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Legal Developments.

FINAL RULE--AMENDMENT TO REGULATION C

The Board of Governors is amending 12 C.F.R. Part 203, its Regulation C, which implements the Home Mortgage Disclosure Act. The amendments: modify the Loan Application Register to prepare for Year 2000 data systems conversion; delete the requirement to enter the reporting institution's parent company on the Transmittal Sheet; and make certain other technical changes to the regulation and reporting forms.

Effective September 24, 1998, 12 C.F.R. Part 203 is amended as follows, and the amendments apply to data collected for calendar year 1998, to be reported by March 1, 1999.

Part 203--Home Mortgage Disclosure (Regulation C)

1. The authority citation for Part 203 continues to read as follows:

Authority: 12 U.S.C. 2801-2810.

2. Section 203.1 is amended by revising the last sentence of paragraph (a) to read as follows:

Section 203.1--Authority, purpose, and scope.

(a) Authority. * * * The information-collection requirements have been approved by the U.S. Office of Management and Budget under 44 U.S.C. 3501 et seq. and have been assigned OMB Numbers 1550-0159, 3064-0046, 1550-0021, and 7100-0247 for institutions reporting data to the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the Federal Reserve System, respectively; numbers for the National Credit Union Administration and the Department of Housing and Urban Development are pending.

3. Section 203.3 is amended as follows:

a. Paragraphs (a)(1) introductory text and (a)(2) introductory text are republished;

b. Paragraph (a)(1)(ii) is revised; and

c. Paragraph (a)(2)(ii) is revised.

The revisions read as follows:

Section 203.3--Exempt Institutions.

(a) Exemption based on location, asset size, or number of home purchase loans.

(1) A bank, savings association, or credit union is exempt from the requirements of this regulation for a given calendar year if on the preceding December 31:

(i) * * *

(ii) The institution's total assets were at or below the asset threshold established by the Board. The asset threshold was adjusted from $10 million to $28 million as of December 31, 1996. For subsequent years, the Board will adjust the threshold 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 twelve-month period ending in November, with rounding to the nearest million. The Board will publish any adjustment to the asset figure in December in the staff commentary.

(2) A for-profit mortgage lending institution (other than a bank, savings association, or credit union) is exempt from the requirements of this regulation for a given calendar year if:

(i) * * *

(ii) The institution's total assets combined with those of any parent corporation were $10 million or less on the preceding December 31, and the institution originated fewer than 100 home purchase loans (including refinancings of home purchase loans) in the preceding calendar year.

4. In Appendix A to part 203 under the heading Paperwork Reduction Act Notice, the undesignated paragraph is revised to read as follows:

Appendix A to Part 203--Form and Instructions for Completion of HMDA Loan/Application Register

Paperwork Reduction Act Notice

This report is required by law (12 U.S.C. 2801-2810 and 12 C.F.R. Part 203). An agency may not conduct or sponsor, and an organization is not required to respond to, a collection of information unless it displays a currently valid OMB Control Number. The OMB Control Numbers for this information collection are 1557-0159, 3064-0046, 1550-0021, and 7100-0247 for institutions reporting data to the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the Federal Reserve System, respectively; numbers for the National Credit Union Administration and the Department of Housing and Urban Development are pending. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing the burden, to the respective agencies and to the Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, D.C. 20503.

5. Appendix A to Part 203 is amended as follows:

a. Paragraph I.A.2. is revised;

b. Paragraphs V.A.2. and V.A.3. are revised;

c. In paragraph V.B.3., the introductory text is revised; and

d. Paragraph V.E.1. introductory text is republished and paragraph V.E.1.4 is revised.

The revisions read as follows:

I. WHO MUST FILE A REPORT

A. Depository Institutions

1. * * *

2. The asset threshold was adjusted from $10 million to $28 million as of December 31, 1996. Any adjustment to the asset threshold for depository institutions will be published by the Board in December in the staff commentary.

V. INSTRUCTIONS FOR COMPLETION OF LOAN/ APPLICATION REGISTER

A. Application or Loan Information

1. * * *

2. Date application received. For paper submissions only, enter the date the loan application was received by your institution by month, day, and year, using numerals in the form MM/DD/CCYY (for example, 01/15/1999). For institutions submitting data in electronic form, the proper format is CCYYMMDD. If your institution normally records the date shown on the application form, you may use that date instead. Enter "NA" for loans purchased by your institution.

3. Type. Indicate the type of loan or application by entering the applicable code from the following:

1 -- Conventional (any loan other than FHA, VA, FSA, or RHS loans)

2 -- FHA-insured (Federal Housing Administration)

3 -- VA-guaranteed (Veterans Administration)

4 -- FSA/RHS-guaranteed (Farm Service Agency or Rural Housing Service)

B. Action Taken

3. Date of action. For paper submissions only, enter the date by month, day, and year, using numerals in the form MM/DD/CCYY (for example, 02/22/1999). For institutions submitting data in electronic form, the proper format is CCYYMMDD.

E. Type of Purchaser

1. Enter the applicable code to indicate whether a loan that your institution originated or purchased was then sold to a secondary market entity within the same calendar year:

4 -- FAMC (Federal Agricultural Mortgage Corporation)

6. In Appendix A, the Loan/Application Register Transmittal Sheet is revised to read as follows:

(The Transmittal Sheet appears on p. 944.)

7. In Appendix A, the Loan/Application Register is revised to read as follows:

(The Loan/Application Register appears on p. 945.)

8. In Appendix A, the Loan/Application Register Code Sheet is revised to read as follows:

Loan/Application Register Code Sheet

Use the following codes to complete the Loan/Application Register. The instructions to the HMDA-LAR explain the proper use of each code.

Application or Loan Information

Type:

1 -- Conventional (any loan other than FHA, VA, FSA, or RHS loans)

2 -- FHA-insured (Federal Housing Administration)

3 -- VA-guaranteed (Veterans Administration)

4 -- FSA/RHS-guaranteed (Farm Service Agency or Rural Housing Service)

Purpose:

1 -- Home purchase (one-to-four family)

2 -- Home improvement (one-to-four family)

3 -- Refinancing (home purchase or home improvement, one-to-four family)

4 -- Multifamily dwelling (home purchase, home improvement, and refinancings)

Owner-Occupancy:

1 -- Owner-occupied as a principal dwelling

2 -- Not owner-occupied

3 -- Not applicable

Action Taken:

1 -- Loan originated

2 -- Application approved but not accepted

3 -- Application denied by financial institution

4 -- Application withdrawn by applicant

5 -- File closed for incompleteness

6 -- Loan purchased by your institution

Applicant Information:

Race or National Origin:

1 -- American Indian or Alaskan Native

2 -- Asian or Pacific Islander

3 -- Black

4 -- Hispanic

5 -- White

6 -- Other

7 -- Information not provided by applicant in mail or telephone application

8 -- Not applicable

Sex:

1 -- Male

2 -- Female

3 -- Information not provided by applicant in mail or telephone application

4 -- Not applicable

Type of Purchaser:

0 -- Loan was not originated or was not sold in calendar year covered by register

1 -- FNMA (Federal National Mortgage Association)

2 -- GNMA (Government National Mortgage Association)

3 -- FHLMC (Federal Home Loan Mortgage Corporation)

4 -- FAMC (Federal Agricultural Mortgage Corporation)

5 -- Commercial bank

6 -- Savings bank or savings association

7 -- Life insurance company

8 -- Affiliate institution

9 -- Other type of purchaser

Reasons for Denial (optional):

1 -- Debt-to-income ratio

2 -- Employment history

3 -- Credit history

4 -- Collateral

5 -- Insufficient cash (down payment, closing costs)

6 -- Unverifiable information

7 -- Credit application incomplete

8 -- Mortgage insurance denied

9 -- Other

FINAL RULE -- AMENDMENT TO REGULATION E

The Board of Governors is amending 12 C.F.R. Part 205, its Regulation E (Electronic Fund Transfers). The amendment to the final rule is revising the time periods for investigating alleged errors involving point-of-sale and foreign-initiated transactions. The former rule extended the statutory time periods for these transactions to allow financial institutions a longer period to investigate before they must provisionally credit an account and a longer period to complete an investigation. The final rule requires financial institutions to provisionally credit an account within 10 business days (rather than 20) and leaves in place the 90 calendar day period to complete the investigation of an alleged error.

At the same time, the Board is extending the time periods to provisionally credit funds and investigate claims involving new accounts. The rule applies to claims made within 30 calendar days after an account is opened. The rule allows 20 business days for resolving an alleged error and up to 90 calendar days for completing the investigation.

Effective September 24, 1998, 12 C.F.R. Part 205 is revised as follows, and compliance is optional until April 1, 1999.

Part 205--Electronic Fund Transfers (Regulation E)

1. The authority citation for Part 205 continues to read as follows:

Authority: 15 U.S.C. 1693-1693r.

2. Section 205.11 is amended by revising paragraph (c)(3) as follows:

Section 205.11--Procedures for resolving errors.

(c) * * *

(3) Extension of time periods. The time periods in paragraphs (c)(1) and (c)(2) of this section are extended as follows:

(i) The applicable time is 20 business days in place of ten business days under paragraphs (c)(1) and (c)(2) of this section if the notice of error involves an electronic fund transfer to or from the account within 30 days after the first deposit to the account was made.

(ii) The applicable time is 90 days in place of 45 days under paragraph (c)(2) of this section, for completing an investigation, if a notice of error involves an electronic fund transfer that:

(A) Was not initiated within a state;

(B) Resulted from a point-of-sale debit card transaction; or

(C) Occurred within 30 days after the first deposit to the account was made.

3. In Appendix A to Part 205, in A-3 Model Forms for Error Resolution Notice (Sections 205.7(b)(10) and 205.8(b)), the undesignated second and third paragraphs following paragraph (a)(3) are revised to read as follows:

Appendix A to Part 205--Model Disclosure Clauses and Forms

Model Forms for Error Resolution Notice (Sections 205.7(b)(10) and 205.8(b))

(a) Initial and annual error resolution notice (Sections 205.7(b)(l0) and 205. 8(b))

We will determine whether an error occurred within ten business days after we hear from you and will correct any error promptly. If we need more time, however, we may take up to 45 days to investigate your complaint or question. If we decide to do this, we will credit your account within ten business days for the amount you think is in error, so that you will have the use of the money during the time it takes us to complete our investigation. If we ask you to put your complaint or question in writing and we do not receive it within 10 business days, we may not credit your account.

We will tell you the results within three business days after completing our investigation. If we decide that there was no error, we will send you a written explanation. You may ask for copies of the documents that we used in our investigation.

FINAL RULE--AMENDMENT TO REGULATION M

The Board of Governors is amending 12 C.F.R. Part 213, its Regulation M, which implements the Consumer Leasing Act. The Act requires lessors to provide consumers with uniform cost and other disclosures about consumer lease transactions. The final rule adopts several technical amendments to the regulation and commentary concerning lease payments, advertisements, and the treatment of taxes.

Effective September 24, 1998, 12 C.F.R. Part 213 is amended as follows, and compliance is optional until October 1, 1999.

Part 213--Consumer Leasing (Regulation M)

1. The authority citation for Part 213 is revised to read as follows:

Authority: 15 U.S.C. 1604; 1667f.

2. Section 213.4 is amended by revising paragraph (f)(8) to read as follows:

Section 213.4--Content of disclosures.

(f) Payment calculation. * * *

(8) Lease payments. The lease payments with a description such as "the number of payments in your lease."

3. Section 213.7 is amended by revising paragraph (d)(l)(ii) to read as follows:

Section 213. 7--Advertising.

(d) Advertising of terms that require additional disclosure.

(1) Triggering terms. * * *

(ii) A statement of any capitalized cost reduction or other payment (or that no payment is required) prior to or at consummation or by delivery, if delivery occurs after consummation.

4. Appendix A to part 213 is amended by revising Appendix A-I, Appendix A-2, and Appendix A-3 to read as follows:

5. In Supplement I to Part 213--Official Staff Commentary to Regulation M, under Section 213.4--Content of Disclosures, the following amendments are made:

a. A new paragraph 409(7) Total of Base Periodic Payments is added in numerical order.

b. The heading to paragraph 4(f)(8) and paragraph 1. are revised.

c. Under paragraph 4(n) Fees and taxes, paragraph 1.ii. is revised.

d. Under Appendix A Model Forms, paragraph 2. v. is revised.

The addition and revisions read as follows:

Supplement I to Part 213--Official Staff Commentary to Regulation M

Section 213.4--Content of Disclosures 4(f)(7) Total of Base Periodic Payments

1. Accuracy of disclosure. If the periodic payment calculation under section 213.4(f) has been calculated correctly, the amount disclosed under section 213.4(f)(7)--the total of base periodic payments--is correct for disclosure purposes even if that amount differs from the base periodic payment disclosed under section 213.4(f)(9) multiplied by the number of lease payments disclosed under section 213.4(f)(8), when the difference is due to rounding.

4(f)(8) Lease Payment

1. Lease Term. The lease term may be disclosed among the segregated disclosures.

4(n) Fees and taxes.

1. Treatment of certain taxes. * * *

ii. Taxes that are part of the scheduled payments are reflected in the disclosure under sections 213.4(c), (f) and (n).

APPENDIX A--MODEL FORMS

2. Examples of acceptable changes. * * *

v. Deleting or blocking out inapplicable disclosures. filling in "N/A" (not applicable) or "0," crossing out, leaving blanks, checking a box for applicable items, or circling applicable items (this should facilitate use of multipurpose standard forms).

(The Model Forms appear on pp. 950-955.)

FINAL RULE--AMENDMENT TO REGULATION DD

The Board of Governors is an/ending 12 C.F.R. Part 230, its Regulation DD, which implements the Truth in Savings Act. The final rule implements amendments to the Truth in Savings Act enacted as part of the Economic Growth and Regulatory Paperwork Reduction Act of 1996. The law modifies the rules for indoor lobby signs, eliminates subsequent disclosure requirements for automatically renewable time accounts with terms of one month or less, and repeals the civil liability provisions as of September 30, 2001.

Effective September 24, 1998, 12 C.F.R. Part 230 is amended as follows:

Part 230---Truth in Savings (Regulation DD)

1. The authority citation for Part 230 continues to read as follows:

Authority: 12 U.S.C. 4301 et seq.

2. Section 230.5 is amended by removing paragraph (c) and redesignating paragraph (d) as new paragraph (c).

3. Section 230.8 is amended by revising paragraph (e)(2)(i) to read as follows:

Section 230.8--Advertising.

(e) Exemption for certain advertisements. * * *

(2) Indoor signs.

(i) Signs inside the premises of a depository institution (or the premises of a deposit broker) are not subject to paragraphs (b), (c), (d) or (e)(1) of this section.

4. Section 230.9 is amended by revising paragraph (b) to read as follows:

Section 230.9--Enforcement and record retention.

(b) Civil liability. Section 271 of the Act contains the provisions relating to civil liability for failure to comply with the requirements of the act and this part; Section 271 is repealed effective September 30, 2001.

Supplement I to Part 230--Official Staff Interpretation

5. In Supplement I to Part 230, in Section 230.5 Subsequent disclosures, under paragraph (c), paragraph 1. is removed.

6. In Supplement I to Part 230, in Section 230.8 Advertising, under paragraph (e)(2)(i), paragraph 2. is removed.

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Publication:Federal Reserve Bulletin
Date:Nov 1, 1998
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