendar year 2021, the asset threshold was 
$10,000,000,000. Creditors that had total assets of 10,000,000,000 
or less on December 31, 2020, satisfied this criterion for purposes 
of any loan consummated in 2021 and for purposes of any loan secured 
by a first lien on a principal dwelling of a consumer consummated in 
2022 for which the application was received before April 1, 2022.
* * * * *

Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2021-27900 Filed 12-22-21; 8:45 am]
BILLING CODE 4810-AM-P[FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][RULES]

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