Truth in Lending Act (Regulation Z) Adjustment to Asset-Size Exemption Threshold, 88223-88227 [2023-28076]

Download as PDF Federal Register / Vol. 88, No. 244 / Thursday, December 21, 2023 / Rules and Regulations 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 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). * * * * * Brian Shearer, Senior Advisor, Consumer Financial Protection Bureau. [FR Doc. 2023–28079 Filed 12–20–23; 8:45 am] BILLING CODE 4810–AM–P less than $2 billion (adjusted annually for inflation). They also reflect updates to the exemption the CFPB 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 4.1 percent increase in the average of the CPI–W for the 12-month period ending in November 2023, the exemption threshold for creditors and their affiliates that regularly extended covered transactions secured by first liens is adjusted to $2.640 billion from $2.537 billion and the exemption threshold for certain insured depository institutions and insured credit unions with assets of $10 billion or less is adjusted to $11.835 billion from $11.374 billion. DATES: This rule is effective on January 1, 2024. FOR FURTHER INFORMATION CONTACT: Anna Boadwee and Adrien Fernandez, Attorney-Advisors, 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 CONSUMER FINANCIAL PROTECTION BUREAU 12 CFR Part 1026 Truth in Lending Act (Regulation Z) Adjustment to Asset-Size Exemption Threshold Consumer Financial Protection Bureau. ACTION: Final rule; official interpretation. AGENCY: The Consumer Financial Protection Bureau (CFPB) is amending the official commentary to its Regulation Z in order to make annual adjustments to the asset-size thresholds exempting certain creditors from the requirement to establish an escrow account for a higher-priced mortgage loan (HPML). These changes reflect updates to the exemption from the escrow requirement in the Truth in Lending Act (TILA) for creditors that, together with their affiliates that regularly extended covered transactions secured by first liens, had total assets of khammond on DSKJM1Z7X2PROD with RULES SUMMARY: VerDate Sep<11>2014 15:43 Dec 20, 2023 Jkt 262001 Section 129D of TILA generally requires creditors to establish escrow accounts for certain first-lien higherpriced mortgage loan transactions. However, TILA section 129D also permits the CFPB to exempt creditors from this higher-priced mortgage loan escrow requirement if they meet certain requirements, including any asset-size threshold that the CFPB may establish. In the 2013 Escrows Final Rule,1 the CFPB established 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 CFPB revised the asset-size threshold for small creditors and how it applies. The CFPB 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 1 78 FR 4726 (Jan. 22, 2013). 12 CFR 1026.35(b)(2)(iii)(C). 2 See PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 88223 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 2023, the threshold was $2.537 billion. During the 12-month period ending in November 2023, the average of the CPI– W increased by 4.1 percent. As a result, the exemption threshold is increased to $2.640 billion for 2024.4 Thus, if the creditor’s assets together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2023 are less than $2.640 billion on December 31, 2023, 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 2024 and will also be exempt from the escrow-accounts requirement for higher-priced mortgage loans for purposes of any loan consummated in 2025 with applications received before April 1, 2025. The adjustment to the escrows asset-size exemption threshold also will 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 3 See 80 FR 59943, 59951 (Oct. 2, 2015). The CFPB 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, sec. 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). 4 Numbers may not multiply to totals shown because of rounding. E:\FR\FM\21DER1.SGM 21DER1 88224 Federal Register / Vol. 88, No. 244 / Thursday, December 21, 2023 / Rules and Regulations Protection Act (EGRRCPA),5 Congress directed the CFPB 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.6 In 2021, the CFPB issued a final rule implementing this exemption in § 1026.35(b)(2)(vi) (2021 Escrows Rule).7 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 CFPB established 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 asset threshold. For calendar year 2023, the asset threshold was $11.374 billion. During the 12-month period ending in November 2023, the average of the CPI– W increased by 4.1 percent. As a result, the exemption threshold is increased to $11.835 billion for 2024.8 Thus, a creditor that is an insured depository institution or insured credit union that during calendar year 2023 had assets of $11.835 billion or less on December 31, 2023, satisfies this criterion for purposes of any loan consummated in 2024 and for purposes of any loan secured by a first lien on a principal dwelling of a consumer consummated in 2025 for which the application was received before April 1, 2025. khammond on DSKJM1Z7X2PROD with RULES II. Procedural Requirements A. Administrative Procedure Act Under the Administrative Procedure Act (APA), notice and opportunity for public comment are not required if the CFPB finds that notice and public comment are impracticable, 5 Public Law 115–174, 132 Stat. 1296 (2018). sec. 108, 132 Stat. 1304–05; 15 U.S.C. 1639d(c)(2). 7 86 FR 9840 (Feb. 17, 2021). 8 Numbers may not multiply to totals shown because of rounding. 6 EGRRCPA VerDate Sep<11>2014 15:43 Dec 20, 2023 Jkt 262001 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 CFPB 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 CFPB has determined the amendments fall under the third exception to section 553(d). The CFPB finds that there is good cause to make the amendments effective on January 1, 2024. 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. B. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required.9 As noted previously, the CFPB has determined that it is unnecessary to publish a general notice of proposed rulemaking for this final rule. Accordingly, the RFA’s requirement relating to an initial and final regulatory flexibility analysis does not apply. C. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995,10 the CFPB reviewed this final rule. The CFPB has determined that this rule does not create any new information collections or substantially revise any existing collections. 95 U.S.C. 603(a), 604(a). U.S.C. 3506; 5 CFR part 1320. 10 44 PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 D. Congressional Review Act Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the CFPB will submit a report containing this rule and other required information to the United States Senate, the United States House of Representatives, and the Comptroller General of the United States prior to the rule taking effect. The Office of Information and Regulatory Affairs (OIRA) has designated this rule as not a ‘‘major rule’’ as defined by 5 U.S.C. 804(2). List of Subjects in 12 CFR Part 1026 Advertising, 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 CFPB amends Regulation Z, 12 CFR part 1026, as set forth below: PART 1026—TRUTH IN LENDING (REGULATION Z) 1. The authority citation for part 1026 continues to read as follows: ■ Authority: 12 U.S.C. 2601, 2603–2605, 2607, 2609, 2617, 3353, 5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq. 2. In supplement I to part 1026, under § 1026.35—Requirements for HigherPriced Mortgage Loans, 35(b)(2) Exemptions, paragraphs 35(b)(2)(iii) and (b)(2)(vi)(A) 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 § 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 E:\FR\FM\21DER1.SGM 21DER1 khammond on DSKJM1Z7X2PROD with RULES Federal Register / Vol. 88, No. 244 / Thursday, December 21, 2023 / Rules and Regulations 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 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 VerDate Sep<11>2014 15:43 Dec 20, 2023 Jkt 262001 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 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. PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 88225 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 E:\FR\FM\21DER1.SGM 21DER1 khammond on DSKJM1Z7X2PROD with RULES 88226 Federal Register / Vol. 88, No. 244 / Thursday, December 21, 2023 / Rules and Regulations 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 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 VerDate Sep<11>2014 15:43 Dec 20, 2023 Jkt 262001 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 2024, the asset threshold is $2,640,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2023 has total assets of less than $2,640,000,000 on December 31, 2023, satisfies this criterion for purposes of any loan consummated in 2024 and for purposes of any loan consummated in 2025 for which the application was received before April 1, 2025. 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 PO 00000 Frm 00006 Fmt 4700 Sfmt 4700 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. 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, 2022. E:\FR\FM\21DER1.SGM 21DER1 khammond on DSKJM1Z7X2PROD with RULES Federal Register / Vol. 88, No. 244 / Thursday, December 21, 2023 / Rules and Regulations 10. For calendar year 2022, the asset threshold was $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 had total assets of less than $2,336,000,000 on December 31, 2021, satisfied 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. 11. For calendar year 2023, the asset threshold was $2,537,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2022 had total assets of less than $2,537,000,000 on December 31, 2022, satisfied this criterion for purposes of any loan consummated in 2023 and for purposes of any loan consummated in 2024 for which the application was received before April 1, 2024. 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) (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 higherpriced 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. * * * * * Paragraph 35(b)(2)(vi)(A). VerDate Sep<11>2014 15:43 Dec 20, 2023 Jkt 262001 1. The asset threshold in § 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 § 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 2024, the asset threshold is $11,835,000,000. A creditor that is an insured depository institution or insured credit union that during calendar year 2023 had assets of $11,835,000,000 or less on December 31, 2023, satisfies this criterion for purposes of any loan consummated in 2024 and for purposes of any loan secured by a first lien on a principal dwelling of a consumer consummated in 2025 for which the application was received before April 1, 2025. 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. 2. For calendar year 2022, the asset threshold was $10,473,000,000. Creditors that had total assets of $10,473,000,000 or less on December 31, 2021, satisfied 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. 3. For calendar year 2023, the asset threshold is $11,374,000,000. A creditor that is an insured depository institution or insured credit union that during calendar year 2022 had assets of $11,374,000,000 or less on December 31, 2022, satisfied this criterion for purposes of any loan consummated in 2023 and for purposes of any loan secured by a first lien on a principal dwelling of a consumer consummated PO 00000 Frm 00007 Fmt 4700 Sfmt 4700 88227 in 2024 for which the application was received before April 1, 2024. * * * * * Brian Shearer, Senior Advisor, Consumer Financial Protection Bureau. [FR Doc. 2023–28076 Filed 12–20–23; 8:45 am] BILLING CODE 4810–AM–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 73 [Docket No. FAA–2023–2220; Airspace Docket No. 23–AWP–59] RIN 2120–AA66 Amendment of Restricted Area R–2512 Holtville, CA Federal Aviation Administration (FAA), DOT. ACTION: Final rule; correction; withdrawal. AGENCY: This action withdraws the final rule correction published in the Federal Register on December 6, 2023. That action incorrectly stated that the action would be incorporated by reference. The FAA has determined that withdrawal of the final rule correction is warranted since the action is not incorporated by reference. DATES: As of date 0901 UTC, December 21, 2023, the final rule correction published December 6, 2023 (88 FR 84695), is withdrawn. FOR FURTHER INFORMATION CONTACT: Steven Roff, Rules and Regulations Group, Office of Policy, Federal Aviation Administration, 800 Independence Avenue SW, Washington, DC 20591; telephone: (202) 267–8783. SUPPLEMENTARY INFORMATION: SUMMARY: History The FAA published a final rule in the Federal Register for Docket No. FAA– 2023–2220 (88 FR 78636, November 16, 2023) that amended restricted area R– 2512 in the vicinity of Holtville, CA. The section of 14 CFR part 73 to be amended by the final rule was inadvertently stated as § 73.22. The correct section of 14 CFR part 73 to be amended is § 73.25. Subsequently, the FAA published a final rule correction in the Federal Register for Docket No. FAA–2023–2220 (88 FR 84695, December 6, 2023) that amended restricted area R–2512 in the vicinity of Holtville, CA, correcting the section of 14 CFR part 73 to be amended. That action incorrectly stated E:\FR\FM\21DER1.SGM 21DER1

Agencies

  • CONSUMER FINANCIAL PROTECTION BUREAU
[Federal Register Volume 88, Number 244 (Thursday, December 21, 2023)]
[Rules and Regulations]
[Pages 88223-88227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-28076]


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CONSUMER FINANCIAL PROTECTION BUREAU

12 CFR Part 1026


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

AGENCY: Consumer Financial Protection Bureau.

ACTION: Final rule; official interpretation.

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

SUMMARY: The Consumer Financial Protection Bureau (CFPB) is amending 
the official commentary to its Regulation Z in order to make annual 
adjustments to the asset-size thresholds exempting certain creditors 
from the requirement to establish an escrow account for a higher-priced 
mortgage loan (HPML). These changes reflect updates to the exemption 
from the escrow requirement in the Truth in Lending Act (TILA) for 
creditors that, together with their affiliates that regularly extended 
covered transactions secured by first liens, had total assets of less 
than $2 billion (adjusted annually for inflation). They also reflect 
updates to the exemption the CFPB 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 4.1 percent increase in the 
average of the CPI-W for the 12-month period ending in November 2023, 
the exemption threshold for creditors and their affiliates that 
regularly extended covered transactions secured by first liens is 
adjusted to $2.640 billion from $2.537 billion and the exemption 
threshold for certain insured depository institutions and insured 
credit unions with assets of $10 billion or less is adjusted to $11.835 
billion from $11.374 billion.

DATES: This rule is effective on January 1, 2024.

FOR FURTHER INFORMATION CONTACT: Anna Boadwee and Adrien Fernandez, 
Attorney-Advisors, 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 TILA generally requires creditors to establish 
escrow accounts for certain first-lien higher-priced mortgage loan 
transactions. However, TILA section 129D also permits the CFPB to 
exempt creditors from this higher-priced mortgage loan escrow 
requirement if they meet certain requirements, including any asset-size 
threshold that the CFPB may establish.
    In the 2013 Escrows Final Rule,\1\ the CFPB established 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 CFPB revised the asset-size threshold 
for small creditors and how it applies. The CFPB 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 2023, the threshold was $2.537 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 CFPB 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, sec. 
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 2023, the average of 
the CPI-W increased by 4.1 percent. As a result, the exemption 
threshold is increased to $2.640 billion for 2024.\4\ Thus, if the 
creditor's assets together with the assets of its affiliates that 
regularly extended first-lien covered transactions during calendar year 
2023 are less than $2.640 billion on December 31, 2023, 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 2024 and will also be exempt from the escrow-accounts 
requirement for higher-priced mortgage loans for purposes of any loan 
consummated in 2025 with applications received before April 1, 2025. 
The adjustment to the escrows asset-size exemption threshold also will 
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.
---------------------------------------------------------------------------

    \4\ Numbers may not multiply to totals shown because of 
rounding.
---------------------------------------------------------------------------

    In the 2018 Economic Growth, Regulatory Relief, and Consumer

[[Page 88224]]

Protection Act (EGRRCPA),\5\ Congress directed the CFPB 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.\6\ In 2021, the CFPB issued a final rule 
implementing this exemption in Sec.  1026.35(b)(2)(vi) (2021 Escrows 
Rule).\7\ 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 
CFPB established 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 asset threshold. For calendar year 2023, the asset 
threshold was $11.374 billion.
---------------------------------------------------------------------------

    \5\ Public Law 115-174, 132 Stat. 1296 (2018).
    \6\ EGRRCPA sec. 108, 132 Stat. 1304-05; 15 U.S.C. 1639d(c)(2).
    \7\ 86 FR 9840 (Feb. 17, 2021).
---------------------------------------------------------------------------

    During the 12-month period ending in November 2023, the average of 
the CPI-W increased by 4.1 percent. As a result, the exemption 
threshold is increased to $11.835 billion for 2024.\8\ Thus, a creditor 
that is an insured depository institution or insured credit union that 
during calendar year 2023 had assets of $11.835 billion or less on 
December 31, 2023, satisfies this criterion for purposes of any loan 
consummated in 2024 and for purposes of any loan secured by a first 
lien on a principal dwelling of a consumer consummated in 2025 for 
which the application was received before April 1, 2025.
---------------------------------------------------------------------------

    \8\ Numbers may not multiply to totals shown because of 
rounding.
---------------------------------------------------------------------------

II. Procedural Requirements

A. Administrative Procedure Act

    Under the Administrative Procedure Act (APA), notice and 
opportunity for public comment are not required if the CFPB 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 CFPB 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 CFPB has determined 
the amendments fall under the third exception to section 553(d). The 
CFPB finds that there is good cause to make the amendments effective on 
January 1, 2024. 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.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) does not apply to a rulemaking 
where a general notice of proposed rulemaking is not required.\9\ As 
noted previously, the CFPB has determined that it is unnecessary to 
publish a general notice of proposed rulemaking for this final rule. 
Accordingly, the RFA's requirement relating to an initial and final 
regulatory flexibility analysis does not apply.
---------------------------------------------------------------------------

    \9\ 5 U.S.C. 603(a), 604(a).
---------------------------------------------------------------------------

C. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\10\ the 
CFPB reviewed this final rule. The CFPB has determined that this rule 
does not create any new information collections or substantially revise 
any existing collections.
---------------------------------------------------------------------------

    \10\ 44 U.S.C. 3506; 5 CFR part 1320.
---------------------------------------------------------------------------

D. Congressional Review Act

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

List of Subjects in 12 CFR Part 1026

    Advertising, 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 CFPB 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 Sec.  1026.35--Requirements for 
Higher-Priced Mortgage Loans, 35(b)(2) Exemptions, paragraphs 
35(b)(2)(iii) and (b)(2)(vi)(A) 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

[[Page 88225]]

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

[[Page 88226]]

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 2024, the asset 
threshold is $2,640,000,000. A creditor that together with the assets 
of its affiliates that regularly extended first-lien covered 
transactions during calendar year 2023 has total assets of less than 
$2,640,000,000 on December 31, 2023, satisfies this criterion for 
purposes of any loan consummated in 2024 and for purposes of any loan 
consummated in 2025 for which the application was received before April 
1, 2025. 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 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.
    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, 2022.

[[Page 88227]]

    10. For calendar year 2022, the asset threshold was $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 had total assets of less than $2,336,000,000 on December 31, 2021, 
satisfied 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.
    11. For calendar year 2023, the asset threshold was $2,537,000,000. 
A creditor that together with the assets of its affiliates that 
regularly extended first-lien covered transactions during calendar year 
2022 had total assets of less than $2,537,000,000 on December 31, 2022, 
satisfied this criterion for purposes of any loan consummated in 2023 
and for purposes of any loan consummated in 2024 for which the 
application was received before April 1, 2024.
    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) (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 
2024, the asset threshold is $11,835,000,000. A creditor that is an 
insured depository institution or insured credit union that during 
calendar year 2023 had assets of $11,835,000,000 or less on December 
31, 2023, satisfies this criterion for purposes of any loan consummated 
in 2024 and for purposes of any loan secured by a first lien on a 
principal dwelling of a consumer consummated in 2025 for which the 
application was received before April 1, 2025. 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.
    2. For calendar year 2022, the asset threshold was $10,473,000,000. 
Creditors that had total assets of $10,473,000,000 or less on December 
31, 2021, satisfied 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.
    3. For calendar year 2023, the asset threshold is $11,374,000,000. 
A creditor that is an insured depository institution or insured credit 
union that during calendar year 2022 had assets of $11,374,000,000 or 
less on December 31, 2022, satisfied this criterion for purposes of any 
loan consummated in 2023 and for purposes of any loan secured by a 
first lien on a principal dwelling of a consumer consummated in 2024 
for which the application was received before April 1, 2024.
* * * * *

Brian Shearer,
Senior Advisor, Consumer Financial Protection Bureau.
[FR Doc. 2023-28076 Filed 12-20-23; 8:45 am]
BILLING CODE 4810-AM-P
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