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Federal Reserve bank of Dallas ROBERT D. McTEER, JR. DALLAS, TEXAS 75265-5906 P R E S ID E N T AN D C H IE F E X E C U T I V E O F F I C E R April 17, 1998 Notice 98-32 TO: The Chief Executive Officer of each financial institution and others concerned in the Eleventh Federal Reserve District SUBJECT Reviews of Regulation B (Equal Credit Opportunity) and Regulation C (Home Mortgage Disclosure) DETAILS The Board of Governors of the Federal Reserve System has requested public comment on reviews of two of its consumer protection regulations: Regulation B (Equal Credit Opportunity) and Regulation C (Home Mortgage Disclosure). The review of Regulation B will determine whether it should be revised to address technological and other developments, identify areas in the regulation that could be revised to better balance consumer protections and industry burden, and delete obsolete provisions. The purpose of the Regulation C review is to identify ways in which the Board could revise it to clarify and simplify the regulatory language, respond to technological and other developments, reduce undue regulatory burden on the industry, delete obsolete provisions, and improve the quality and usefulness of the data. The Board must receive comments about the reviews of Regulation B (refer to Docket No. R-1008) and/or Regulation C (refer to Docket No. R-1001) by May 29, 1998. Please address comments to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue, N.W., Washington, DC 20551. ATTACHMENTS Copies of the Board’s notices as they appear on pages 12326-29 (Regulation B) and pages 12329-31 (Regulation C), Vol. 63, No. 48 of the Federal Register dated March 12, 1998, are attached. For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) MORE INFORMATION For more information, please contact Eugene Coy at (214) 922-6201. For additional copies of this Bank’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, Thursday March 12, 1998 Part V Federal Reserve System 12 CFR Parts 202 and 203 Equal Credit Opportunity and Home Mortgage Disclosure; Proposed Rules 12326 Federal Register/Vol. 63, No. 4 8 /Thursday, March 12, 1998/Proposed Rules FEDERAL RESERVE SYSTEM 12 CFR Part 202 [Regulation B; Docket No. R -1008] Equal Credit Opportunity B oard of G overnors of the F ederal Reserve System . ACTION: A dv ance n o tice of p ro p o sed rulem aking. AGENCY: SUMMARY: P u rsu a n t to its Regulatory P lan n in g a n d R eview Program , the F ederal Reserve B oard (the “ B oard”) is u n d e rta k in g a rev iew of R egulation B, w h ic h carries out th e p ro vision s of the Equal C redit O p p o rtu n ity A ct (the “ ECOA”). T he ECOA m akes it u n la w fu l for credito rs to disc rim in a te again st an a p p lic a n t in an y aspect of a credit tran sa ctio n on th e basis of race, color, religion, n atio n al origin, sex, m arital status, age, a n d o th er specified bases. T he rev iew w ill d eterm in e w h e th e r R egulation B sh o u ld b e rev ise d to ad d ress tech nolog ical an d o th er develo pm ents; id e n tify areas in the reg u la tio n th a t c o u ld be rev ise d to better b alan c e co n su m er p rotection s a n d in d u stry b u rd en ; a n d delete obsolete provisions. To gather inform ation n ecessary for th is review a n d to en su re th e p artic ip a tio n of in tereste d parties, th e B oard is soliciting co m m en t on several specific issues, w h ile also soliciting co m m en t generally on p o te n tia l revision s to th e regulation. DATES: C om m ents m u st be receiv ed by M ay 29, 1998. ADDRESSES: C om m ents sh o u ld refer to D ocket No. R—1008, a n d m ay be m ailed to W illiam W. W iles, Secretary, B oard of G overnors of th e F ederal Reserve System , 20th Street a n d C o n stitu tio n A venue, N.W., W ashington, DC 20551. C om m ents also m ay be d eliv ere d to Room B -2222 of th e Eccles B uilding b e tw e en 8:45 a.m. an d 5:15 p.m . w eekdays, or to th e gu ard sta tio n in the Eccles B uilding c o u rty a rd on 20th Street, N.W. (betw een C o n stitu tio n A v en u e a n d C Street) an y tim e. C om m ents m ay be in sp e c te d in Room M P -5 0 0 of th e M artin B uilding b etw een 9:00 a.m. a n d 5:00 p.m . w eekdays, except as p ro v id e d in 12 CFR section 261.12 of th e B oard ’s R ules Regarding A vailab ility of Inform ation. FOR FURTHER INFORMATION CONTACT: N atalie E. T aylor or S h eilah G oodm an, Staff A ttorneys, or Jane Jensen Gell, S enior A ttorney, D ivision of C o nsum er and C om m unity Affairs, B oard of G overnors of th e F ederal Reserve System , W ashington, DC 20551, at (202) 4 5 2 -2 4 1 2 or 452 -36 67; for th e h earin g im p aired only, con tact D iane Jenkins, T eleco m m u n icatio n s D evice for th e D eaf (TDD), at (202) 452-3544. SUPPLEMENTARY INFORMATION: I. Background on ECOA and Regulation B T he E qual C redit O p p o rtu n ity Act, 15 U.S.C. 1691, en acted in 1974, m akes it u n la w fu l for a cred itor to disc rim in a te against a n ap p lic a n t in an y aspect of a cred it tran sa ctio n on th e basis of sex or m arital status. In 1975, p u rs u a n t to sectio n 703 of th e ECOA, the Board issu e d R egulation B to im p le m e n t the ECOA. T h e Congress a m e n d e d the ECOA in 1976 to p ro h ib it d isc rim in a tio n on th e a d d itio n a l bases of race, color, religion, n atio n al origin, age (pro vided th e a p p lic a n t has th e capacity to contract), rec eip t of p u b lic assistan ce benefits, an d good faith exercise of a righ t u n d e r th e C onsum er C redit P rotection Act. T h e B oard issu ed an am en d e d R egulation B in 1976 to reflect th e am en d m en ts. U n d er the B oard’s R egulatory P lan n in g an d Review Program , w h ich req u ires p erio d ic rev iew of th e B oard’s regulations, th e B oard rev iew ed R egulation B a n d revised it in 1985 (50 FR 48018, N ovem ber 20, 1985). In 1989, th e B oard m o d ifie d R egulation B to im p le m e n t am en d m e n ts to th e ECOA c o n ta in e d in th e W o m en ’s B usiness O w n e rsh ip A ct of 1988. T hose am en d m e n ts re q u ire d th a t creditors give w ritte n no tice to b u sin e ss a p p lica n ts of th e righ t to a w ritte n statem en t of reasons for a credit denial, a n d im po sed a reco rd re te n tio n req u irem en t for reco rds relating to b u sin e ss cred it ap p lica tio n s (54 FR 50482, D ecem ber 7, 1989). The B oard further m o d ifie d th e reg u latio n in 1993 to im p lem en t a m en d m e n ts to th e ECOA c o n ta in e d in th e F ederal D eposit Insuran ce C orp oration Im p ro v em en t A ct of 1991. T he am en d m e n ts p ro v id ed ap p lica n ts w ith a right to obtain a copy of the ap p ra isal re p o rt u se d in a n a p p lica tio n se cu red b y re sid e n tia l real p ro p erty , an d ex p a n d e d th e enfo rcem en t resp o n sib ilities of th e federal financial su p erv iso ry agencies w h e n inform ation ab o u t p o ssib le v io lation s of th e ECOA becom es k n o w n (58 FR 65657, D ecem ber 16, 1993). The B oard also m o d ified th e regu lation in 1997 to im p le m e n t am en d m e n ts to th e ECOA c o n ta in e d in th e E conom ic G row th an d Regulatory P aperw ork R ed u ctio n A ct of 1996. T he am en d m e n ts created a privilege for in fo rm atio n d ev elo p ed by creditors as a re su lt of “ self-tests” they c o n d u c t (62 FR 66412, D ecem ber 18, 1997). II. R eview o f Regulation B T he B oard w ill rev iew R egulation B w ith th ree goals in m in d : (1) To d eterm in e w h e th e r regulatory am en d m e n ts are n e e d e d to add ress tech nological a n d other d evelopm ents; (2) to id e n tify areas in th e regulation th a t c o u ld be rev ise d to b etter balance co n su m er p rotection s a n d in d u stry b u rd en ; a n d (3) to d elete obsolete provisions. T his A d v an ce N otice of P rop osed R ulem aking is in te n d e d to gather in fo rm atio n a b o u t b ro ad p o licy issues th a t c o u ld be ad d re ssed b y revisio ns to th e regulation. T he B oard is soliciting co m m en t on several specific issues, b u t also req uests suggestions generally on o th e r issues th a t com m enters believe sh o u ld be ad d re ssed or clarified. T he B oard w ill p u b lish a p ro p o se d ru le after evalu atin g th e com m ents a n d further analysis. C oncurrently, th e B oard is u n d erta k in g a rev iew of R egulation C (Home M ortgage D isclosure); an adv an ce n otice of p ro p o se d rulem ak in g is p u b lish e d elsew here in to d a y ’s Federal Register. C om m ent is specifically solicited on the follow ing issues: 1. P reapplication M arketing P ractices T he ECOA an d R egulation B p ro h ib it d isc rim in a tio n by a cre d ito r against an a p p lica n t— a p erso n w h o h as req u e sted or receiv ed credit—on a p ro h ib ite d basis regarding an y asp ect of a cred it tran saction. Credit tran sa ctio n is defin ed in th e regu lation as every aspect of an a p p lic a n t’s dealings w ith a cred itor b eg in nin g w ith inform ation req u irem en ts. T hus, th e coverage of th e ECOA is generally lim ite d to a p erso n w h o has, at a m in im u m , soug ht cred it inform ation. H ow ever, th e Board recognizes th a t a p erso n c o u ld be d isco uraged from seeking cre d it or cred it inform ation. A ccordingly, the regu lation exp ressly p ro h ib its a creditor from engaging in any practice th at w o u ld discourage a reaso nable p erso n (on a p ro h ib ite d basis) from ap p ly in g for credit. T he official staff com m entary provides th a t a creditor is p ro h ib ite d from u sin g w ords, sym bols, or other form s o f c o m m u n ic atio n in adv ertisin g th a t express, im ply, or suggest a discrim in ato ry preference or a policy of exclusion, althou gh a cre d ito r is p e rm itte d to engage in affirm ative advertising to so licit or encourage trad itio n a lly d isad v an tag ed groups to a p p ly for credit. A side from th e p ro h ib itio n against discou ragem en t, th e ECOA has n o t b ee n in te rp re te d to a p p ly to a cre d ito r’s p re a p p lic a tio n m arketing p ractices— Federal Register/Vol. 63, No. 4 8 /Thursday, March 12, 1998/Proposed Rules su c h as th e selectio n of p ersons so licited for a cre d it c a rd .1 C reditors use a n u m b e r of te ch n iq u e s to decid e to w h o m solicitations w ill b e sent. For in stance, credito rs w ill often specify criteria to cre d it b u reau s, w h ic h th e n u tiliz e cred it rep o rts to co m p ile m ailin g lists th a t id e n tify p o te n tia l ap p lica n ts w h o m e et th o se criteria. T his m arketing te c h n iq u e — inv olvin g p resc re en e d so licitatio n s—is u su a lly carried o u t th ro u g h m a ile d so licitation s as w ell as by telem arketing. B ecause in d iv id u a ls selected th ro u g h th e prescreenin g process have n o t req u e sted credit, they are n o t d ee m e d to be a p p lica n ts for p u rp o ses of R egulation B w h e n th e prescreen in g occurs. It is on ly after the in d iv id u a ls re sp o n d to a c re d ito r’s in v itatio n th a t th e reg u latio n applies. D uring th e 1985 rev iew of R egulation B, the B oard c o n sid ered w h e th e r p resc re en e d so licitation s sh o u ld be covered b y th e regulation. It w as generally reco gnized th a t p resc re en e d solicitations c o u ld re su lt in a greater availability o f cre d it for consum ers. A lso, th e re w as no evidence at th a t tim e th a t creditors w ere im p ro p e rly m aking use of p ro h ib ite d ch aracteristics. T herefore, th e B oard d ee m e d it u n n ec essary to m odify th e regulation. T he B oard recognizes th a t prescreen in g o n a p ro h ib ite d basis m ay facilitate th e id e n tific atio n of p o ten tial custom ers a n d p ro v id e greater access to cre d it for som e consum ers. For exam ple, som e creditors h av e u se d age to target “ o ld e r” in d iv id u a ls for cred it solicitations a n d related fin ancial services. H ow ever, th e B oard a n d the o th er b anking agencies h av e also found instances in w h ic h creditors, p rim arily in th e cre d it card in d u stry , h av e u se d age to ex clude y o u th a n d eld erly p erso n s from receiving solicitatio ns for p rea p p ro v e d credit. G iven th e p ote n tia l for u sin g p ro h ib ite d bases in p rescreen in g to im p ro p e rly exclud e certain categories of in d iv id u als, the B oard seeks to gain a better u n d e rsta n d in g of c u rren t p ractices, an d solicits co m m en t on h o w a n d to w hat extent creditors are u sing an y p ro h ib ite d bases in p re a p p lic a tio n m arketing. 2. In q u iry v. A p p lic a tio n R egulation B allow s creditors to estab lish th e ir o w n ap p lica tio n pro ced u res, in c lu d in g w h a t a n d h o w m u c h in fo rm atio n to p rov id e to consum ers w h o req u e st in form ation 1The Fair Housing Act (FHA), w hich bars discrim ination in housing-related transactions, differs in its treatm ent of prescreened solicitations. The FHA has been interpreted to prohibit persons from prescreening on a prohibited basis, whereas the ECOA perm its any prescreening since only “applicants” receive the protections of the act. before ap p ly in g for credit. C reditors a n d others h av e ex pressed co n cern th a t th e cu rren t d istin c tio n u n d e r R egulation B b etw e en an in q u iry an d an a p p lica tio n is difficult to apply. T he ru le d istin g u ish es b etw een an in q u iry a n d an a p p lic a tio n b ased on w h a t th e credito r co m m u nicates to th e con sum er. W h en a co n su m er req u ests cre d it inform ation, th is in q u iry m ay entail a d isc u ssio n of th e c o n su m e r’s cre d it characteristics. Creditors have suggested th a t u n d e r the reg u latio n it is u n clea r w h e n a credito r is sim p ly p ro v id in g in fo rm atio n rath er th a n co m m u n icatin g a cre d it d ecisio n — for exam ple, w h e n th e cre d ito r explains its u n d e rw ritin g sta n d ard s in the context of th e a p p lic a n t’s credit characteristics. A cred itor is req u ired to no tify a co n su m er of action taken (including, as ap p ro p riate, a n o tice of adverse action) if in resp o n se to a co n su m e r’s requ est for cred it in fo rm atio n th e cre d ito r com m unicates a d ecisio n n o t to ex ten d credit. C reditors say th a t it is b u rd e n so m e to p ro v id e a n adv erse action n o tice to every co n su m er w h o is p ro v id e d w ith negative in fo rm atio n in th e inform ationgathering process. A lso, th e y suggest th a t som e co nsum ers m ig h t be co n cern ed ab out receiving adverse action notices w h e n th e y are m erely in th e process of gathering in fo rm atio n to sh o p for a loan. M ost q uestions th a t th e Board receives regarding th e d istin ctio n b etw e en a n in q u iry a n d an ap p lica tio n arise in m ortgage processes. W ith the in creased u se of p requ alificatio ns, preap p ro v als, a n d in teractiv e loancalcu latio n tools p ro v id ed over the In ternet, creditors have h a d difficulty determ in in g w h e th e r a n o tice is requ ired . Som etim es, w h a t begins w ith a creditor pro v id in g in fo rm atio n tu rn s into an ev alu atio n of cred itw orthiness. W ith p req u alificatio n s or preap p ro v als, co n su m ers begin th e ir lo a n -sh o p p in g by ap p ro a ch in g a len d er to d eterm in e th e p rice of a h o m e they co u ld afford. In th is process, creditors often o btain a n d rev iew th e c o n su m er’s cred it rep o rt for a m ore accurate p ictu re of th e c o n su m e r’s deb t obligations an d cred it history. In m o st cases, the co n su m er has n o t id e n tifie d a specific property, n o r is th e co nsum er n ecessarily rea d y to seek a lo an from a p a rticu la r creditor. Som e creditors p ro v id e loancalcu latio n tools o n th e ir h o m e page on th e Internet; a n d co n su m ers are able to calcu late th e p rice of a h o m e th e y co u ld afford b y entering info rm atio n about inco m e an d other data. Som e program s w ill calcu late th e m a x im u m am o u n t for w h ic h th e co n su m er co u ld qualify. O ther program s encourage th e consum er 12327 to call th e financial in stitu tio n w h e n in fo rm atio n h as b een en tered a n d it ap p ears from th e calcu latio n th a t th e co n su m er w o u ld n o t qualify for a m ortgage d u e to, for exam ple, low inco m e an d high debt. Som e cre d ito rs’ h o m e pages enable th e co n su m er to take th e n ex t step of ap p ly in g to th e financial in stitu tio n for a h o m e loan. In determ in in g w h e th e r it is possible to p ro v id e a d d itio n a l g u id an ce to clarify th e d istin c tio n b etw een an in q u iry an d ap p lica tio n , th e B oard believes it is im p o rta n t to encourage creditors to p ro v id e inform ation, counseling, a n d assistan ce to co nsum ers seeking credit inform ation. T he sharing of info rm ation th ro u g h co u n seling program s, su c h as ho m e -o w n e rsh ip counseling, is a p rim e exam ple. In h o m e-o w n ersh ip counseling, a th ird -p a rty organization a n d financial in stitu tio n m ay p artn e r to co u n sel p o te n tia l h o m e b uyers— ty p ically first-tim e h o m e buy ers and, often b u t n o t necessarily, low -incom e ho m e b u y ers—on h o w to ob tain a mortgage. A credit re p o rt is often o b tain ed to determ in e th e c o n su m e r’s financial p o sitio n an d to assist in an ongoing coun seling process th a t co u ld sp a n a y ear or longer. In som e program s, th e th ird -p arty organ izatio n m ay n o t on ly p ro v id e cou nseling services, b u t also m ay p resc re en a p p lica n ts for the lender. T he B oard solicits com m ent on w h e th e r th e m ore form al th e process becom es in pro v id in g inform ation, counseling, a n d assisting po te n tia l ap p lica n ts— for exam ple, verifying cred it inform ation, or prescreen ing ap p lica n ts— th e m ore th e process sh o u ld be trea te d as a n ap plicatio n. The Board also solicits co m m en t on th e follow ing: (1) S h o u ld th e B oard devise a different test for determ in in g w h e n an inform al d isc u ssio n becom es an ap plicatio n? If yes, w h a t sh o u ld be th e test? (2) S h o u ld th e B oard seek to establish a “b rig h t-lin e” test? For exam ple, sh o u ld a n in q u iry becom e an a p p lica tio n w h e n a cred itor evaluates or verifies credit in fo rm atio n throu gh th ird -p arty info rm ation (such as by obtaining a cre d it re p o rt or credit score)? (3) W hen, if at all, w o u ld th e use of an interactiv e lo an -calcu latio n tool co n stitu te an app lication ? (4) Is it possib le or desirable to ap p ly th e cu rren t n o tification ru les to hom eo w n ersh ip co u nselin g program s? If not, h o w sh o u ld th e ru les be d esign ed to d istin g u ish ed u catio n -o rien ted co u nseling from adv ice offered b y a len der, for exam ple, to a consum er requ estin g a p req u alificatio n decision? 12328 Federal Register/Vol. 63, No. 48/Thursday, March 12, 1998/Proposed Rules (5) A re th e re som e h o m e-o w n ersh ip co unseling program s th a t h av e elem ents of b o th co u nseling an d ap p lica tio n s su c h th a t they sh o u ld be d istin g u ish e d from ed u c atio n -o rie n te d counseling? (6) Does th e issu e of d istin g u ish in g an in q u iry from a n ap p lic a tio n also arise in nonm ortgage processes? If so, w h a t are som e of th e d istin g u ish in g characteristics of su c h processes? W o u ld a test d ev e lo p e d for mortgage processes be effective for nonm ortgage processes? 3. V o lu n ta ry Data C ollection R egulation B generally pro h ib its creditors from in q u irin g abo ut an a p p lic a n t’s sex, m arital status, race, color, religion, an d n atio n al origin. T his p ro v isio n w as in c lu d e d in th e reg u latio n in th e b elief th a t if creditors d id n o t h av e th is inform ation , they c o u ld n o t u se it to disc rim in a te against ap p lican ts. A t th e sam e tim e, excep tio ns to th is p ro h ib itio n w ere also in c lu d e d in R egulation B. T he regu lation requires creditors to collect “m o nito rin g in fo rm atio n ” (age, sex, m arital status, an d race or n atio n al origin) for mortgage lo an ap p lican ts. T his req u irem en t w as a d d e d b ecau se of th e specific co n cern th a t th e d ata w as n e e d e d to h e lp detect m ortgage le n d in g d iscrim in atio n . T he reg u latio n also allow s cred itors to collect d ata if re q u ire d b y an o th er regulation, order, or agreem ent of a court or enforcem ent agency to m o n ito r or enforce co m p lia n ce w ith th e ECOA, R egulation B, or an y o th er federal or state statute or regulation. T his ex cep tio n w as in c lu d e d in th e reg u latio n so th a t le n d ers w o u ld n o t hav e to choose b e tw e en com peting regu lation s or statutes. For exam ple, creditors can co llect d ata p u rs u a n t to th e H om e M ortgage D isclosure A ct w ith o u t co ncern s abo ut violating R egulation B. In A p ril 1995, th e B oard p u b lish e d for co m m en t a p ro p o sed a m e n d m e n t to R egulation B th a t w o u ld h av e allow ed, b u t n o t req u ired , cred itors to collect in fo rm atio n ab ou t a n a p p lic a n t’s sex, m arital status, race, color, a n d n atio n al origin for nonm ortgage cre d it pro ducts. T he reg u latio n w o u ld h av e c o n tin u e d to b ar cred itors from co n sid erin g this in fo rm atio n in a cre d it decision. In D ecem ber 1996, th e B oard w ith d re w the p ro p o se d am en d m e n t, no tin g th a t this issu e m ig h t be m ore a p p ro p riate for the Congress to consider. S ince issu an ce of th e final action, the B oard has rec eiv e d req uests from th e other federal fin an cial regulatory agencies, creditors, a n d co m m u n ity groups asking for fu rth e r co n sid eratio n of th is m atter. T he B oard believes th at in light of th e overall rev iew of R egulation B it is ap p ro p riate to evalu ate w h e th e r th e p ro h ib itio n on data co llectio n sh o u ld be changed. The B oard solicits co m m en t o n w h e th e r to co n sid er a m en d in g R egulation B to rem ov e th e p ro h ib itio n b arring creditors from collecting certain info rm atio n abou t a p p lica n ts for nonm ortgage credit produ cts. 4. D efinition o f Creditor T he ECOA an d R egulation B p ro h ib it a credito r from disc rim in a tin g against a n a p p lic a n t o n a p ro h ib ite d basis regarding an y asp ect of a credit tran saction . T he ECOA’s d efin itio n of cred itor in c lu d e s any one w h o “regularly e x te n d s” or “regularly arranges for” th e ex ten sio n of credit. R egulation B com bines th e co ncep ts a n d defines a cred itor as a p erso n w ho, in the ord in ary cou rse of b usin ess, regularly p articip a te s in th e d ecisio n of w h e th e r or n o t to ex ten d credit, in c lu d in g p erso n s su c h as a p o te n tia l p u rc h a se r of an obligation w h o in fluences th e d ecisio n of w h e th e r or n o t to exten d credit. For p u rp o ses of §§ 202.4 an d 202.5(a) (the p ro h ib itio n s against d isc rim in a tio n an d discouragem ent), brokers or others w h o regularly refer ap p lica n ts to creditors (or w h o select or offer to select creditors to w h o m a p p lica tio n s ca n be m ade) are also d ee m e d creditors. As creditors ex p a n d th e ir d istrib u tio n system s for le n d in g services a n d p ro d u cts, th e y have in creasin gly asked for g u id an ce abou t h o w th e d efin itio n of “ cre d ito r” ap p lies w h e n a le n d e r acts in co n ju n ctio n w ith oth er p arties a n d d isc rim in a tio n occurs. T he q uestion co u ld arise in th e co ntex t of tran sactions in w h ic h a m ortgage broker d iscrim in ates in originating loans th a t are fu n d ed by or closed in th e nam e of th e lender, for exam ple, an d also cou ld arise in o th er types of lend in g, su ch as auto m obile financing. R egulation B pro v id es th a t a p erso n (w ho m ay o th erw ise be a creditor) is n o t a credito r regarding a vio latio n of th e ECOA or th e reg u latio n co m m itted by a n o th er credito r un le ss th e p erso n kn ew or h a d reason ab le n otice of th e act, practice, or p o licy th a t c o n stitu ted the v iolation before becom ing in v olv ed in th e cre d it transaction. T he B oard solicits co m m en t o n w h e th e r it is desirable or feasible to p ro v id e fu rth er g u id an ce in th is area, su c h as th e circu m stances u n d e r w h ic h a credito r is d eem ed to have k now ledge of th e acts of other p arties w h e n th e credito r has p articip a te d in th e decision to extend cre d it or set th e cre d it term s. C om m ent is so licited o n th e follow ing: (1) Is it feasible for th e reg u latio n to p ro v id e m ore specific g u id a n ce given th a t m ost issu es w ill d e p e n d on th e facts of a p a rtic u la r case? (2) S h o u ld th e c u rren t test— w h ic h relies on w h e th e r a p erso n k n e w or h a d reasonab le n o tice of an act of d isc rim in a tio n —be m odified ? If so, in w h a t w ay? (3) S h o u ld th e reg u latio n address w h eth er, an d u n d e r w h at circum stan ces, a creditor m u st m o n ito r th e pricing or oth er cre d it term s w h e n an o th er cred itor (for exam ple, a broker) p articip ates in th e transactio ns? 5. D o cu m en ta tio n fo r B u sin e ss Credit C urrently, R egulation B requires w ritte n ap p lica tio n s if th e cre d it is p rim a rily for th e p u rch a se or refinancing of an a p p lic a n t’s p rin c ip a l dw elling. T his ru le does n o t ap p ly to b u sin e ss credit. M any requ ests for bu sin ess cre d it are m a d e orally or w ith o u t a form al w ritte n ap p licatio n . In su ch cases, a cred itor u su a lly req uests th a t th e a p p lic a n t su b m it a financial statem en t for evaluation. As a general rule, R egulation B p ro h ib its creditors from req u irin g th e signature of a p erso n other th a n th e ap p lic a n t on an y credit in stru m e n t w h ere th e ap p lic a n t is in d iv id u a lly creditw o rth y. W here the financial statem en t offered to su p p o rt th e b usin ess cre d it lists join tly h eld p ro p erty an d is signed by b o th ow ners, som e cred itors are treatin g th e financial sta te m en t as a join t app lication. A ccordingly, b o th o w ners often are req u ired to sign the n o te—even w here th e req u e st for cre d it is being m a d e by o nly one of th e p ro p erty ow ners. The B oard does n o t b elieve th a t a joint p ro p erty o w n e r’s signature on a financial sta te m en t to attest to the accuracy or veracity of in fo rm atio n is definitive ev idence of a joint a p plicatio n. W ith o u t d o c u m en ta tio n in th e files other th a n th e fin an cial statem ent, in stitu tio n s m ay be re q u ire d to sp e n d c o nsid erable tim e an d expense estab lish in g th a t an ap p lic a tio n w as for joint, rath e r th a n in d iv id u al, credit. In ad d itio n , agencies th a t exam ine for com pliance w ith R egulation B m ay im p ose costs an d other b u rd e n s on in stitu tio n s w h e n it is difficu lt to d eterm in e w h e th e r a joint p ro p erty o w n er actu ally in te n d e d to be a joint ap p lican t. A ccordingly, th e B oard has b een asked to revise th e reg u latio n to p ro v id e g u id an ce o n w h a t m e ch an ism s m ay be u se d by creditors to establish a jo in t p ro p erty o w n e r’s in te n t to ap p ly for joint b u sin e ss credit. T he B oard solicits co m m en t on the follow ing: Federal Register/Vol. 63, No. 4 8 / Thursday, March 12, 1998/Proposed Rules (1) W hat are som e m ech an ism s th ro u g h w h ic h ev id en ce of an a p p lica tio n for jo in t cre d it can be established? (2) S h o u ld th e B oard pro v id e gu id an ce to clarify th e m e ch a n ism s th ro u g h w h ic h a n a p p lica tio n for joint cre d it can be ev idenced? If not, h o w can creditors en su re th a t th e ir p ractices do n o t violate th e regulation? 6. B u sin e ss Credit E x e m p tio n s T he ECOA au th o rizes th e B oard to ex em p t a class of tran sactio n s, or a p a rtic u la r ty p e o f tran sa ctio n w ith in a class, if th e B oard d eterm in es th a t the ap p lic a tio n of all or part of the reg u latio n to su c h tran sa ctio n s w o u ld n o t co n trib u te su b stan tially to effectuating th e p u rp o ses of th e regulation. P u rsu a n t to S ection 703 of th e ECOA, th e B oard h as exercised its a u th o rity to ex em p t b u sin e ss c re d it from certain n o tific atio n an d rec o rd rete n tio n req u irem en ts for co n su m er cre d it if the b u sin e ss h a d gross rev en u es in excess of $1 m illio n in its p reced in g fiscal year, or if the busin ess req u e sted an extensio n of trad e credit, cred it in c id e n t to a factoring agreem ent, or o th e r sim ilar ty p es of b u sin e ss credit. A m en d m en ts to th e ECOA co n tain e d in th e W o m en ’s B usiness O w n ersh ip A ct of 1988 req u ire th e B oard to review exem p tio n s after five years to d eterm in e w h e th e r a n ad d itio n a l ex ten sio n is appro priate. W h ile th e exem p tio n s for certain b u sin e ss credit do n o t affect th e b asic p ro h ib itio n against d isc rim in a tio n in cre d it tran sactio n s, th e exem ption s do red u c e b u rd e n for credito rs by m odifying th e n otice req u irem en ts of th e reg u latio n u n d e r § 202.9(a)(3) an d th e reco rd re te n tio n ru les u n d e r § 202.12(b)(5). T h e B oard solicits co m m en t on w h e th e r th e se exem p tions are still appro priate. 7. O ther Issues T he B oard solicits com m ents on an y o th e r b ro ad p o licy issues th a t sh o u ld be ad d re ssed in th e regulation. By order of the Board of Governors of the Federal Reserve System, M arch 6, 1998. William W. Wiles, Secretary o f the Board. [FR Doc. 98-6325 Filed 3-11-98; 8:45 am] BILLING CODE 6210-01-P FEDERAL RESERVE SYSTEM 12 CFR Part 203 [Regulation C; Docket No. R-1001] Home Mortgage Disclosure B oard of G overnors of the F ederal Reserve System . AGENCY: A d vance n otice of p ro p o sed rulem aking. ACTION: SUMMARY: P u rsu a n t to its Regulatory P lan n in g a n d R eview Program , the B oard is u n d erta k in g a rev ie w of R egulation C (Home M ortgage D isclosure). T he p u rp o se of th e review is to id en tify w ays in w h ic h th e Board co u ld revise R egulation C to clarify an d sim p lify th e regu lato ry language; re sp o n d to techno log ical a n d other dev elop m en ts; red u c e u n d u e regulatory b u rd e n o n th e in dustry; d elete obsolete provisions; a n d im p rov e th e q u ality an d u sefulness of th e data. To gather in fo rm atio n n ecessary for th is review a n d to en su re th e p a rtic ip a tio n of in tereste d parties, th e B oard is soliciting co m m en t o n several specific issues, w h ile also soliciting co m m en t generally o n p o te n tia l revision s to th e regulation. DATES: C om m ents m u st b e receiv ed by M ay 29, 1998. ADDRESSES: C om m ents sh o u ld refer to Docket No. R -1 00 1, an d m ay be m ailed to W illiam W. W iles, Secretary, B oard of G overnors of th e F ederal Reserve System , 20th Street a n d C onstitution A venue, N.W., W ashington, D.C. 20551. C om m ents also m ay b e d eliv ere d to Room B -222 2 of th e Eccles B uilding b etw een 8:45 a.m. an d 5:15 p.m. w eekd ay s, or to th e g u ard statio n in th e Eccles B u ilding c o u rty a rd on 20th Street, N.W . (betw een C o nstitution A v en ue a n d C Street) at an y tim e. C om m ents received w ill be available for in sp e ctio n in Room M P -5 0 0 of the M artin B u ilding b e tw e en 9:00 a.m. an d 5:00 p.m . w eekdays, ex cept as p ro v id ed in 12 CFR 261.12 of th e B oard’s Rules R egarding A vailability of Inform ation. FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell or John C. W ood, Senior A ttorneys, or P am ela M orris B lum enthal, Staff A ttorney, D ivision of C onsu m er a n d C o m m u nity Affairs, B oard of G overnors of th e F ederal Reserve System , at (202) 4 5 2 -3 6 6 7 or (202) 45 2-2 412 ; for th e h earing im p aired only, D iane Jenkins, T eleco m m u n icatio n s D evice for the Deaf, at (202) 452-3544. SUPPLEMENTARY INFORMATION: I. Background on HMD A and R egulation C T he H om e M ortgage D isclosure A ct of 1975 (HMDA) (12 U.S.C. 2801 et seq.) requires in stitu tio n s to collect an d rep o rt d ata abou t h o m e p u rch a se an d h o m e im p ro v e m en t loans. In stitu tio n s m u st rep o rt data for loans orig in ated or p u rch a sed , as w ell as for loan ap p lica tio n s th a t do n o t re su lt in an origination. R egulation C, w h ic h carries ou t th e act, requires in stitu tio n s to 12329 rep o rt in fo rm atio n ab out th e a p p lica tio n or loan: th e ap p lic a tio n date, th e actio n tak en a n d th e date of th a t action, the loan am o unt, an d th e loan type an d pu rp o se. In stitu tio n s m u st also rep o rt data a b o u t a p p lica n ts or borrow ers: th e ir race, sex, an d incom e. Finally, in stitu tio n s m u st rep o rt th e p rop erty location a n d o cc u p an c y status, an d id en tify th e ty p e of p u rc h a se r for loans th a t th e y sell. In stitu tio n s rep o rt th is in fo rm atio n to th e ir sup erv isory agencies on an ap p lica tio n -b y -ap p lica tio n basis u sin g a register form at. In stitu tio n s m u st m ake th is register available to th e pu blic, w ith certain fields red a cte d to preserve a p p lic a n ts’ privacy. In ad d itio n , the F ederal F in an c ial In stitu tio n s E x am in atio n C ouncil (FFIEC), o n b eh a lf of th e su p erv iso ry agencies, com piles th is in fo rm atio n an d prepares in d iv id u a l d isclo su re statem ents for each in stitu tio n , aggregate rep o rts for all covered in stitu tio n s in each m e tro p o lita n statistical area (MSA), a n d o th e r reports. In d iv id u a l disclosure statem ents are available to th e p u b lic from each in stitu tio n , an d disclosu re statem ents an d aggregate rep orts are available at cen tral d ep ositories in each MSA. T he p u rp o se of HMDA is threefold. O ne p u rp o se is to p ro v id e th e p u b lic a n d g o v ern m en t officials w ith in fo rm atio n th a t w ill h elp sh ow w h e th e r fin an cial in stitu tio n s are serving th e h o u sin g n ee d s of th e n eig hbo rho ods a n d co m m u n ities in w h ic h th e y are located. A seco nd p u rp o se is to h elp p u b lic officials target p u b lic in v estm en ts to prom o te p rivate in v e stm e n ts in n eig hbo rho ods w h ere in v e stm e n t is need ed . F inally, th e collectio n a n d disclosure requ irem en ts p ro v id e data th at assist in identifying po ssible discrim in ato ry le n d in g p attern s a n d enforcing a n tid isc rim in a tio n statutes. HMDA specifies th e data th at in stitu tio n s m u st collect a n d report. Because of th e v o lu m e of info rm atio n th a t m u st be aggregated (in 1996, th e data reflected 14.8 m illio n loans an d applications) in stitu tio n s m u st sta n d ard iz e th e d ata rep orts an d generally su b m it th e m to th e ir sup erv isory agency in a m achinereadable form. T he B oard has im p o sed few ad d itio n a l item s of d ata collection b e y o n d th o se in the statute. To facilitate data retrieval, each en try in th e in s titu tio n ’s HMDA lo a n /a p p lic a tio n register (HMDA-LAR) m u st co n tain a u n iq u e identifier. E ach entry m u st also co n tain th e ap p lic a tio n date a n d the ac tio n ta k en date. In stitu tio n s m u st d istin g u ish lo an s to p u rch a se or im p ro v e m u ltifam ily dw ellin gs from 12330 Federal Register/Vol. 63, No. 4 8 /Thursday, March 12, 1998/Proposed Rules other h o m e p u rc h a se or hom e im p ro v e m en t loans. II. R eview o f R egulation C P u rsu a n t to th e B oard ’s R egulatory P lan n in g an d R eview Program , the B oard has u n d e rta k e n a rev iew of R egulation C to determ in e w h e th e r rev isio n s m ig h t be m a d e to im pro ve th e regulation. T h e reg u la tio n w as last rev ie w ed in 1988, w h e n th e B oard m ade organizatio nal an d te ch n ic al changes to red u c e b u rd en . As d isc u sse d below , the Board h as id e n tifie d several possib le areas for revision. T h e B oard invites com m en ts on th e se a n d any o th er issues th a t m ig h t w a rra n t review . A fter evalu atin g th e com m ents, th e B oard w ill p u b lish a p ro p o se d ru le for p u b lic com m ent. C o ncurren tly, th e B oard is also u n d erta k in g a rev iew of R egulation B (Equal C redit O pportunity); an advance n o tice of p ro p o sed ru lem aking is p u b lish e d elsew h ere in to d a y ’s Federal Register. C om m ent is specifically so licited on th e follow ing issues: 1. R eporting P reapprovals HMDA an d R egulation C requ ire le n d ers to rep o rt data regarding a p p lica tio n s for m ortgage loans th a t do n o t re su lt in originations. U n d er R egulation C, a n ap p lic a tio n is d efin ed as a n oral or w ritte n req u e st for a h om e p u rc h a se or h o m e im p ro v e m en t loan th a t is m ade accord in g to th e p ro ced u res estab lish ed b y th e le n d er for th e ty p e of cre d it requested. C urrently, a credito r th a t m akes a p relim in a ry d ecisio n about a p o te n tia l a p p lic a n t’s cre d itw o rth in ess before receiving a form al a p p lica tio n does n o t rep o rt th e decisio n— w h eth e r th e d ecisio n involves a “p re q u a lifica tio n ” follow ing a cursory rev ie w or involves co m p reh en siv e u n d e rw ritin g th a t co u ld re su lt in an ap p ro v a l subject to th e a p p lic a n t’s finding a n acceptab le p ro p erty (a “p re a p p ro v a l”). F ollow ing a p reap p ro v al, h o m e bu yers id e n tify th e p ro p erty th ey w ish to p u rch a se an d le n d ers evalu ate in fo rm atio n relatin g to th e p ro p erty offered as security for the loan. P reapp rovals th a t lead to an o rigination are rep o rted o n th e H M D A LAR. C urrently, requ ests for p reap p ro v als th a t re su lt in d en ials are n o t reported. To tn e extent th a t reliance on p rea p p ro v a ls beco m es sta n d ard in d u stry practice, th e ap p lic a tio n d ata cou ld becom e less u se fu l for th e in te n d e d p u rp o se of p ro v id in g a basis for c o m p ariso n regarding a c re d ito r’s le n d in g decisions. If p o te n tia l borrow ers are d e n ie d at th e p rea p p ro v a l stage an d p rea p p ro v a l d ecisions are n o t repo rted , th e rep o rted d en ials m ay n o t be fully rep rese n ta tiv e of a le n d e r’s credit decisions. T he B oard h as b ee n asked to co n sid er req u irin g creditors to collect a n d rep o rt p reap pro vals, u sin g a special code to d istin g u ish th e m from form al ap p licatio n s. C om m ent is req u e sted on all aspects of th e issue in c lu d in g th e follow ing: (1) H as th e p ractice of p reap p ro v als becom e co m m on en o u g h to suggest the n ee d for coverage u n d e r R egulation C? (2) In p rea p p ro v a l tran sactions, th e cre d ito r m ay lack som e of th e data called for by th e HM DA-LAR. For exam ple, th e loan am o u n t m ay be p relim in a ry a n d th e co n su m er often has n o t id e n tifie d a p ro p erty address. W hat level of in fo rm atio n w o u ld m ake th e rep o rtin g of data o n preap p ro v als useful? M ore generally, at w h at stage in th e loan a p p lica tio n process w o u ld data regarding th e se d ecision s better reflect th e p a tte rn of a cre d ito r’s len d in g practices? (3) Does rep o rtin g p reap p ro v al req u ests re p re se n t a p o te n tia lly greater b u rd e n th a n rep o rtin g other tran saction s? A re th ere reporting d istin ctio n s, in e ith er th e lev el of in fo rm atio n or th e type of p reapp rov als, th a t w o u ld m in im iz e the b urd en ? (4) H om e-ow n ersh ip counseling program s som etim es share sim ilarities w ith p reap p ro v al program s. Some h o m e -o w n e rsh ip co u nselin g program s m ay target low - a n d m od erate-in co m e consum ers; others are available to any first-tim e h o m e b u y er a n d have elem ents of b o th co u nselin g a n d credit evaluation. T he m ore form al th e process of p ro v id in g in fo rm atio n a n d assistance becom es— for exam ple, by verifying cre d it in fo rm atio n —th e m ore the co unseling p ro cess resem bles a preapp rov al. T he B oard b elieves it is im p o rta n t to e n su re th a t credito rs are n o t d isco uraged from p ro v id in g assistance to co n su m ers seeking credit inform ation th ro u g h counseling program s. C onsequently, th e B oard solicits co m m en t on w ays to distin g u ish co u nseling program s from p reap p ro v al program s so as n o t to discourage creditors from p ro v id in g inform ation, assistance, a n d co u n seling to consu m ers sh o p p in g for credit. (5) O ne ap p ro a ch for rep ortin g p reap p ro v al decisio ns w o u ld be to track th e req u irem en ts of R egulation B (Equal C redit O p portun ity) an d req uire rep o rtin g of all requ ests th a t req uire an adverse actio n n o tice u n d e r Regulation B. If a cred itor evaluates in form ation a b out a co nsum er, d ecid es to decline th e request, a n d co m m u n icates the d ecisio n to th e con su m er, R egulation B requ ires th e cred itor to treat th e request as an a p p lica tio n an d sen d a notice of adverse action. C urren tly u n d e r R egulation C, credito rs are in stru c ted n o t to rep o rt p rea p p ro v a l decisions, even if u n d e r R egulation B th e y are req u ired to give adverse action notices on p rea p p ro v a l requ ests th a t are denied. O ne disadv an tage to th is ap p ro a ch is th a t o nly d en ials w o u ld be reported. (6) W o u ld tracking th e requ irem en ts of R egulation B w o rk b etter if th at regulatio n w ere rev ise d along w ith R egulation C to establish a “b rig h t-lin e” te st th a t d istin g u ish e d b e tw e en an in q u iry a n d a n ap p licatio n ? S u p p o se that, u n d e r b o th regulations, a n in q u iry (or request for a preapproval) w o u ld be treated as a n ap p lic a tio n o n ly if a cred itor ev alu ated or verified credit inform atio n th ro u g h th ird p arty in fo rm atio n (such as by obtaining a cre d it rep o rt or cre d it score). 2. R ep o rtin g R efin a n cin g s a n d H o m e Im p ro v e m e n t L oans R egulation C pro v id es co nsiderable flexibility in th e rep o rtin g of refinancing tran sactio n s in o rd er to m in im ize co m p lian ce b u rd en . A creditor, at its option , m ay rep o rt a refin an cing tran sa ctio n u n d e r one of several tests: if th e existing obligation w as a reportable tran sa ctio n u n d e r R egulation C; if the existing obligation w as se cu red by a lien o n a dw elling; or if th e n ew tran sa ctio n w ill be se cu red b y a lie n o n a dw elling. T his ap proach, a d o p ted in 1995, is in te n d e d to facilitate co m p lian ce by allow ing le n d ers to rep o rt all dw ellingsecu red refinances. Som e rep o rtin g in stitu tio n s as w ell as users of th e HMDA d ata believe th is rule m akes th e resu ltin g data difficult to analyze an d of lim ite d value. T hey note th a t th e data m erge refinancings to red u c e th e b o rro w er’s in terest rate on a h o m e m ortgage w ith n ew ly hom ese cu red loans u se d by th e b orrow er to co n so lid ate an d replace p reviously u n se c u re d co n su m er loans su ch as cre d it card debt. T he H om e M ortgage D isclosure A ct requ ires th e reporting of inform ation a b out m ortgage loans in p art to d eterm in e w h e th e r lenders are m eeting th e h o u sin g n eed s of th e ir com m unities. T he act defines a “ mortgage lo a n ” as (1) a lo an se cu red b y resid e n tia l real p ro p erty or (2) a h o m e im p ro v e m en t loan. R egulation C im p lem en ts the act by establishing a “ p u rp o se te st” an d requiring le n d ers to re p o rt loans for the p u rp o se of h o m e p u rch a se or hom e im p rov em ent, an d th e refinancings of th o se loans. By e x p a n d in g th e d efin itio n of “refin an c in g ,” th e B oard b ro ad e n ed th a t category to in c lu d e — at the in s titu tio n ’s o p tio n — all dw ellingse cu red loans, regardless of th e p u rp o se of th e original loan. T he Board solicits Federal Register/Vol. 63, No. 4 8 /Thursday, March 12, 1998/Proposed Rules co m m en t on w h e th e r th e repo rting categories sh o u ld be fu rth e r m odified. C om m ent is req u e sted on all aspects of th e issue in c lu d in g th e follow ing: (1) W o u ld a change in th e rep o rtin g categories im p ro v e th e u sefu ln ess of th e data? (2) W o u ld a change in th e rep ortin g categories m ake co m p lian ce easier an d red u c e b u rd en ? (3) W o u ld th e cost of a change in th e rep o rtin g categories o utw eigh any p o ssible benefits? 3. P urchased Loans U n d er HMDA an d R egulation C, in stitu tio n s m u st rep o rt all lo an s th at th e y pu rch ase, ev en th o se p u rc h a se d in b u lk or in th e co n tex t of th e p u rch a se of a b ranch. In som e circu m stances, this re q u ire m e n t m a y im p o se a b u rd en . For exam ple, som e in stitu tio n s b elieve th at obtaining th e correct geographic rep o rtin g d ata is m ore costly if th e loans w ere originated m a n y years ago an d the en tity th a t o rig in ated a n d so ld th e loans w as n o t a HMDA reporter. T he staff co m m entary to R egulation C pro v id es th a t a HMDA rep o rter n e e d n o t rep o rt loans ac q u ired th ro u g h a merger. T he B oard h as receiv ed req uests to ex ten d th is m erger ex c ep tio n to loans ac q u ired th ro u g h th e a c q u isitio n of a b ran ch . T he B oard h as also received requ ests to ex c lu d e “ se a so n e d ” p u rc h a se d loans, or tho se th a t w ere n o t p u rc h a se d at or sh o rtly after th e origination of th e loan. C om m ent is req u e sted on all asp ects of th e issue in c lu d in g th e follow ing: (1) H ow u sefu l is p u b lic d isclo su re of d ata o n loans p u rc h a se d as p art of a b ra n c h acquisition ? To w h a t extent, if any, is it m ore b u rd en so m e to rep o rt loans p u rc h a se d as p art of a b ra n c h acq u isitio n th a n oth er p u rc h a se d loans? If th e B oard w ere to ex c lu d e loans p u rc h a se d as p art of a b ra n c h acq uisition , sh o u ld th e ex c lu sio n be lim ite d to a p u rch a se invo lving “bricks a n d m ortar?” W hat if an in stitu tio n p u rc h a se d th e assets of a b ra n c h b u t n o t th e liabilities? (2) Is th e re som e o th e r w ay to m odify th e p u rc h a se d lo a n category th a t w o u ld im p rov e th e data quality an d red u c e bu rd en ? 4. T em p o ra ry F inancing R egulation C exclu des certain data from HMDA reporting, in c lu d in g tem p o rary financin g su ch as co n stru c tio n or bridge loans. Some in stitu tio n s th a t m ake a co nsid erable n u m b e r of co n stru c tio n lo an s w o u ld like to in c lu d e th e m w ith th e ir HMDA data. M ore generally, a n u m b e r of HMDA repo rters have req u e sted th a t the B oard define “tem p o rary fin an cin g .” C om m ent is req u e sted o n all aspects of th e issue in c lu d in g th e follow ing: (1) H ow u se fu l w o u ld it be for creditors to disclose data on co n stru c tio n lending? W o u ld these d ata be m ore b u rd en so m e to collect an d rep o rt th a n data on p e rm a n e n t financing? If th e B oard p erm itte d lend ers to rep o rt co n stru c tio n loans, sh o u ld su c h loans be re p o rte d w ith h o m e p u rch a se loans or w ith a separate code? (2) Regarding tem po rary financing generally, sh o u ld th e B oard define ho m e p u rch a se loans w ith a te rm of less th a n a sp ecified tim e as tem porary? If so, sh o u ld th e th re sh o ld be one year? Tw o years? 5. M obile H o m e T ransactions C urrently, p u rch a ses or refinan cings of m o bile ho m es are re p o rte d together w ith p u rch a ses or refin ancing s of trad itio n a l hom es. H ow ever, u n d erw ritin g stan d ard s for tran sactions in volving m o bile hom es m ay differ significantly from tran sa ctio n s involving trad itio n a l hom es. Som e HMDA repo rters a n d users of th e HMDA data have suggested th a t th e d ata w o u ld be m ore useful a n d easier to analyze if tran sa ctio n s in vo lving m o b ile h om es w ere rep o rted u sin g a separate code. C om m ent is req u e sted on all aspects of th e issue, in c lu d in g w h e th e r it w o u ld red u c e b u rd e n a n d im p rov e the u sefu ln ess of th e HMDA data to id e n tify tran sa ctio n s involving m obile h om es using a special code. 6. A d d itio n a l R eporting Som e u sers believe th a t th e HMDA d ata w o u ld be m ore u se fu l if certain a d d itio n a l pieces of in fo rm atio n w ere collected. F or exam ple, requ iring in stitu tio n s to rep o rt th e reaso ns for den ial co u ld facilitate fair lending review s. C urrently, o n ly th ose in stitu tio n s su p e rv ised by th e Office of th e C om ptroller of th e C urrency an d the Office of T hrift S u p erv isio n are req u ired to rep o rt d en ial reasons (w h ich is v o lu n tary u n d e r th e statute). The d ata rep o rted v o lu n tarily sh o w th a t the level of rep o rtin g varies by sup erv iso ry agency. For exam ple, for d ata collected in 1996, 84 p erc en t of th e d e n ie d loans re p o rte d to th e F ederal D eposit In su ran ce C orporation an d 64 p erc en t of th e d en ied loans rep o rted to th e F ederal Reserve in c lu d e d d en ial reasons. In contrast, only 27 p e rc e n t of th e d en ied loans re p o rte d to th e D ep artm en t of H ousing a n d U rb an D evelo pm ent c o n ta in e d d en ial reasons. 12331 O ther HMDA u sers suggest th a t the reg u latio n sh o u ld req u ire in stitu tio n s to rep o rt th e ap p ra ise d v alu e of the p ro p erty p u rch a sed . T his repo rting w o u ld allo w users of th e d ata to calcu late a loan-to-value ratio. C om m ent is req u e sted on all aspects of these issu es in c lu d in g th e follow ing: (1) W ou ld th e p u b lic d isclosu re of data co n cern in g d enial reaso n s or p ro p erty v alu e fu rth er th e p u rp o ses of HMDA, a n d in w h a t way? (2) A re th e re p ractical difficulties in obtaining an d rep o rtin g these data? (3) W hat costs w o u ld be in v o lv ed in rep o rtin g den ial reaso ns or p ro p erty value? 7. R eorganization o f th e R egulation a n d A p p e n d ic e s C urrently, in stitu tio n s h av e a variety of sources to assist th e m w ith HMDA com plian ce. A p p e n d ix A to R egulation C pro v id es in stru c tio n s for com pleting th e lo a n /a p p lic a tio n register, an d A p p e n d ix B pro v id es in stru c tio n s for com pletin g th e d ata co llectio n form. In ad d itio n , th e B oard issu ed a staff com m en tary (as S u p p le m e n t I to the regulation), an d th e FFIEC p u b lish es the G uide to H M D A R eporting: G etting it R ight! T he B oard w ill co n sid er reorganizing th e regu lation , ap p e n d ic es, an d su p p le m e n t to clarify a n d sim plify th e p rese n tatio n of th e m aterial, an d thereby red u c e b u rd en . C om m ent is req u ested on all aspects of th e issue in c lu d in g th e following: (1) W o u ld it lessen b u rd e n if the in terp re tiv e m aterial from the in stru c tio n s w ere in c o rp o rated into th e com m en tary a n d th e in stru c tio n s w ere conv erted in to sim ple code d escrip tions? (2) C ould th e regu lation b e organized to p re se n t in fo rm atio n m ore clearly (for exam ple, by co nsolid ating th e coverage req u irem en ts c u rren tly fo u n d in b oth th e defin itio n al sectio n a n d the exem p tions sections in a single “ coverage” section)? W o uld th e b u rd e n of learning a reo rganized regulation outw eigh th e benefits of sim plificatio n a n d clarification? 8. O ther Issues T he B oard solicits co m m ents on any other b ro ad p o licy issues th a t sh o u ld be ad d re ssed in th e regulation. By order of the Board of Governors of the Federal Reserve System, March 6, 1998. William W. Wiles, Secretary o f the Board. [FR Doc. 98-6326 Filed 3-11-98; 8:45 am] BILLING CODE 6 210 -01 -P