Truth in Lending Act (Regulation Z) Adjustment to Asset-Size Exemption Threshold, 104398-104402 [2024-30653]

Download as PDF khammond on DSK9W7S144PROD with RULES 104398 Federal Register / Vol. 89, No. 246 / Monday, December 23, 2024 / Rules and Regulations proposed rule, inflation has affected farming and marketing costs across the industry which requires the Board to raise the assessment rate to fund promotional activities that maintain and expand the market for watermelons. According to the Board’s FOB and movement data, (which is available on their website: https:// www.watermelon.org/audiences/ industry/assessment/), the demand for watermelons has increased significantly since the last assessment increase from 4.3 billion pounds in 2008 to 5.5 billion pounds in 2023. The assessment increase is structured so importers pay nine cents per hundredweight, and handlers and producers split the cost each remitting four and a half cents per hundredweight. This is modeled by the current assessment structure of the Plan where importers pay six cents per hundredweight and handlers and procedures each remit three cents per hundredweight. The assessment rate structure borne on the industry is reflective of the production of the commodity. Additionally, four importers of watermelons left supportive comments for the assessment increase during the comment period, with one stating that the Board’s efforts increase demand for watermelons in the United States which is evident as the number of watermelons imported from Mexico continue to grow. Another commenter who stated opposition to the changes presented in the proposed rule voiced concern that importers of watermelons may not have equitable opportunities to address questions or concerns regarding the increase or other Board funded activities. The commenter asked if government officials of exporter countries were notified of the proposed assessment increase. AMS acknowledges this comment and notes that the proposed rule was published in the Federal Register to provide notice to all interested parties, including government officials of exporting countries, of the proposed modifications. The comment period provided an opportunity for industry members and the public alike to voice any concerns they may have with the proposed changes to the Plan. As with other interested parties, government officials had notice and opportunity to comment on the proposed assessment increase. No government officials commented on the proposed rule. Additionally, prior to the publication of the proposed rule, the Board conducted outreach to industry stakeholders, including those representing imported watermelons. For example, the Board VerDate Sep<11>2014 16:08 Dec 20, 2024 Jkt 265001 presented potential budgetary examples with the assessment increase to inform stakeholders, including importers, of the proposed assessment increase and activities that could be funded by the Board prior to the publication of the proposed rule. The Board presented at various state and regional association meetings, including the National Watermelon Association, which was attended by importers of watermelons, providing all growers equal opportunity to raise questions. In addition, the Board currently has nine importers members who represent the industry and help oversee the Board’s policies and budget. AMS and the Board agree that transparency and communication to all stakeholders is critical, and accordingly, the Board notified the industry of the potential assessment increase through a variety of channels including industrywide newsletters, regional and national conventions, and email correspondence. AMS received two non-substantive comments. One of the unrelated comments was focused on pest control, and another voiced support for an athlete sponsored by the Board. Accordingly, no changes were made to the rule as proposed, based on the comments received. After consideration of all relevant material presented, including the information and recommendations submitted by the Board, the comments received, and other available information, it is hereby found that this rule, as hereinafter set forth, is consistent with and will effectuate the purposes of the Act. List of Subjects in 7 CFR Part 1210 Administrative practice and procedure, Advertising, Agricultural research, Consumer information, Marketing agreements, Reporting and recordkeeping requirements, Watermelons. For the reasons set forth in the preamble, the Agricultural Marketing Service amends part 1210, chapter XI of title 7 of the Code of Federal Regulations as follows: PART 1210—WATERMELON RESEARCH AND PROMOTION PLAN 1. The authority citation for part 1210 continues to read as follows: ■ Authority: 7 U.S.C. 4901–4916 and 7 U.S.C. 7401. 2. Amend § 1210.515 by revising paragraphs (a) and (b) to read as follows: ■ § 1210.515 Levy of assessments. (a) An assessment of four and a half cents per hundredweight shall be levied on all watermelons produced for PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 ultimate consumption as human food, and an assessment of four and a half cents per hundredweight shall be levied on all watermelons first handled for ultimate consumption as human food. An assessment of nine cents per hundredweight shall be levied on all watermelons imported into the United States for ultimate consumption as human food at the time of entry in the United States. (b) The import assessment shall be uniformly applied to imported watermelons that are identified by the numbers 0807.11.30 and 0807.11.40 in the Harmonized Tariff Schedule of the United States or any other number used to identify fresh watermelons for consumption as human food. The U.S. Customs Service and Border Protection (Customs) will collect assessments on such watermelons at the time of entry and will forward such assessment as per the agreement between Customs and USDA. Any importer or agent who is exempt from payment of assessments may submit to the Board adequate proof of the volume handled by such importer for the exemption to be granted. * * * * * Erin Morris, Associate Administrator, Agricultural Marketing Service. [FR Doc. 2024–30268 Filed 12–20–24; 8:45 am] BILLING CODE P 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). The exemption threshold for creditors and their affiliates that regularly extended covered transactions secured by first liens is adjusted to $2.717 billion and the exemption threshold for certain insured depository institutions and insured credit unions with assets of $10 billion or less is adjusted to $12.179 billion. SUMMARY: E:\FR\FM\23DER1.SGM 23DER1 Federal Register / Vol. 89, No. 246 / Monday, December 23, 2024 / Rules and Regulations This rule is effective on January 1, 2025. DATES: FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory Implementation & Guidance Program Analyst, Office of Regulations, at (202) 435–7700 or at: https://reginquiries. consumerfinance.gov. If you require this document in an alternative electronic format, please contact CFPB_ Accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: I. Background Section 129D of the Truth in Lending Act (TILA) 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 2024, the threshold was $2.640 billion. During the 12-month period ending in November 2024, the average of the CPI– W increased by 2.9 percent. As a result, the exemption threshold is increased to 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 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). $2.717 billion for 2025.4 Thus, if the creditor’s assets together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2024 are less than $2.717 billion on December 31, 2024, 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 2025 and will also be exempt from the escrow-accounts requirement for higher-priced mortgage loans for purposes of any loan consummated in 2026 with applications received before April 1, 2026. 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 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 khammond on DSK9W7S144PROD with RULES 2 See VerDate Sep<11>2014 16:08 Dec 20, 2024 Jkt 265001 4 Adjusted dollar amounts throughout this final rule are calculated by applying the relevant consumer price index to the previous year’s unrounded dollar amount before rounding to the nearest million dollars. Accordingly, applying the rounded consumer price index figures to the previous year’s rounded dollar amounts may not add up to the total dollar amount shown. 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). PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 104399 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 2024, the asset threshold was $11.835 billion. During the 12-month period ending in November 2024, the average of the CPI– W increased by 2.9 percent. As a result, the exemption threshold is increased to $12.179 billion for 2025. Thus, a creditor that is an insured depository institution or insured credit union that during calendar year 2024 had assets of $12.179 billion or less on December 31, 2024, satisfies this criterion for purposes of any loan consummated in 2025 and for purposes of any loan secured by a first lien on a principal dwelling of a consumer consummated in 2026 for which the application was received before April 1, 2026. 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 § 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 E:\FR\FM\23DER1.SGM 23DER1 104400 Federal Register / Vol. 89, No. 246 / Monday, December 23, 2024 / Rules and Regulations 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, 2025. The amendments in this final rule are technical and non-discretionary, and they merely apply the method previously established in the agency’s regulations for automatic adjustments to the threshold. The Regulatory Flexibility Act (RFA) does not apply to a rulemaking where a general notice of proposed rulemaking is not required.8 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 1995,9 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. 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). khammond on DSK9W7S144PROD with RULES 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. U.S.C. 603(a), 604(a). U.S.C. 3506; 5 CFR part 1320. 9 44 VerDate Sep<11>2014 16:08 Dec 20, 2024 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, revise Paragraph 35(b)(2)(iii) and Paragraph 35(b)(2)(vi)(A) to read as follows: ■ Supplement I to Part 1026—Official Interpretations B. Regulatory Flexibility Act 85 Authority and Issuance For the reasons set forth above, the CFPB amends Regulation Z, 12 CFR part 1026, as set forth below: Jkt 265001 * * * * * 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 PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 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 § 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 E:\FR\FM\23DER1.SGM 23DER1 khammond on DSK9W7S144PROD with RULES Federal Register / Vol. 89, No. 246 / Monday, December 23, 2024 / Rules and Regulations 1,500 loans that were sold, assigned, or otherwise transferred by the creditor or its affiliates to another person, or that were subject at the time of consummation to a commitment to be acquired by another person, and 2,500 such loans in 2016. Because the 2016 transaction activity exceeds the threshold but the 2015 transaction activity does not, the creditor satisfies this condition for exemption for a higher-priced mortgage loan consummated during 2017 if the creditor received the application for the loan before April 1, 2017, but does not satisfy this condition for a higher-priced mortgage loan consummated during 2017 if the application for the loan was received on or after April 1, 2017. C. For purposes of § 1026.35(b)(2)(iii)(B), extensions of first-lien covered transactions, during the applicable time period, by all of a creditor’s affiliates, as ‘‘affiliate’’ is defined in § 1026.32(b)(5), are counted toward the threshold in this section. ‘‘Affiliate’’ is defined in § 1026.32(b)(5) as ‘‘any company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.).’’ Under the Bank Holding Company Act, a company has 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 VerDate Sep<11>2014 16:08 Dec 20, 2024 Jkt 265001 subject to § 1026.32, an affiliate regularly extends covered transactions if, in any 12month period, it extends more than one covered transaction that is subject to the requirements of § 1026.32 or one or more such transactions through a mortgage broker. Thus, if a creditor’s affiliate regularly extended first-lien covered transactions during the preceding calendar year, the creditor’s assets as of the end of the preceding calendar year, for purposes of the asset limit, take into account the assets of that affiliate. If the creditor, together with its affiliates that regularly extended first-lien covered transactions, exceeded the asset limit in the preceding calendar year—to be eligible to operate as a small creditor for transactions with applications received before April 1 of the current calendar year—the assets of the creditor’s affiliates that regularly extended covered transactions in the year before the preceding calendar year are included in calculating the creditor’s assets. C. If multiple creditors share ownership of a company that regularly extended first-lien covered transactions, the assets of the company count toward the asset limit for a co-owner creditor if the company is an ‘‘affiliate,’’ as defined in § 1026.32(b)(5), of 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 PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 104401 each 12-month period ending in November, with rounding to the nearest million dollars. The CFPB will publish notice of the asset threshold each year by amending this comment. For calendar year 2025, the asset threshold is $2,717,000,000. A creditor that together with the assets of its affiliates that regularly extended first-lien covered transactions during calendar year 2024 has total assets of less than $2,717,000,000 on December 31, 2024, satisfies this criterion for purposes of any loan consummated in 2025 and for purposes of any loan consummated in 2026 for which the application was received before April 1, 2026. 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 E:\FR\FM\23DER1.SGM 23DER1 khammond on DSK9W7S144PROD with RULES 104402 Federal Register / Vol. 89, No. 246 / Monday, December 23, 2024 / Rules and Regulations 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. 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. 12. For calendar year 2024, the asset threshold was $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 had total assets of less than $2,640,000,000 on December 31, 2023, satisfied 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. 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). VerDate Sep<11>2014 16:08 Dec 20, 2024 Jkt 265001 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. * * * * * 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 CFPB will publish notice of the asset threshold each year by amending this comment. For calendar year 2025, the asset threshold is $12,179,000,000. A creditor that is an insured depository institution or insured credit union that during calendar year 2024 had assets of $12,179,000,000 or less on December 31, 2024, satisfies this criterion for purposes of any loan consummated in 2025 and for purposes of any loan secured by a first lien on a principal dwelling of a consumer consummated in 2026 for which the application was received before April 1, 2026. 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 was $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 PO 00000 Frm 00036 Fmt 4700 Sfmt 4700 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. 4. 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, satisfied 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. * * * * * Brian Shearer, Assistant Director, Office of Policy Planning and Strategy, Consumer Financial Protection Bureau. [FR Doc. 2024–30653 Filed 12–20–24; 8:45 am] BILLING CODE 4810–AM–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 71 [Docket No. FAA–2024–2104; Airspace Docket No. 23–ANM–38] RIN 2120–AA66 Establishment of Class E Airspace; Austin Airport, Austin, NV Federal Aviation Administration (FAA), DOT. ACTION: Final rule. AGENCY: This action establishes Class E airspace extending upward from 700 feet above the surface at Austin Airport, Austin, NV. The airport is transitioning from visual flight rules (VFR) to instrument flight rules (IFR), and these actions support the safety and management of IFR operations at the airport. DATES: Effective date 0901 UTC, February 20, 2025. The Director of the Federal Register approves this incorporation by reference action under 1 CFR part 51, subject to the annual revision of FAA Order JO 7400.11 and publication of conforming amendments. ADDRESSES: A copy of the Notice of Proposed Rulemaking (NPRM), all comments received, this final rule, and all background material may be viewed online at www.regulations.gov using the FAA Docket number. Electronic retrieval help and guidelines are available on the website. It is available 24 hours each day, 365 days each year. FAA Order JO 7400.11J, Airspace Designations and Reporting Points, and SUMMARY: E:\FR\FM\23DER1.SGM 23DER1

Agencies

  • CONSUMER FINANCIAL PROTECTION BUREAU
[Federal Register Volume 89, Number 246 (Monday, December 23, 2024)]
[Rules and Regulations]
[Pages 104398-104402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30653]


=======================================================================
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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.

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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). The exemption threshold for creditors and their 
affiliates that regularly extended covered transactions secured by 
first liens is adjusted to $2.717 billion and the exemption threshold 
for certain insured depository institutions and insured credit unions 
with assets of $10 billion or less is adjusted to $12.179 billion.

[[Page 104399]]


DATES: This rule is effective on January 1, 2025.

FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory 
Implementation & Guidance Program Analyst, Office of Regulations, at 
(202) 435-7700 or at: https://reginquiries.consumerfinance.gov. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Section 129D of the Truth in Lending Act (TILA) 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 2024, the threshold was $2.640 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 2024, the average of 
the CPI-W increased by 2.9 percent. As a result, the exemption 
threshold is increased to $2.717 billion for 2025.\4\ Thus, if the 
creditor's assets together with the assets of its affiliates that 
regularly extended first-lien covered transactions during calendar year 
2024 are less than $2.717 billion on December 31, 2024, 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 2025 and will also be exempt from the escrow-accounts 
requirement for higher-priced mortgage loans for purposes of any loan 
consummated in 2026 with applications received before April 1, 2026. 
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\ Adjusted dollar amounts throughout this final rule are 
calculated by applying the relevant consumer price index to the 
previous year's unrounded dollar amount before rounding to the 
nearest million dollars. Accordingly, applying the rounded consumer 
price index figures to the previous year's rounded dollar amounts 
may not add up to the total dollar amount shown.
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    In the 2018 Economic Growth, Regulatory Relief, and Consumer 
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 2024, the asset 
threshold was $11.835 billion.
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    \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 2024, the average of 
the CPI-W increased by 2.9 percent. As a result, the exemption 
threshold is increased to $12.179 billion for 2025. Thus, a creditor 
that is an insured depository institution or insured credit union that 
during calendar year 2024 had assets of $12.179 billion or less on 
December 31, 2024, satisfies this criterion for purposes of any loan 
consummated in 2025 and for purposes of any loan secured by a first 
lien on a principal dwelling of a consumer consummated in 2026 for 
which the application was received before April 1, 2026.

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

[[Page 104400]]

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, 2025. The amendments in 
this final rule are technical and non-discretionary, and they merely 
apply 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.\8\ 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.
---------------------------------------------------------------------------

    \8\ 5 U.S.C. 603(a), 604(a).
---------------------------------------------------------------------------

C. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995,\9\ 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.
---------------------------------------------------------------------------

    \9\ 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, revise Paragraph 35(b)(2)(iii) and 
Paragraph 35(b)(2)(vi)(A) 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

[[Page 104401]]

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 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 CFPB will publish notice of the asset threshold 
each year by amending this comment. For calendar year 2025, the 
asset threshold is $2,717,000,000. A creditor that together with the 
assets of its affiliates that regularly extended first-lien covered 
transactions during calendar year 2024 has total assets of less than 
$2,717,000,000 on December 31, 2024, satisfies this criterion for 
purposes of any loan consummated in 2025 and for purposes of any 
loan consummated in 2026 for which the application was received 
before April 1, 2026. 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

[[Page 104402]]

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.
    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.
    12. For calendar year 2024, the asset threshold was 
$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 had total assets of less than 
$2,640,000,000 on December 31, 2023, satisfied 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.
    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 CFPB will publish 
notice of the asset threshold each year by amending this comment. 
For calendar year 2025, the asset threshold is $12,179,000,000. A 
creditor that is an insured depository institution or insured credit 
union that during calendar year 2024 had assets of $12,179,000,000 
or less on December 31, 2024, satisfies this criterion for purposes 
of any loan consummated in 2025 and for purposes of any loan secured 
by a first lien on a principal dwelling of a consumer consummated in 
2026 for which the application was received before April 1, 2026. 
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 was 
$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.
    4. 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, 
satisfied 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.
* * * * *

Brian Shearer,
Assistant Director, Office of Policy Planning and Strategy, Consumer 
Financial Protection Bureau.
[FR Doc. 2024-30653 Filed 12-20-24; 8:45 am]
BILLING CODE 4810-AM-P
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