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Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations
8. Amend Appendix A to part 325 by
revising footnote 39 to read as follows:

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Appendix A to Part 325—Statement of
Policy on Risk-Based Capital
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II * * *
C.* * *

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39 This

category would also include a firstlien residential mortgage loan on a one-tofour family property that was appropriately
assigned a 50 percent risk weight pursuant to
this section immediately prior to
modification (on a permanent or trial basis)
under the Home Affordable Mortgage
Program established by the U.S. Department
of Treasury, so long as the loan, as modified,
is not 90 days or more past due or in
nonaccrual status and meets other applicable
criteria for a 50 percent risk weight. In
addition, real estate loans that do not meet
all of the specified criteria or that are made
for the purpose of property development are
placed in the 100 percent risk category.

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12 CFR Chapter V
For reasons set forth in the common
preamble, the Office of Thrift
Supervision amends part 567 of Chapter
V of title 12 of the Code of Federal
Regulations as follows:

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PART 567—CAPITAL
9. The authority for citation for part
567 continues to read as follows:

■

Authority: 12 U.S.C. 1462, 1462a, 1463,
1464, 1467a, 1828 (note)

PART 567—CAPITAL
10. Section 576.1 is amended in the
definition Qualifying mortgage loan by
revising paragraph (4) to read as follows

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Definitions.

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*
Qualifying mortgage loan
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*
(4) A loan that meets the requirements
of this section prior to modification on
a permanent or trial basis under the U.S.
Department of Treasury’s Home
Affordable Mortgage Program may be
included as a qualifying mortgage loan,
so long as the loan is not 90 days or
more past due.
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15:06 Nov 19, 2009

Dated at Washington DC, this 12th day of
November 2009.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
Dated: October 29, 2009.
By the Office of the Thrift Supervision.
John E. Bowman,
Acting Director.
[FR Doc. E9–27776 Filed 11–19–09; 8:45 am]
BILLING CODE 6714–01–P; 6210–01–P; 4810–33–P;
6720–01–P

FEDERAL RESERVE SYSTEM
12 CFR Part 226

Truth in Lending

Office of Thrift Supervision

VerDate Nov<24>2008

By order of the Board of Governors of the
Federal Reserve System, November 12, 2009.
Jennifer J. Johnson,
Secretary of the Board.

[Regulation Z; Docket No. R–1378]

Department of the Treasury

§ 567.1

Dated: November 10, 2009.
John C. Dugan,
Comptroller of Currency.

Jkt 220001

AGENCY: Board of Governors of the
Federal Reserve System.
ACTION: Interim final rule; request for
public comment.
SUMMARY: The Board is publishing for
public comment an interim final rule
amending Regulation Z (Truth in
Lending). The interim rule implements
Section 131(g) of the Truth in Lending
Act (TILA), which was enacted on May
20, 2009, as Section 404(a) of the
Helping Families Save Their Homes
Act. TILA Section 131(g) became
effective immediately upon enactment
and established a new requirement for
notifying consumers of the sale or
transfer of their mortgage loans. The
purchaser or assignee that acquires the
loan must provide the required
disclosures in writing no later than 30
days after the date on which the loan is
sold or otherwise transferred or
assigned. The Board is issuing this
interim rule, effective immediately upon
publication, so that parties subject to the
statutory requirement have guidance on
how to comply. However, to allow time
for any necessary operational changes,
compliance with the interim final rule
is optional for 60 days from the date of
publication; during this period, covered
persons would continue to be subject to
the statute’s requirements. The Board
seeks comment on all aspects of the
interim rule.
DATES: This interim final rule is
effective November 20, 2009; however,
to allow time for any necessary

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operational changes, compliance with
this interim final rule is optional until
January 19, 2010. Comments must be
received on or before January 19, 2010.
ADDRESSES: You may submit comments,
identified by Docket No. R– 1378, by
any of the following methods:
• Agency Web Site: http://
www.federalreserve.gov. Follow the
instructions for submitting comments at
http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
• E-mail:
regs.comments@federalreserve.gov.
Include the docket number in the
subject line of the message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Address to Jennifer J. Johnson,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue, NW., Washington,
DC 20551.
All public comments will be made
available on the Board’s Web site at
http://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical
reasons. Accordingly, comments will
not be edited to remove any identifying
or contact information. Public
comments may also be viewed
electronically or in paper in Room MP–
500 of the Board’s Martin Building (20th
and C Streets, NW.,) between 9 a.m. and
5 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Paul
Mondor, Senior Attorney, or Stephen
Shin, Attorney; Division of Consumer
and Community Affairs, Board of
Governors of the Federal Reserve
System, Washington, DC 20551, at (202)
452–2412 or (202) 452–3667. For users
of Telecommunications Device for the
Deaf (TDD) only, contact (202) 263–
4869.
SUPPLEMENTARY INFORMATION:

I. Background
The Truth in Lending Act (TILA), 15
U.S.C. 1601 et seq., seeks to promote the
informed use of consumer credit by
requiring disclosures about its costs and
terms. TILA requires additional
disclosures for loans secured by
consumers’ homes and permits
consumers to rescind certain
transactions that involve their principal
dwelling. TILA directs the Board to
prescribe regulations to carry out its
purposes and specifically authorizes the
Board, among other things, to issue
regulations that contain such
classifications, differentiations, or other
provisions, or that provide for such

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Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations

adjustments and exceptions for any
class of transactions, that in the Board’s
judgment are necessary or proper to
effectuate the purposes of TILA,
facilitate compliance with TILA, or
prevent circumvention or evasion of
TILA. 15 U.S.C. 1604(a). TILA is
implemented by the Board’s Regulation
Z, 12 CFR part 226. An Official Staff
Commentary interprets the requirements
of the regulation and provides guidance
to creditors in applying the rules to
specific transactions. See 12 CFR part
226, Supp. I.
On May 20, 2009, the Helping
Families Save Their Homes Act of 2009
(the ‘‘2009 Act’’) was signed into law.
Public Law 111–22, 123 Stat. 1632.
Section 404(a) of the 2009 Act amended
TILA to establish a new requirement for
notifying consumers of the sale or
transfer of their mortgage loans. The
purchaser or assignee that acquires the
loan must provide the required
disclosures no later than 30 days after
the date on which the loan is acquired.
This provision is contained in TILA
Section 131(g), 15 U.S.C. 1641(g), which
applies to any consumer credit
transaction secured by the principal
dwelling of a consumer. Consequently,
the disclosure requirements in Section
131(g) apply to both closed-end
mortgage loans and open-end home
equity lines of credit (HELOCs).
Section 131(g) became effective
immediately upon enactment on May
20, 2009, and did not require the
issuance of implementing regulations.
Mortgage loans sold or transferred on or
after that date became subject to the
requirements of Section 131(g), and
failure to comply can result in civil
liability under TILA Section 130(a). See
15 U.S.C. 1640(a). Accordingly, as
discussed below, the Board finds there
is good cause for issuing an interim rule
that is effective immediately upon
publication, so that parties subject to the
rule have guidance on how to interpret
and comply with the statutory
requirements.
Under the Real Estate Settlement
Procedures Act (RESPA), consumers
must be notified when the servicer of
their mortgage loan has changed.1 The
2009 Act’s legislative history reflects
that, in addition to the information
provided under RESPA, the Congress
intended to provide consumers with
information about the identity of the
owner of their mortgage loan. In some
cases, consumers that have an extended
right to rescind the loan under TILA
Section 125, 15 U.S.C. 1635, can assert
1 RESPA is implemented by Regulation X, 24 CFR
part 3500, which is issued by the Department of
Housing and Urban Development (HUD).

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that right against the purchaser or
assignee. See TILA Section 131(c), 15
U.S.C. 1641(c). Among other things, the
2009 Act seeks to ensure that consumers
attempting to exercise this right know
the identity of the assignee and how to
contact the assignee or its agent for that
purpose. See 155 Cong. Rec. S5098–99
(daily ed. May 5, 2009); 155 Cong. Rec.
S5173–74 (daily ed. May 6, 2009). The
legislative history indicates, however,
that TILA Section 131(g) was not
intended to require notice when a
transaction ‘‘does not involve a change
in the ownership of the physical note,’’
such as when the note holder issues
mortgage-backed securities but does not
transfer legal title to the loan. 155 Cong.
Rec. S5099.
II. Summary of the Interim Final Rule
Consistent with the legislative intent,
this interim final rule implements
Section 404(a) of the 2009 Act by
applying the new disclosure
requirements to any person or entity
that acquires ownership of an existing
consumer mortgage loan, whether the
acquisition occurs as a result of a
purchase or other transfer or
assignment. A person is covered by the
rule only if the person acquires legal
title to the debt obligation. Although
TILA and Regulation Z generally apply
only to persons to whom the obligation
is initially made payable and that
regularly engage in extending consumer
credit, Section 404(a) and the interim
final rule apply to persons that acquire
mortgage loans without regard to
whether they also extend consumer
credit by originating mortgage loans.
However, the interim final rule applies
only to persons that acquire more than
one mortgage loan in any 12-month
period.
To comply with the interim rule, a
covered person must mail or deliver the
required disclosures on or before the
30th day following the date that the
covered person acquired the loan. The
disclosure need not be given, however,
if the covered person transfers or assigns
the loan to another party on or before
that date. This exception seeks to
prevent the confusion that could result
if consumers receive outdated contact
information for parties that no longer
own their loan. For example, a covered
person that acquires a mortgage loan on
March 1 must mail or deliver the
disclosures on or before March 31.
However, if the covered person sells or
assigns the loan to a third party on
March 31 (or earlier), the covered
person need not provide the disclosures,
but subsequent purchasers would have
to comply with the rule.

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III. Legal Authority
General Rulemaking Authority
As noted above, TILA Section 105(a)
directs the Board to prescribe
regulations to carry out the act’s
purposes. 15 U.S.C. 1604(a). Section 404
of the 2009 Act became effective
immediately without any requirement
that the Board first issue implementing
rules. Nevertheless, the Board finds that
the legislative purpose of Section 404
will be furthered and its effectiveness
enhanced by the issuance of rules that
specify the manner in which covered
persons can comply with its provisions.
In addition, the Board believes that
implementing regulations will facilitate
covered persons’ compliance with the
statutory provisions.
TILA also specifically authorizes the
Board, among other things, to:
• Issue regulations that contain such
classifications, differentiations, or other
provisions, or that provide for such
adjustments and exceptions for any
class of transactions, that in the Board’s
judgment are necessary or proper to
effectuate the purposes of TILA,
facilitate compliance with the act, or
prevent circumvention or evasion. 15
U.S.C. 1604(a).
• Exempt from all or part of TILA any
class of transactions if the Board
determines that TILA coverage does not
provide a meaningful benefit to
consumers in the form of useful
information or protection. The Board
must consider factors identified in the
act and publish its rationale at the time
it proposes an exemption for comment.
15 U.S.C. 1604(f).
Authority To Issue Interim Final Rules
Without Notice and Comment
The Administrative Procedures Act
(APA), 5 U.S.C. 551 et seq., generally
requires public notice before
promulgation of regulations. See 5
U.S.C. 553(b). Unless notice or a hearing
is specifically required by statute,
however, the APA also provides an
exception ‘‘when the agency for good
cause finds (and incorporates the
finding and a brief statement of reasons
therefore in the rules issued) that notice
and public procedure thereon are
impracticable, unnecessary, or contrary
to the public interest.’’ 5 U.S.C.
553(b)(B).
As an initial matter, neither TILA nor
the 2009 Act specifically requires the
Board to provide notice or a hearing
with respect to this rulemaking. See
TILA Section 105(a), 15 U.S.C. 1604(a).
In addition, the Board finds that there
is good cause to conclude that providing
notice and an opportunity to comment
before issuing this interim final rule

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would be impracticable and contrary to
the public interest. The statutory
requirements in Section 404 became
effective upon enactment on May 20,
2009, as noted above. Covered persons
must comply with those requirements
even if the Board does not issue this
interim final rule.
This interim final rule implements the
requirements contained in the 2009 Act
but also interprets the statutory text to
resolve issues and ambiguities not
directly addressed by the statute.
Providing notice and opportunity for
comment on these matters before
issuing these rules is not in the public
interest because the legislation was
effective upon enactment. As a result,
persons covered by Section 404(a)
already must be in compliance with the
law or face potential liability for
violations. The Board is issuing final
rules at this time so that covered
persons receive immediate guidance on
how they can comply with the law in a
manner that effectuates its purposes and
avoids potential liability. The Board’s
issuance of a notice of proposed
rulemaking for public comment would
not serve this purpose because it would
not provide certainty regarding a
covered person’s compliance obligations
until the rules were finalized. By
clarifying that Section 404(a) of the 2009
Act covers persons that acquire
mortgage loans even if they are not
‘‘creditors’’ as defined under TILA, the
interim final rule also ensures that
consumers will receive the notice that
was intended by the legislation.
Consequently, the Board finds that the
use of notice and comment procedures
before issuing these rules would be
impracticable and would not be in the
public interest. Interested parties will
still have an opportunity to submit
comments in response to this interim
final rule.
Authority To Issue Interim Final Rules
That Are Effective Immediately
This interim final rule is effective
upon publication in the Federal
Register. Institutions may rely on the
rules immediately to ensure they are
complying with the statutory
requirements. However, to allow time
for any necessary operational changes,
compliance with the interim final rules
is optional until January 19, 2010.
During this 60-day period, institutions
continue to be subject to the statute’s
requirements.
The APA generally requires that rules
be published not less than 30 days
before their effective date. See 5 U.S.C.
553(d). As with the notice and comment
requirement, however, the APA
provides an exception when ‘‘otherwise

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provided by the agency for good cause
found and published with the rule.’’ 5
U.S.C. 553(d)(3). Similarly, Section 302
of the Riegle Community Development
and Regulatory Improvement Act of
1994 generally requires that new
regulations and amendments to existing
regulations prescribed by a Federal
banking agency, which impose
additional reporting, disclosure, or other
new requirements on insured depository
institutions, take effect on the first day
of the calendar quarter that begins on or
after the date on which the regulations
are published in final form.2 There is an
exception, however, when ‘‘the agency
determines, for good cause published
with the regulation, that the regulations
should become effective before such
time.’’ 12 U.S.C. 4802(b)(1)(A).
The interim final rule implements
statutory disclosure requirements that
have been in effect since May 20, 2009.
For the reasons discussed above, the
Board finds there is good cause to make
these rules effective immediately. These
rules are intended to interpret and
clarify the statutory requirements and
provide compliance guidance. The
Board will consider public comments
on the provisions before adopting
further rules.
Finally, TILA Section 105(d) generally
provides that a regulation requiring any
disclosure that differs from the
disclosures previously required shall
have an effective date no earlier than
‘‘that October 1 which follows by at
least six months the date of
promulgation.’’ To the extent that the
interim rule contains disclosure
requirements that are already in effect
under the statute, Section 105(d) does
not apply. Moreover, the Board believes
that the effective date mandated by the
2009 Act for the specific disclosures
required under section 404 overrides the
general provision in TILA Section
105(d).
IV. Section-by-Section Analysis
Section 226.39—Mortgage Transfer
Disclosures
39(a) Scope
Section 226.39(a) defines the scope of
the interim rule’s coverage. The
disclosure requirements of § 226.39
apply to any ‘‘covered person,’’ with
certain exceptions that are specified in
the rule. For purposes of the rule, a
‘‘covered person’’ includes any natural
person or organization (as defined in
section 226.2(a)(22) of the regulation)
that acquires more than one existing
2 See Public Law 103–325, Title III, § 302(b), Sept.
23, 1994, 108 Stat. 2214, codified at 12 U.S.C.
4802(b).

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mortgage loan in any 12-month period.
Consistent with the statute, the rule
applies to all consumer mortgage
transactions secured by the principal
dwelling of a consumer, whether the
transaction is a closed-end loan or an
open-end line of credit.
Generally, TILA and Regulation Z
apply to parties that regularly extend
consumer credit. However, Section
404(a) of the 2009 Act is not limited to
persons that extend credit by originating
loans. Section 404(a) imposes the
disclosure duty on the ‘‘creditor that is
the new owner or assignee of the debt.’’
The Board believes that to give effect to
the legislative purpose, the term
‘‘creditor’’ in Section 404(a) must be
construed to refer to the owner of the
debt following the sale, transfer or
assignment, without regard to whether
that party would be a ‘‘creditor’’ for
other purposes under TILA or
Regulation Z. The Board declines to
limit Section 404(a) to parties that
originate consumer loans because such
an interpretation would exempt a
significant percentage of mortgage
transfers which are acquisitions by
secondary market investors that do not
extend consumer credit and are not
‘‘creditors’’ for purposes of other
provisions of Regulation Z.
The Board also believes that Section
404(a) of the 2009 Act does not alter the
definition of ‘‘creditor’’ as currently
used in TILA or Regulation Z. Thus, the
fact that a person purchases mortgage
loans and provides disclosures under
§ 226.39 does not by itself make that
person a ‘‘creditor’’ for purposes of
TILA and Regulation Z (even if the
disclosure provided under Section
404(a) uses the term ‘‘creditor’’).
Accordingly, in describing the persons
subject to the requirements of § 226.39,
the interim final rule uses the term
‘‘covered person’’ rather than the term
‘‘creditor.’’
Under the interim final rule, the
disclosure requirements in § 226.39
apply only to persons that acquire more
than one consumer mortgage transaction
in any 12-month period. Generally,
TILA and Regulation Z cover only
parties that are regularly engaged in
consumer credit transactions, who are
expected to have the capacity to put
systems in place to ensure compliance
with the rules. There is no indication in
the legislative history that Section 404
was intended to apply more broadly.
For example, individual homeowners
might choose to facilitate the sale of
their home by providing seller financing
and accepting the buyer’s promissory
note for a portion of the purchase price.
At a later date, ownership of the debt
obligation might be transferred to

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another family member or to a trust for
estate planning purposes, or might be
transferred to another person if the
original note holder dies. The Board
believes that a formal notice under
Section 404 is not needed in situations
involving individual transfers because
the acquiring party is likely to provide
adequate information to borrowers to
ensure that they know to whom the loan
payments should be made.
Accordingly, to prevent undue burden
on individuals under the interim rule, a
person who acquires only one existing
mortgage loan in any 12-month period
is not a covered person. The Board
intends to exclude persons who are not
regularly engaged in the business of
purchasing or investing in consumer
mortgages loans and are involved in
such transactions infrequently and
would not have systems in place to
comply. The Board specifically solicits
comment on this definition and whether
the scope of the interim final rule’s
coverage is appropriate, or whether a
different standard should apply in
determining which persons must
comply with the disclosure requirement
in § 226.39. For example, comment is
requested on whether the Board should
use the same standard that applies in
determining whether a person is
regularly engaged in extending
consumer credit, which would limit the
application of § 226.39 to persons that
have acquired more than five mortgage
loans in the preceding or current
calendar year. See § 226.2(a)(17)(i),
footnote 3.
To become a ‘‘covered person’’ subject
to § 226.39, a person must become the
owner of an existing mortgage loan by
acquiring legal title to the debt
obligation. Consequently, § 226.39 does
not apply to persons who acquire only
a beneficial interest in the loan or a
security interest in the loan, such as
when the owner of the debt obligation
uses the loan as security to obtain
financing and the party providing the
financing obtains only a security
interest in the loan. Section 226.39 also
does not apply to a party that assumes
the credit risk without acquiring legal
title to the loans. Accordingly, an
investor who purchases an interest in a
pool of loans (such as mortgage-backed
securities, pass-through certificates,
participation interests, or real estate
mortgage investment conduits) but does
not directly acquire legal title in the
underlying mortgage loan, is not
covered by § 226.39.
The Board has received a letter from
the Department of Housing and Urban
Development’s Office of General
Counsel, in its capacity as legal counsel
for the Government National Mortgage

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Association (Ginnie Mae), seeking to
clarify Ginnie Mae’s status under
Section 404(a) of the 2009 Act. Ginnie
Mae guarantees securities that are
collateralized by mortgage loans. HUD’s
letter states that, as the guarantor of
these securities, Ginnie Mae obtains
equitable title in the mortgage loans but
further states that the issuers of the
securities retain legal title to the loans
that collateralize the securities.
According to HUD, legal title to the
loans is not conveyed to Ginnie Mae
unless the issuer of the securities
defaults in its obligations. If the
securities issuer defaults, Ginnie Mae
can immediately extinguish the
securities issuer’s interest in the loans
and take legal title. Based on HUD’s
representations and legal opinion
regarding Ginnie Mae’s status, the Board
believes that the requirements of
§ 226.39 do not apply to Ginnie Mae
until it finds the issuer in default and
acquires legal title to the loans.
Section 131(f) of TILA addresses the
treatment of loan servicers under the
assignee liability provisions in Section
131 as well as the provisions of Section
131(g) which were added by the 2009
Act. Under TILA section 131(f)(2), a
party servicing the mortgage loan is not
treated as the owner of the obligation if
the obligation was assigned to the
servicer solely for the administrative
convenience of the servicer in servicing
the obligation. Accordingly, the
requirements of § 226.39 do not apply to
a loan servicer in this circumstance,
even if the servicer holds legal title to
the loan.
Some industry representatives have
requested clarification whether a
disclosure under § 226.39 is required in
the case of a merger, acquisition, or
reorganization. The Board believes that
the statute covers acquisitions that
occur in these situations when
ownership of the loan is transferred to
a different legal entity. Accordingly, the
interim final rule does not provide an
exception for such transactions.
39(b) Disclosure Required
Section 226.39(b) contains the general
requirement for covered persons to
provide the disclosures required under
Section 404 of the 2009 Act, unless the
exception specified in § 226.39(c)
applies. The disclosures must be mailed
or delivered to the consumer on or
before the 30th calendar day following
the date that the covered person
acquires the loan. For purposes of this
requirement, the date that the covered
person acquires the loan is deemed to be
the acquisition date that is recognized in
the books and records of the acquiring
party. If there is more than one covered

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person, the interim rule provides that
only one disclosure shall be given; the
covered persons must determine among
themselves which one of them will
provide the disclosure. If there is more
than one consumer, a covered person
may mail or deliver the disclosures to
any consumer who is primarily liable on
the obligation.
The transfer of ownership of a
mortgage loan is subject to the
disclosure requirements of this section
when the acquiring party is a separate
legal entity from the transferor, even if
the parties are affiliated entities.
However, if a covered person acquires a
mortgage loan and subsequently
transfers the loan to another entity, the
regulation does not prohibit the two
entities from combining their
disclosures on a single document.
Comment 39(b)–2 clarifies how two
entities may comply with the rules in
certain circumstances by providing a
single form that covers both entities. For
example, a covered person that acquires
a loan on August 31 might mail a single
disclosure on or before September 30
with the knowledge that it will assign
the loan to another entity on October 15.
The covered person could mail a single
disclosure providing the required
information for both entities and
indicating when the subsequent transfer
will occur.
39(c) Exceptions
To comply with the interim final rule,
a covered person must mail or deliver
the required disclosures on or before the
30th day following the date that the
covered person acquired the loan.
Section 226.39(c)(1) provides an
exception, however, if the covered
person transfers or assigns the loan to
another party on or before that date.
This exception is made pursuant to the
Board’s authority to make exceptions
and exemptions under TILA Sections
105(a) and 105(f). 15 U.S.C. 1604(a),
1604(f). This exception seeks to prevent
the confusion that could result if
consumers receive outdated contact
information for parties that no longer
own their loans. For example, if a
mortgage loan is originated on February
22 and the original creditor sells the
loan on March 1 to a covered person,
the covered person must mail or deliver
the disclosures required by § 226.39 on
or before March 31. However, under the
exception in § 226.39(c)(1) the covered
person would not be required to provide
the disclosures if the loan is sold or
otherwise transferred or assigned to a
third party on or before March 31.
The Board specifically solicits public
comment on the need for this exception
and its scope. The Board believes that

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this exception is necessary and proper
to effectuate the purposes of Section 404
and to facilitate compliance. The Board
is concerned about the potential for
consumers to receive multiple
disclosures, some of which contain
information that is outdated and
inaccurate by the time it is received.
This can occur because during the
normal securitization process, several
legal entities may be created to serve as
acquisition vehicles to hold the loan for
a short period before delivering the loan
to an entity that ultimately holds it for
the investors. After origination, a loan
might be assigned to one or more
entities for only a few days before it is
transferred to an entity that will hold it
for a much longer time period.
The Board believes that consumers
may be confused if they receive one or
more notices on or around the 30th day
identifying multiple parties that no
longer own the loan. Consequently, the
interim final rule requires notices to be
provided only by a covered person that
still owns the loan on the 30th day after
the acquisition. Thus consumers would
be likely to receive notices only from
parties actually holding the loan as of
that date. In contrast, notices sent by
temporary holders would provide
information that most consumers are
unlikely to need or use and could create
information overload for many
consumers, thereby hindering their
ability to determine which party should
be contacted to address a particular
concern. The Board believes that the
disclosure of short-term holdings of the
debt obligation that do not reflect the
current ownership status at the time the
consumer receives the notice would be
of minimal value to consumers and does
not provide meaningful disclosure
consistent with the purposes of TILA or
the 2009 Act. Thus, the Board believes
that a regulatory exception adopted
pursuant to TILA Section 105(a) would
effectuate TILA’s purposes and facilitate
compliance.
The Board has also considered the
relevant statutory factors in TILA
Section 105(f). The Board believes that
the Section 105(f) exemption is
appropriate because the disclosure of
ownership interests that are held less
than the 30-day period would not
provide a meaningful benefit to
consumers in the form of useful
information or protection. It would also
complicate compliance and impose
unnecessary burden and expense for
persons that would be required to
comply, that would not be outweighed
by the benefits to consumers.3 The
3 In exercising its exemption authority under
Section 105(f), Board must determine whether

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Board requests comment on whether the
scope of this exemption is appropriate
and whether the 30-day period should
be shorter or longer.
In some cases, the original creditor or
owner of the mortgage loan may sell or
transfer the legal title to secure business
financing, pursuant to a repurchase
agreement that obligates the original
creditor or owner to repurchase the loan
within a short period, typically a month
or less. Under § 226.39(c)(2) of the
interim final rule, if the original creditor
or owner does not recognize the
transaction as a sale of the loan on its
books and records for accounting
purposes, the acquiring party is not
subject to the disclosure requirements of
§ 226.39. However, if the transferor does
not repurchase the mortgage loan, the
acquiring party must make the
disclosures required by § 226.39 within
30 days after the date that the
transaction is recognized as an
acquisition in its books and records.
This exception is also being adopted
pursuant to the Board’s authority in
TILA Sections 105(a) and 105(f). As
with the exception in § 226.39(c)(1), the
exception for repurchase agreements in
§ 226.39(c)(2) seeks to prevent consumer
confusion from the receipt of outdated
disclosures. The Board believes that
providing disclosures for the
transactions covered by the exception in
§ 226.39(c)(2) would not provide a
meaningful benefit to consumers in the
form of useful information or protection.
The Board also believes that the
disclosure of transfers that are subject to
repurchase agreements would
complicate compliance and impose
unnecessary burden and expense for
persons that would be required to
comply, that would not be outweighed
by the benefits to consumers. Comment
is requested on this exception, and any
unintended consequences that may
result.
39(d) Content of Required Disclosures
Section 226.39(d) sets forth the
contents of the notice that must be
coverage of such transactions provides a meaningful
benefit to consumers in light of specific factors. 15
U.S.C. 1604(f)(2). These factors, which the Board
has reviewed, are (1) the amount of the loan and
whether the disclosure provides a benefit to
consumers who are parties to the transaction
involving a loan of such amount; (2) the extent to
which the requirement complicates, hinders, or
makes more expensive the credit process; (3) the
status of the borrower, including any related
financial arrangements of the borrower, the
financial sophistication of the borrower relative to
the type of transaction, and the importance to the
borrower of the credit, related supporting property,
and coverage under TILA; (4) whether the loan is
secured by the principal residence of the borrower;
and (5) whether the exemption would undermine
the goal of consumer protection.

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provided under this section. The
disclosures must identify the loan that
was acquired or transferred and,
consistent with the statute, contain the
following: (1) The identity, address, and
telephone number of the covered person
that owns the mortgage loan; (2) the date
of the acquisition or transfer; (3) contact
information that the consumer can use
to reach an agent or party having
authority to act on behalf of the covered
person; (4) the location of the place
where the transfer of the ownership of
the debt is recorded.
Identity, address, and telephone
number. Section 226.39(d)(1) requires
acquiring parties to provide their name,
as well as their address and telephone
number. Under the interim final rule,
the party identified must be the covered
person who owns the mortgage loan,
regardless of whether another party has
been appointed to service the loan or
otherwise serve as the covered person’s
agent. The covered person has the
option of also providing an electronic
mail address or Internet Web site
address but is not required to do so.
Section 226.39(d)(1) provides that if
there is more than one covered person,
the required information must be
provided for each of them. The Board
specifically solicits comments on the
benefits of this approach, or whether the
identification of multiple parties may
create confusion for consumers. Should
there be limits on the number of covered
persons identified and, if so, what limits
would be appropriate consistent with
the legislative intent?
Acquisition date. Section 226.39(d)(2)
requires disclosure of the date that the
covered person acquired the loan. For
purposes of this section, this is defined
as the date of acquisition recognized in
the books and records of the covered
person. The Board believes that this
approach provides flexibility to
accommodate a variety of circumstances
in which the acquisition could occur.
Agent’s contact information. Under
§ 226.39(d)(3), a covered person must
identify and provide contact
information for the agent or party
having authority to act on behalf of the
covered person. The notice must
identify one or more persons who are
authorized to receive legal notices on
behalf of the covered person and resolve
issues concerning the consumer’s
payments on the loan. However, contact
information for an agent is not required
to be provided under § 226.39(d)(3) if
the consumer can use the information
provided for the covered person
provided under paragraph § 226.39(d)(1)
for these purposes. Thus, the interim
final rule implements the disclosure
requirement in Section 404 but does not

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require that the owner of a loan
designate an agent or other party for any
specific purpose. The rule simply
requires that the owner disclose contact
information when there is such an
agent, so that consumers can direct their
inquiries to the appropriate party.
The Board recognizes that separate
entities may be authorized by the owner
of the loan to act on its behalf for
different purposes. Identifying the party
authorized to receive legal notices is
intended to ensure that consumers have
sufficient information to assert legal
claims, including a right to rescind the
loan, if applicable. However, a covered
person might appoint a different agent
to resolve loan servicing issues. In such
cases, the covered person must provide
contact information for each agent. If
multiple agents are listed, the disclosure
must state the extent to which the
authority of each agent differs, for
example, by indicating if only one of the
agents is authorized to receive legal
notices or only one is authorized to
resolve issues concerning payments.
A covered person may comply with
§ 226.39(d)(3) by providing a telephone
number on the written disclosure if the
consumer can use the telephone number
to obtain the address of the agent or
other authorized person identified. This
differs from the requirement in
§ 226.39(d)(1), which requires covered
persons who acquire a loan to provide
their name, address, and telephone
number in all cases. The flexibility in
§ 226.39(d)(3) is intended to allow
covered persons to use a single
disclosure form that contains a
nationwide toll-free telephone number,
even though there may be different
physical locations to which documents
should be sent in different regions of the
country. Comment is specifically
solicited on this approach and whether
both a telephone number and address
for the agent or authorized
representative should be required to be
included on each disclosure under
§ 226.39(d)(3).
Comment 39(d)(3)–2 clarifies that the
covered person has the option of also
providing the agent’s electronic mail
address or internet web site address but
is not required to do so.
Recording location. Section 404
requires that the disclosure state the
location of the place where the transfer
of ownership of the debt is recorded.
When a mortgage loan is sold, however,
the transfer in ownership of the debt
instrument typically is not recorded in
public records. The new owner’s
security interest in the property that
secures the debt may or may not be
recorded in the public land records or,
if it is recorded, it may not yet be

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recorded at the time the disclosure is
sent.
Consistent with the statute,
§ 226.39(d)(4) of the interim final rules
requires covered persons to disclose the
location where their ownership of the
debt is recorded. However, if the
transfer of ownership has not been
recorded in public records at the time
the disclosure is provided, the covered
person can comply with the rule by
stating this fact. Whether or not the
transfer of ownership has been recorded
in public records at the time the
disclosure is made, the disclosure may
state that the transfer ‘‘is or may be
recorded’’ at the specified location.
The covered person also has the
option of disclosing the location where
the covered person’s security interest in
the property is or may be recorded. In
light of the fact that the transfer in
ownership of the debt instrument
usually is not recorded in public
records, the Board specifically solicits
comment on whether disclosure of the
location where the security interest is
recorded should be required.
Comment 39(d)(4)–2 clarifies that the
covered person is not required to
provide the postal address for the
governmental office where the covered
person’s ownership interest is recorded
or the name of the jurisdiction where
the property is located. For example, it
would be sufficient in all cases to
disclose that the transaction is or may
be recorded in the office of public land
records or the recorder of deeds office
‘‘for the county or local jurisdiction
where the property is located.’’
The Board has taken this approach
after considering the relative costs and
benefits of requiring that the disclosure
provide more detailed information.
Industry representatives have noted that
this information may not be readily
accessible to the acquiring party. A
requirement to provide the name and
address of the governmental office
would require parties that provide such
notices to develop and maintain a
system for matching the property
address to the correct governmental
office, and keeping the database up to
date with correct address information.
The Board does not believe that this
would provide substantial benefit to
consumers because they presumably
know the county or jurisdiction in
which the property is located and can
easily obtain the address of the
governmental office from public
directories or other sources. The Board
solicits comments on the approach
taken in the interim final rule and the
relative costs and benefits of requiring
more detailed disclosures about the

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location where the lender’s security
interest is or may be recorded.
39(e) Optional Disclosures
Section 404 provides that the party
acquiring a loan shall notify the
borrower of ‘‘any other relevant
information’’ regarding the new owner
of the loan. The Board interprets this
statutory language as permitting the
Board to impose additional disclosure
requirements to further the legislative
purpose. Any additional disclosure
requirements would be imposed by
regulation after notice and comment.
The Board does not believe that the
statutory language requires covered
persons to determine independently
what additional information a reviewing
court might subsequently determine to
be legally relevant in order to avoid
liability. Although the interim final rule
does not contain any additional
disclosure requirements, the Board
solicits comment on whether the rule
should include any such requirements.
The Board also believes that, under the
statutory language, covered persons are
permitted, in their sole discretion, to
include additional information that they
might deem relevant or helpful to
consumers, which is reflected in
§ 226.39(e) of the interim final rule. For
example, the covered person may
choose to inform consumers that the
location where they should send
mortgage payments has not changed.
V. Initial Regulatory Flexibility
Analysis
The Regulatory Flexibility Act (5
U.S.C. 601 et seq.) requires an initial
and final regulatory flexibility analysis
only when 15 U.S.C. 553 requires
publication of a notice of proposed
rulemaking. See 5 U.S.C. 603(a), 604(a).
However, the Board has found good
cause under 5 U.S.C. 553(b)(B) to
conclude that, with respect to this
interim final rule, publication of a
notice of proposed rulemaking is
impracticable and not in the public
interest. Accordingly, the Board is not
required to perform an initial or final
regulatory flexibility analysis.
Nonetheless, to solicit additional
information from small entities subject
to the interim final rule, the Board is
publishing an initial regulatory
flexibility analysis.
Based on its analysis and for the
reasons stated below, the Board believes
that this interim final rule will not have
a significant economic impact on a
substantial number of small entities.
The Board invites comment on the effect
of the interim final rule on small
entities.

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A. Reasons for the Interim Final Rule
As indicated above, the 2009 Act was
signed into law on May 20, 2009.
Section 404 amended TILA to establish
a new requirement for notifying
consumers of the sale or transfer of their
mortgage loans. This requirement
became effective immediately upon
enactment on May 20, 2009, and did not
require the issuance of implementing
regulations. As discussed above, the
Board believes there is good cause for an
interim final rule so that parties subject
to the rule have guidance on how to
interpret and comply with the statutory
requirements and consumers receive
notices consistent with legislative
intent.
Congress enacted TILA based on
findings that economic stability would
be enhanced and competition among
consumer credit providers would be
strengthened by the informed use of
credit resulting from consumers’
awareness of the cost of credit. One of
the stated purposes of TILA is to
provide a meaningful disclosure of
credit terms to enable consumers to
compare credit terms available in the
marketplace more readily and avoid the
uninformed use of credit.
B. Summary of 2009 Act
As described previously, the
purchaser or assignee that acquires a
loan must provide the required
disclosures no later than 30 days after
the date on which the loan is acquired.
Section 226.39(c) of the rule provides an
exception if the covered person transfers
or assigns the loan to another party on
or before that date. Section 226.39(d)
sets forth the contents of the notice.
Consistent with the statute, the interim
final rule requires that the notice
contain the following: (1) The identity,
address, and telephone number of the
covered person who owns the mortgage
loan; (2) the acquisition date; (3) a
mailing address and telephone number
that the borrower can use to reach an
agent of the covered person; and (4) the
location where the covered person’s
interest in the property securing the
loan is or may be recorded.

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C. Statement of Objectives and Legal
Basis
The SUPPLEMENTARY INFORMATION
contains this information. The legal
basis for the interim final rule is in TILA
Sections 105(a), 105(f). 15 U.S.C.
1604(a), 1604(f). A more detailed
discussion of the Board’s rulemaking
authority is set forth in the
SUPPLEMENTARY INFORMATION.

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D. Description of Small Entities to
Which the Interim Final Rule Would
Apply
The interim final rule would apply to
all persons that acquire more than one
existing mortgage loan in any 12-month
period, other than servicers that take
title solely as an administrative
convenience to enable them to service
the loans. The Board cannot identify
with certainty the number of small
entities that meet this definition. The
Board can estimate, however,
approximate numbers of small entities
that purchase mortgage loans, as
discussed below.
The Board can identify through data
from Reports of Condition and Income
(‘‘call reports’’) approximate numbers of
small depository institutions that would
be subject to the interim final rules if
they acquire more than one mortgage
loan in a 12-month period.
Approximately 16,345 depository
institutions in the United States filed
call report data in December of 2008, of
which approximately 11,907 had total
domestic assets of $175 million or less
and thus were considered small entities
for purposes of the Regulatory
Flexibility Act. Of 4231 banks, 565
thrifts and 7111 credit unions that filed
call report data and were considered
small entities, 4091 banks, 530 thrifts,
and 4797 credit unions, totaling 9418
institutions, extended mortgage credit.
For purposes of this analysis, thrifts
include savings banks, savings and loan
entities, co-operative banks and
industrial banks.
The Board cannot identify with
certainty the number of small nondepository institutions because they do
not file call reports. Neither can the
Board determine with certainty how
many of the 11,907 institutions
identified above as small entities
acquired mortgage loans in 2008.
Although an estimated 9418 such
institutions extended mortgage credit,
the Board recognizes that not all entities
that extend mortgage credit also acquire
existing mortgage loans. Moreover, the
reverse is also true: there are entities
that acquire existing mortgage loans but
do not extend mortgage credit.
The Board has another source of
information, data obtained under the
Home Mortgage Disclosure Act (HMDA),
12 U.S.C. 2801 et seq.; 12 CFR part 203.
Based on loan purchases reported for
2008 under HMDA, the Board estimates
that 553 of the reporting institutions
engaged in more than one mortgage
acquisition. The 8388 lenders covered
by HMDA in 2008 accounted for the
majority, but not all, of the home
lending in the United States.

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Accordingly, the 553 institutions that
reported loan purchases in 2008
probably do not represent all mortgage
acquirers; institutions must report loan
purchases only if they are required to
report under HMDA based on loan
originations and assets. Nevertheless,
the Board’s experience has been that the
HMDA data are reasonably
representative of the whole mortgage
market.
A total of 2,921,684 loan purchases
were reported under HMDA in 2008 by
entities reporting more than one
purchase (and thus subject to the
interim final rule). Of those loan
purchases, 2,773,918 were reported by
depository institutions. Of those
depository institution loan purchases,
2,122,288 (76.5%) were reported by
large depository institutions (assets
greater than $175 million), and 651,630
(23.5%) were reported by small
depository institutions (assets of $175
million or less). Of the 553 HMDA
reporters reporting more than one loan
purchase, 502 were depository
institutions. Of those 502 depository
institutions, 387 (77.1%) were large and
115 (22.9%) were small. Those 115
small depository institutions represent
just slightly less than one percent
(0.97%) of the 11,907 total small
institutions estimated above from call
report data.
A total of 147,766 loan purchases
were reported under HMDA by nondepository institutions that reported
more than one loan purchase in 2008.
The Board cannot tell from the HMDA
data how many of those loan purchases
were reported by small entities. Neither
can the Board tell how many of the 51
non-depository institutions that
reported those loan purchases are small
entities. If the relative shares among
small and large non-depository
institutions do not differ significantly
from those among depository
institutions, however, the shares for
non-depository institutions can be
estimated. On that basis, the Board
estimates that 12 small non-depository
institutions reported 34,725 loan
purchases and that 39 large nondepository institutions reported 113,041
loan purchases (estimates are rounded
to whole numbers).
Using the foregoing numbers from
2008 HMDA data for depository
institutions and the foregoing estimates
for non-depository institutions, the
Board estimates the following numbers
for all entities reporting under HMDA
combined: of the 2,921,684 loan
purchases reported by 553 entities
reporting more than one purchase,
2,235,329 (76.5%) were reported by 426
large entities (77%), and 686,355

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(23.5%) were reported by 127 small
entities (23%). Based on these estimates,
less than one-quarter of the institutions
reporting covered loan purchases under
HMDA were small entities, and less
than one-quarter of the covered loan
purchases reported were reported by
small entities.
The foregoing data are not complete
in many respects. Not all depository
institutions that file call reports are
reporters under HMDA, and not all
HMDA reporters file call reports.
Further, some unknown number of
entities purchase more than one
mortgage loan in any 12-month period
and yet file neither call reports nor
HMDA data; how many of those are
small entities also is unknown.
Nevertheless, if one assumes that the
existing data are reasonably
representative of the market as a whole,
they present an overall picture of
minimal economic impact on small
entities. For all these reasons, the Board
believes that the interim final rule will
not have a significant economic impact
on a substantial number of small
entities.

significant burden in responding to
consumer requests. Furthermore, the
Board has provided an exception to the
rule for mortgage owners who do not
hold the loan more than 30 days. The
Board believes that this exception
balances the needs of consumers for
information with the burdens on
industry of compliance and the
potential for confusion to consumers of
multiple disclosures.

E. Projected Reporting, Recordkeeping,
and Other Compliance Requirements
The compliance requirements of the
interim final rules are described in the
SUPPLEMENTARY INFORMATION. As
indicated above, the Board is adopting
a new disclosure rule requiring that
consumers receive notice when
ownership of their mortgage loan is
transferred. The Board is aware that
numerous covered persons are already
complying with these statutory
provisions, which became effective on
May 20, 2009. Therefore the additional
burden imposed by the Board’s rule
itself is likely to be minimal.
Furthermore, the information required
to be provided is easily obtainable by
the covered person. The covered person
must provide contact information for
itself and any agent (but is not required
to designate an agent), may use the
acquisition date in its own books and
records, and may generally describe the
location where the covered person’s
interest in the property securing the
mortgage loan is or may be recorded.
This information generally is already
required by the statute.
Based on informal surveys of industry
representatives and practices in effect,
the Board understands that entities are
likely to designate servicers as their
agents. Servicers already respond to
consumer requests on the behalf of
covered persons. Therefore, other than
providing the notice itself, covered
persons (including those who are small
entities) are not likely to incur

G. Significant Alternatives to the Interim
Final Rule
As noted above, this interim final rule
implements the statutory requirements
of the 2009 Act that were effective on
May 20, 2009. The Board has
implemented these requirements to
minimize burden while retaining
benefits to consumers. The Board was
not required to issue rules but has
decided that rules are needed to clarify
who is subject to the requirements and
what information must be disclosed,
and to ensure that consumers receive
disclosures of ownership that are
consistent with legislative intent. The
Board welcomes comment on any
significant alternatives that would
minimize the impact of the interim final
rule on small entities.
The Board welcomes further
information and comment on any costs,
compliance requirements, or changes in
operating procedures arising from the
application of the interim final rule to
small businesses.

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F. Other Federal Rules
The Board has not identified other
rules that conflict with the rule. As
indicated previously, under RESPA and
HUD’s Regulation X, consumers must be
notified when the servicer of their
mortgage loan has changed. Therefore,
the disclosure of contact information for
the agent of the owner of the mortgage
loan, typically the servicer under
applicable agreements, is already
generally required by law. As a result of
existing requirements, servicers are
already subject to disclosure of their
contact information and are already
subject to calls regarding administration
of payment information.

VI. Paperwork Reduction Act
In accordance with the Paperwork
Reduction Act (PRA) of 1995 (44 U.S.C.
3506; 5 CFR part 1320 appendix A.1),
the Board reviewed the interim final
rule under the authority delegated to the
Board by the Office of Management and
Budget (OMB). The collection of
information that is required by this final
rule is found in 12 CFR 226.39. The
Board may not conduct or sponsor, and
an organization is not required to

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respond to, this information collection
unless the information collection
displays a currently valid OMB control
number. The OMB control number is
7100–0199.
This information collection is
required to provide benefits for
consumers and is mandatory (15 U.S.C.
1601 et seq.). Since the Board does not
collect any information, no issue of
confidentiality arises. The respondents/
recordkeepers are persons or entities
that acquire legal title to more than one
mortgage loan in any 12-month period,
including for-profit financial
institutions and small businesses.
TILA and Regulation Z are intended
to ensure effective disclosure of the
costs and terms of credit to consumers.
For closed-end loans, such as mortgage
and installment loans, cost disclosures
are required to be provided prior to
consummation. Special disclosures are
required in connection with certain
products, such as reverse mortgages,
certain variable-rate loans, and certain
mortgages with rates and fees above
specified thresholds. To ease the burden
and cost of complying with Regulation
Z (particularly for small entities), the
Board provides model forms, which are
appended to the regulation. TILA and
Regulation Z also contain rules
concerning credit advertising. Creditors
are required to retain evidence of
compliance with Regulation Z for 24
months (12 CFR 226.25), but Regulation
Z does not specify the types of records
that must be retained.
Under the PRA, the Board accounts
for the paperwork burden associated
with Regulation Z for the state member
banks and other entities supervised by
the Board that engage in activities
covered by Regulation Z and, therefore,
are respondents under the PRA.
Appendix I of Regulation Z defines the
institutions supervised by the Federal
Reserve System as: state member banks,
branches and agencies of foreign banks
(other than federal branches, Federal
agencies, and insured state branches of
foreign banks), commercial lending
companies owned or controlled by
foreign banks, and organizations
operating under section 25 or 25A of the
Federal Reserve Act. Other Federal
agencies account for the paperwork
burden imposed on the entities for
which they have administrative
enforcement authority under TILA.
The current total annual burden to
comply with the provisions of
Regulation Z is estimated to be
1,011,311 hours for the 1,138
institutions supervised by the Federal
Reserve that are deemed to be
respondents for the purposes of the
PRA.

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Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations

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As discussed in the preamble, the
Board is adopting a new disclosure rule
requiring that consumers receive notice
when ownership of their mortgage loan
is transferred. The new disclosure
requirement will impose a one-time
increase in the total annual burden
under Regulation Z for respondents
supervised by the Federal Reserve that
engage in mortgage acquisitions. The
Board estimates that 68 respondents 4
supervised by the Federal Reserve will
take, on average, 40 hours (one business
week) to update their systems, internal
procedure manuals, and provide
training for relevant staff to comply with
the new disclosure requirements in
§ 226.39. Accordingly, this revision is
estimated to result in a one-time
increase in the aggregate burden by
2,720 hours for these 68 respondents.
On a continuing basis, the Board
estimates that 68 respondents
supervised by the Federal Reserve
would take, on average, 8 hours 5 per
month to comply with the new
disclosure requirements, which would
increase the ongoing aggregate burden
by 6,528 hours annually for these
respondents. Accordingly, the Board
estimates that the new disclosure
requirement will increase the total
annual burden on a continuing basis for
respondents supervised by the Federal
Reserve from 1,011,311 to 1,017,839
hours (not including the one-time
increase of 2,720 hours to implement
the changes, as described above). This
total estimated burden increase
represents averages for all respondents
supervised by the Federal Reserve. The
Board expects that the amount of time
required to implement each of the
changes for a given institution may vary
based on the size and complexity of the
respondent.
The other federal financial institution
supervisory agencies (the Office of the
Comptroller of the Currency (OCC), the
Office of Thrift Supervision (OTS), the
Federal Deposit Insurance Corporation
(FDIC), and the National Credit Union
Administration (NCUA)) are responsible
for estimating and reporting to OMB the
4 Based on loan purchases reported for 2008
under the Home Mortgage Disclosure Act (HMDA),
12 U.S.C. 2801 et seq., and Regulation C (12 CFR
part 203), the Board estimates that 58 of the 553
institutions engaged in such mortgage acquisitions
are supervised by the Federal Reserve. Based on
average Call Report data for the past four quarters,
approximately 95 institutions that do not report
under HMDA also would be subject to these new
disclosure requirements and 10 of these institutions
are supervised by the Federal Reserve.
5 Because financial institutions are familiar with
the existing RESPA provisions which require
notification to consumers when the servicer of their
mortgage loan has changed, the Federal Reserve
believes that implementation of requirements in
§ 226.39 should not be overly burdensome.

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total paperwork burden for the
domestically chartered commercial
banks, thrifts, and federal credit unions
and U.S. branches and agencies of
foreign banks for which they have
primary administrative enforcement
jurisdiction under TILA Section 108(a),
15 U.S.C. 1607(a). These agencies may,
but are not required to, use the Board’s
methodology for estimating burden.
Using the Board’s method, the total
current estimated annual burden for the
approximately 17,200 domestically
chartered commercial banks, thrifts, and
federal credit unions and U.S. branches
and agencies of foreign banks
supervised by the Board, OCC, OTS,
FDIC, and NCUA under TILA would be
approximately 17,765,525 hours. The
final rule will impose a one-time
increase in the estimated annual burden
for the estimated 638 institutions
thought to engage in mortgage
acquisitions by 25,520 hours. On a
continuing basis the annual burden
would increase by 61,248 hours. The
total annual burden is estimated to be
17,852,293 hours. The above estimates
represent an average across all
respondents and reflect variations
between institutions based on their size,
complexity, and practices.
The Board has a continuing interest in
public opinion on its collections of
information. At any time, comments
regarding the burden estimate or any
other aspect of this collection of
information, including suggestions for
enhancing the quality of information
collected and ways for reducing the
burden on respondent. Comments on
the collection of information may be
sent to: Secretary, Board of Governors of
the Federal Reserve System, 20th and C
Streets, NW., Washington, DC 20551;
and to the Office of Management and
Budget, Paperwork Reduction Project
(7100–0199), Washington, DC 20503.
List of Subjects in 12 CFR Part 226
Consumer protection, Federal Reserve
System, Mortgages, Reporting and
recordkeeping requirements, Truth in
lending.
Authority and Issuance
For the reasons set forth in the
preamble, the Board amends Regulation
Z, 12 CFR part 226, as set forth below:

■

PART 226—TRUTH IN LENDING
(REGULATION Z)
1. The authority citation for part 226
continues to read as follows:

■

Authority: 12 U.S.C. 3806; 15 U.S.C. 1604,
1637(c)(5), and 1639(l); Public Law 111–24
§ 2, 123 Stat. 1734.

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Subpart E—Special Rules for Certain
Home Mortgage Transactions
2. Add a new § 226.39 to Subpart E of
Part 226 to read as follows:

■

§ 226.39

Mortgage transfer disclosures.

(a) Scope. The disclosure
requirements of this section apply to
any covered person except as otherwise
provided in this section. For purposes of
this section:
(1) A ‘‘covered person’’ means any
person, as defined in § 226.2(a)(22), that
becomes the owner of an existing
mortgage loan by acquiring legal title to
the debt obligation, whether through a
purchase, assignment, or other transfer,
and who acquires more than one
mortgage loan in any twelve-month
period. For purposes of this section, a
servicer of a mortgage loan shall not be
treated as the owner of the obligation if
the servicer holds title to the loan or it
is assigned to the servicer solely for the
administrative convenience of the
servicer in servicing the obligation.
(2) A ‘‘mortgage loan’’ means any
consumer credit transaction that is
secured by the principal dwelling of a
consumer.
(b) Disclosure required. Except as
provided in paragraph (c) of this
section, any person that becomes a
covered person as defined in this
section shall mail or deliver the
disclosures required by this section to
the consumer on or before the 30th
calendar day following the acquisition
date. If there is more than one covered
person, only one disclosure shall be
given and the covered persons shall
agree among themselves which covered
person shall comply with the
requirements that this section imposes
on any or all of them.
(1) Acquisition date. For purposes of
this section, the date that the covered
person acquired the mortgage loan shall
be the date of acquisition recognized in
the books and records of the acquiring
party.
(2) Multiple consumers. If there is
more than one consumer liable on the
obligation, a covered person may mail
or deliver the disclosures to any
consumer who is primarily liable.
(c) Exceptions. Notwithstanding
paragraph (b) of this section, a covered
person is not subject to the requirements
of this section with respect to a
particular mortgage loan if:
(1) The covered person sells or
otherwise transfers or assigns legal title
to the mortgage loan on or before the
30th calendar day following the date
that the covered person acquired the
mortgage loan; or

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Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations

(2) The mortgage loan is transferred to
the covered person in connection with
a repurchase agreement and the
transferor that is obligated to repurchase
the loan continues to recognize the loan
as an asset on its own books and
records. However, if the transferor does
not repurchase the mortgage loan, the
acquiring party must make the
disclosures required by § 226.39 within
30 days after the date that the
transaction is recognized as an
acquisition in its books and records.
(d) Content of required disclosures.
The disclosures required by this section
shall identify the loan that was acquired
or transferred and state the following:
(1) The identity, address, and
telephone number of the covered person
who owns the mortgage loan. If there is
more than one covered person, the
information required by this paragraph
shall be provided for each of them.
(2) The acquisition date recognized by
the covered person.
(3) How to reach an agent or party
having authority to act on behalf of the
covered person (or persons), which shall
identify a person (or persons)
authorized to receive legal notices on
behalf of the covered person and resolve
issues concerning the consumer’s
payments on the loan. However, no
information is required to be provided
under this paragraph if the consumer
can use the information provided under
paragraph (d)(1) of this section for these
purposes. If multiple persons are
identified under this paragraph, the
disclosure shall provide contact
information for each and indicate the
extent to which the authority of each
agent differs. For purposes of this
paragraph (d)(3), it is sufficient if the
covered person provides only a
telephone number provided that the
consumer can use the telephone number
to obtain the address for the agent or
other person identified.
(4) The location where transfer of
ownership of the debt to the covered
person is recorded. However, if the
transfer of ownership has not been
recorded in public records at the time
the disclosure is provided, the covered
person complies with this paragraph by
stating this fact.
(e) Optional disclosures. In addition
to the information required to be
disclosed under paragraph (d) of this
section, a covered person may, at its
option, provide any other information
regarding the transaction.
■ 3. In Supplement I to Part 226, under
Subpart E, a new Section 226.39—
Mortgage Transfer Disclosures is added
to read as follows:

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Supplement I to Part 226—Official Staff
Interpretations
*

*

*

*

*

Subpart E—Special Rules for Certain
Home Mortgage Transactions
*

*

*

*

*

Section 226.39—Mortgage transfer
disclosures.
39(a) Scope.
Paragraph 39(a)(1).
1. Covered persons. The disclosure
requirements of § 226.39 apply to any
‘‘covered person’’ that becomes the legal
owner of an existing mortgage loan, whether
through a purchase, assignment, or other
transfer, regardless of whether the person
also meets the definition of a ‘‘creditor’’ in
Regulation Z. The fact that a person
purchases or acquires mortgage loans and
provides disclosures under § 226.39 does not
by itself make that person a ‘‘creditor’’ as
defined in the regulation.
2. Acquisition of legal title. To become a
‘‘covered person’’ subject to § 226.39, a
person must become the owner of an existing
mortgage loan by acquiring legal title to the
debt obligation. The transfer of ownership of
a mortgage loan is subject to the disclosure
requirements of this section when the
acquiring party is a separate legal entity from
the transferor, even if the parties are affiliated
entities. Section 226.39 does not apply to
persons who acquire only a beneficial
interest in the loan or a security interest in
the loan. Section 226.39 also does not apply
to a party that assumes the credit risk
without acquiring legal title to the loan.
Thus, an investor that acquires mortgagebacked securities, pass-through certificates,
or participation interests and does not
directly acquire legal title in the underlying
mortgage loans is not covered by this section.
3. Loan servicers. Pursuant to TILA Section
131(f)(2), the servicer of a mortgage loan is
not treated as the owner of the obligation for
purposes of § 226.39 if the servicer holds title
to the loan as a result of the assignment of
the obligation to the servicer solely for the
administrative convenience of the servicer in
servicing the obligation.
4. Mergers, corporate acquisitions, or
reorganizations. Disclosures are required
under § 226.39 when, as a result of a merger,
corporate acquisition, or reorganization the
ownership of a mortgage loan is transferred
to a different legal entity.
Paragraph 39(a)(2).
1. Mortgage transactions covered. Section
226.39 applies to any consumer credit
transaction secured by the principal dwelling
of a consumer, which includes closed-end
mortgage loans as well as home equity lines
of credit.
39(b) Disclosure required.
1. Generally. A covered person must mail
or deliver the disclosures required by
§ 226.39 on or before the 30th calendar day
following the date that the covered person
acquired the loan, unless the exception in
§ 226.39(c) applies. For example, if a covered
person acquires a mortgage loan on March 1,
the required disclosure must be mailed or

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delivered on or before March 31. For
purposes of this requirement, the date that
the covered person acquires the loan is the
acquisition date recognized in its books and
records.
2. Disclosure provided on behalf of
multiple entities. A mortgage loan may be
acquired by a covered person and
subsequently transferred to an affiliate or
other entity that is also a covered person
required to provide disclosures under
§ 226.39. In such cases, a single disclosure
may be provided on behalf of both entities
instead of providing two separate
disclosures, as long as the disclosure satisfies
the timing and content requirements
applicable to both entities. For example, if a
covered person acquires a loan on August 31
with the knowledge that it will assign the
loan to another entity on October 15, the
covered person could mail a single disclosure
on or before September 30 which provides
the required information for both entities and
indicates when the subsequent transfer is
expected to occur. Even though one person
delegates responsibility for the disclosures to
another covered person, each has a duty to
ensure that disclosures related to its
acquisition are accurate and provided in a
timely manner.
39(c) Exceptions.
Paragraph 39(c)(1).
1. Example. If a mortgage loan is originated
on February 22nd and the original creditor
sells the loan on March 1 to a covered
person, under the exception in § 226.39(c)
the covered person would not be required to
provide disclosures under § 226.39 if the loan
is sold or otherwise transferred or assigned
to another party on or before March 31.
Paragraph 39(c)(2).
1. Repurchase agreements. The original
creditor or owner of the mortgage loan might
sell or transfer legal title to the loan to secure
short-term business financing under an
agreement where the original creditor or
owner is also obligated to repurchase the
loan within a brief period, typically a month
or less. If the original creditor or owner does
not recognize such transactions as a sale of
the loan on its own books and records for
accounting purposes, the transfer of the loan
in connection with such a repurchase
agreement is not covered by § 226.39 and the
acquiring party is not required to provide
disclosures. However, if the transferor does
not repurchase the mortgage loan, the
acquiring party must make the disclosures
required by § 226.39 within 30 days after the
date that the transaction is recognized as an
acquisition in its books and records.
39(d) Content of required disclosures.
1. Identifying the loan. The disclosures
required by this section should identify the
loan that was acquired or transferred. The
covered person has flexibility in determining
what information to provide for this purpose.
For example, the covered person may
identify the loan by stating the address of the
mortgaged property along with the account
number or other identification number
previously known to the consumer, which
may appear in a truncated format.
Alternatively, the covered person might
identify the loan by specifying the date on
which the credit was extended and the
original amount of the loan or credit line.

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Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / Rules and Regulations
Paragraph 39(d)(1).
1. Identification of covered person. Section
226.39(d)(1) requires acquiring parties to
provide their name, address, and telephone
number. The party identified must be the
covered person who owns the mortgage loan,
regardless of whether another party has been
appointed to service the loan or otherwise
serve as the covered person’s agent. In
addition to providing a postal address and a
telephone number, the covered person may,
at its option, provide an address for receiving
electronic mail or an internet web site
address but is not required to do so.
Paragraph 39(d)(3).
1. Identifying agents. Under § 226.39(d)(3),
the covered person must provide contact
information for the agent or other party
having authority to act on behalf of the
covered person and who is authorized to
receive legal notices on behalf of the covered
person and resolve issues concerning the
consumer’s payments on the loan. Section
226.39(d)(3) does not require that a covered
person designate an agent or other party, but
if the consumer cannot use the covered
person’s contact information for these
purposes the disclosure must provide contact
information for an agent or other party that
can address these matters. If multiple agents
are listed on the disclosure, the disclosure
shall state the extent to which the authority
of each agent differs by indicating if only one
of the agents is authorized to receive legal
notices, or only one of the agents is
authorized to resolve issues concerning
payments. For purposes of § 226.39(d)(3), it
is sufficient to provide a telephone number
as the contact information provided that
consumers can use the telephone number to
obtain the mailing address for the agent or
other person identified.
2. Other contact information. The covered
person may also provide an agent’s electronic
mail address or internet web site address but
is not required to do so.
Paragraph 39(d)(4).
1. Recording location. Section 226.39(d)(4)
requires disclosure of the location where
transfer of ownership of the debt to the
covered person is recorded. If the transfer of
ownership has not been recorded in public
records at the time the disclosure is
provided, the covered person complies with
§ 226.39(d)(4) by stating this fact. Whether or
not the transfer has been recorded at the time
the disclosure is made, the disclosure may
state that the transfer ‘‘is or may be recorded’’
at the specified location.
2. Postal address not required. In
disclosing the location where the transfer of
ownership is recorded, the covered person is
not required to provide a postal address for
the governmental office where the covered
person’s ownership interest is recorded. The
covered person also is not required to
provide the name of the county or
jurisdiction where the property is located.
For example, it would be sufficient to
disclose that the transaction is or may be
recorded in the office of public land records
or the recorder of deeds office ‘‘for the county
or local jurisdiction where the property is
located.’’
39(e) Optional disclosures.
1. Generally. Section 226.39(e) provides
that covered persons may, at their option,

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include additional information about the
mortgage transaction that they consider
relevant or helpful to consumers. For
example, the covered person may choose to
inform consumers that the location where
they should send mortgage payments has not
changed.
By order of the Board of Governors of the
Federal Reserve System, November 13, 2009.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E9–27742 Filed 11–19–09; 8:45 am]
BILLING CODE 6210–01–P

Federal Energy Regulatory
Commission
18 CFR Part 358
[Docket No. RM07–1–002; Order No. 717–
B]

Standards of Conduct for
Transmission Providers; Order on
Rehearing and Clarification
Issued November 16, 2009.
AGENCY: Federal Energy Regulatory
Commission.
ACTION: Order on rehearing and
clarification.
SUMMARY: The Federal Energy
Regulatory Commission (Commission)
issued Order No. 717–A to make even
clearer the Standards of Conduct as
implemented by Order No. 717. This
order addresses requests for rehearing
and clarification concerning paragraph
80 of Order No. 717–A and whether an
employee who is not making business
decisions about contract non-price
terms and conditions is considered a
‘‘marketing function employee.’’
DATES: Effective Date: This rule will
become effective November 23, 2009.
FOR FURTHER INFORMATION CONTACT:
Leonard Tao, Office of the General
Counsel—Energy Markets, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC 20426,
(202) 502–8214.
SUPPLEMENTARY INFORMATION:

129 FERC ¶ 61,123
Before Commissioners: Jon Wellinghoff,
Chairman; Suedeen G. Kelly, Marc Spitzer,
and Philip D. Moeller.

I. Introduction
1. On October 16, 2008, the
Commission issued Order No. 717
amending the Standards of Conduct for
Transmission Providers (the Standards
of Conduct or the Standards) to make
them clearer and to refocus the rules on
the areas where there is the greatest

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potential for abuse.1 On October 15,
2009, the Commission issued Order No.
717–A to address requests for rehearing
and clarification of Order No. 717,
largely affirming the reforms adopted in
Order No. 717.2 In this order, the
Commission grants limited rehearing
and clarification to address certain
specific matters petitioners raised
regarding one of the Commission’s
determinations in Order No. 717–A.
II. Discussion
Independent Functioning Rule:
Marketing Function Employees
2. In paragraph 80 of Order No. 717–
A, the Commission stated the following:

DEPARTMENT OF ENERGY

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The Commission clarifies that an employee
in the legal, finance or regulatory division of
a jurisdictional entity, whose intermittent
day-to-day duties include the drafting and
redrafting of non-price terms and conditions
of, or exemptions to, umbrella agreements is
a ‘‘marketing function employee.’’
‘‘Marketing functions’’ are not limited to only
price terms and conditions of a contract,
because non-price terms and conditions of a
contract could contain information that an
affiliate could use to its advantage. For
example, delivery or hub locations in a
contract are non-price terms that could be
used to favor an affiliate. In addition,
negotiated terms and conditions could affect
the substantive rights of the parties. For this
reason, we decline to make a generic finding
to limit ‘‘marketing functions’’ to only price
terms and conditions, but will consider
waiver requests concerning an employee
whose intermittent duties involve drafting
non-price terms and conditions.3

Requests for Rehearing and Clarification
3. Several parties have requested
expedited clarification regarding
paragraph 80 of Order No. 717–A.4
Specifically, EEI and Western Utilities
request that the Commission clarify that
legal, finance, and regulatory personnel
can be shared between an entity’s
transmission and marketing function
units.5 Similarly, Otter Tail and Central
Vermont seek clarification that lawyers,
finance, and regulatory personnel may
continue to provide support to
1 Standards of Conduct for Transmission
Providers, Order No. 717, 73 FR 63796 (Oct. 27,
2008), FERC Stats. & Regs. ¶ 31,280 (2008) (‘‘Order
No. 717’’).
2 Standards of Conduct for Transmission
Providers, Order No. 717–A, 74 FR 54463 (Oct. 22,
2009), FERC Stats. & Regs. ¶ 31,297 (2009) (‘‘Order
No. 717–A’’).
3 Order No. 717–A at P 80.
4 Edison Electric Institute (EEI) Oct. 30, 2009
Request for Clarification at 7; The Western Utilities
Compliance Group (Western Utilities) Nov. 2, 2009
Request for Clarification at 6; Otter Tail Power
Company (Otter Tail) Nov. 10, 2009 Request for
Clarification at 1; Central Vermont Public Service
Corporation (Central Vermont) Nov. 12, 2009
Request for Clarification at 1.
5 EEI at 7; Western Utilities at 6.

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