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FEDERAL RESERVE BANK OF NEW YO RK [ Circular No. 10767 January 25, 1995 "1 A C T IO N S R ELA TING TO D ISA ST E R R E L IE F FO R A R E A S A FF E C T E D B Y FL O O D IN G IN T E X A S — Exemptions from Real Estate Appraisal Requirements — Temporary Exceptions to Regulation Z To A ll Depository Institutions in the Second Federal Reserve District, and Others Concerned: The following statement has been issued by the Board of Governors of the Federal Reserve System: The Federal Reserve Board has announced a series of steps designed to help ease financial stress in areas affected by flooding in Texas. A supervisory statement adopted by the Board specific to the Federal Reserve Bank of Dallas encourages financial institutions to work constructively with borrowers who are experiencing difficulty due to the flooding. The statement says that banks may find it appropriate to ease credit terms to help new borrowers restore their financial strength, consistent with prudent banking practices, and to restructure debt or extend repayment terms for existing borrowers. The Board also waived appraisal regulations for real estate related transactions affected by the flooding, and temporarily amended its Truth in Lending Regulation Z to provide relief under waiver rules so that borrowers may gain ready access to loan funds when they use their primary dwelling as collateral for a loan. Under the right of rescission, a borrower normally has three business days to cancel a loan contract when it is secured by the borrower’s principal dwelling. In connection with this matter, the Board of Governors, in cooperation with the four other Federal regulatory agencies — the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration — has issued a joint supervisory statement and order granting temporary exceptions to various statutory and regulatory requirements relating to real estate appraisals in those areas affected by the flooding in Texas. In addition, the Board of Governors has temporarily amended various provisions of its Regulation Z, “Truth in Lending,” to provide relief in those areas in Texas affected by major flooding. Printed on the following pages is the text of the interagency order regarding real estate appraisals and the temporary amendment to Regulation Z as published in the Federal Register. Questions regarding this matter may be directed to Janice A. Oser, Compliance Examinations Department, (Tel. No. 212-720-8136). W i l l ia m J. M cD onough, President. SUPPLEMENTARY INFORMATION: 12CFR Part 226 [Regulation Z; Docket No. R-0861] Truth in Lending Board of Governors of the Federal Reserve System. ACTION: Final rule; temporary7 exceptions. AGENCY: The Board is amending Regulation Z (which implements the Truth in Lending Act) to provide some relief in areas in Texas recently affected by major flooding. The amendments provide a temporary exception to its provisions that prohibit the use of a preprinted form by a creditor to obtain a consumer’s waiver of the right to rescind certain home-secured loans when loan proceeds are needed immediately to meet a consumer’s bona fide personal financial emergency. Generally, Regulation Z requires a mandatory three day waiting period on rescindable transactions before funds can be disbursed. The relief also provides that a consumer’s need to obtain funds immediately shall be regarded as a bona Fide personal financial emergency for purposes of Regulation Z for transactions secured by a consumer’s principal dwelling located in areas of Texas recently declared to be major disaster areas because of extensive flooding. The exception expires one year from the date the area was declared a major disaster. EFFECTIVE DATE: December 8,1994. FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell or Kyung Cho-Miller, Staff Attorneys, Division of Consumer and Community Affairs, at (202) 452-2412 or (202) 452-3667; for the hearing impaired only, contact Dorothea Thompson, Telecommunications Device for the Deaf (TDD), at (202) 452-3544, Board of Governors of the Federal Reserve System, Washington, DC 20551. SUMMARY: I. Background Under the Truth in Lending Act (TILA), 15 U.S.C. 1601—1666j, and Regulation Z, 12 CFR Part 226, with some exceptions, a consumer has the right to rescind a credit obligation secured by the consumer’s principal dwelling for three days after becoming obligated, due to the risk of loss of the consumer’s home in the event of default. There is a mandatory waiting period of three business days before funds can be disbursed in order to give consumers an opportunity to reflect on the loan terms and to elect to cancel the transaction (12 CFR 226.15 and 226.23). A consumer may modify or waive this right of rescission to meet a bona Fide personal financial emergency. The consumer must provide the creditor a written, signed and dated waiver statement that describes the emergency. Under Regulation Z, 12 CFR 226.15(e) and 226.23(e), the waiver statement may not be executed on a preprinted form. The Board has previously adopted an exception to Regulation Z for transactions in areas affected by Hurricanes Andrew and Iniki and the April 1992 Los Angeles civil unresi (57 FR 53545); extensive flooding in the Midwest (58 FR 40582); a major earthquake in California (59 FR 6532): and extensive flooding in Alabama, Florida and Georgia (59 FR 40203). The Board’s exception permitted a temporary waiver of the provisions in Regulation Z that prohibited an institution’s use of a preprinted form to obtain a consumer’s waiver of the right to rescind certain home-secured loans * when loan funds were needed immediately to meet a consumer’s bona Fide personal Financial emergency. In addition, a consumer’s need to obtain funds immediately was regarded as a bona fide personal Financial emergency for purposes of Regulation Z, where the home securing the loan is located in the disaster area. II. Relief for Flood Affected Communities During October 1994, extensive flooding occurred in Texas. As a result, the President has determined that major disaster areas exist in and around Houston, Texas. In order to aid consumers in obtaining credit speedily to begin repairs in these areas and to ease the paperwork burden on banks extending credit in these areas, the Board has determined to provide a temporary exception in this situation to the restrictions in §§ 226.15(e) and 23(e) of Regulation Z. This exception will expire one year from the date the PRINTED IN NEW YORK, FROM FEDERAL REGISTER, VOL. 59, NO. 236, pp. 63714-15 President determined that an area was a major disaster. Pursuant to authority granted in section 105 of the T1LA, the Board is amending Regulation Z to permit a temporary exception to its provisions that prohibit the use of a preprinted form by an institution to obtain a consumer’s waiver of the right to rescind certain home-secured loans when the home is located in an area that the President has determined (under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5170) is a major disaster area as a result of the extensive flooding in 1994 in Texas. The Board notes, however, that the consumer must still sign and date the waiver statement. The following counties in Texas thus far have been declared major disaster areas: Angelina, Austin, Bastrop, Brazos, Brazoria, Burleson, Chambers, Fayette, Fort Bend, Galveston, Grimes, Hardin, Harris, Houston, Jackson, Jasper, Jefferson, Lee, Liberty, Madison, Matagorda, Montgomery, Nacagdoches, Orange, Polk, San Augustine, San Jacinto, Shelby, Trinity, Victoria, Washington, Waller, Walker, and Wharton. III. Public Comment and Effective Date The Administrative Procedures Act (APA), 5 U.S.C. 553, grants specific exemptions from its notice and public comment requirements for rulemakings when these requirements are contrary to the public interest (5 U.S.C. 553(b)(3)(B)). The amendments in the final rule provide a temporary exemption to Regulation Z and remove a restriction that may impair the availability of loans to consumers who have encountered a bona fide personal financial emergency as a result of having a home located in an area where a major disaster has occurred. The Board finds that it is in the public interest to permit this relief immediately and without advance notice and public comment. As explained above, the amendment to Regulation Z will reduce the paperwork burden on banks extending credit in certain disaster areas and aid in making credit speedily available to consumers in these areas. In addition, consumers continue to have the right to rescind certain loans unless that right is specifically waived. Moreover, the exemption is limited in scope and duration and would provide immediate assistance to consumers’ and lenders’ ongoing efforts to reconstruct and rehabilitate only in certain areas that have been affected by recent major disasters recognized under the appropriate federal relief statutes. For reasons explained above, the Board also believes that deferring the effective date of this action is contrary to the public interest in connection with the adoption of the final rule. The APA grants a specific exemption from its requirements relating to this item in these instances (12 U.S.C. 553(d)(3)). Accordingly, the amendments to Regulation Z are effective immediately. Regulatory Flexibility Act Analysis Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 605(b)), the Board does not believe that the adoption of this final rule will have a significant adverse impact on a substantial number of small entities. The amendment imposes no new requirements and temporarily removes a restriction imposed by Regulation Z on entities subject to the regulation. Paperwork Reduction Act Analysis No collection of information pursuant to section 3504(h) of the Paperwork Reduction Act (44 U.S.C. 3501 et seg.) are contained in these changes. List of Subjects in 12 CFR Part 226 Advertising, Banks, Banking, Consumer protection, Credit, Federal Reserve System, Finance, Penalties, Rate limitations, Reporting and recordkeeping requirements, Truth in Lending. For the reason set forth in the preamble, the Board is amending 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 and 1637(c)(5). severe storms and flooding in Texas. In this instance, creditors may use printed forms for the consumer to waive the right to rescind. This exemption to paragraph (e)(1) of this section shall expire one year from the date an area was declared a major disaster. * * * * * Subpart C— Closed-End Credit 4. In § 226.23, a new paragraph (e)(4) and footnote 48c are added to read as follows: § 226.23 Right of rescission. * * * * * (4) The consumer’s need to obtain funds immediately shall be regarded as a bona fide personal financial emergency provided that the dwelling securing the extension of credit is located in an area declared during October 1994 to be a major disaster area, pursuant to 42 U.S.C. 5170, because of severe storms and flooding in Texas.48c In this instance, creditors may use printed forms for the consumer to waive the right to rescind. This exemption to paragraph (e)(1) of this section shall expire one year from the date an area was declared a major disaster. * * * * * By order of the Board of Governors of the Federal Reserve System, dated December 5, 1994. William W. Wiles, Secretary of the Board. [FR Doc. 94-30321 Filed 12-8-94; 8:45 am] BILLING CODE 6210-01-P Subpart B— Open-End Credit §226.16 [Amended] 2. In § 226.16, footnotes 36c and 36d are redesignated as footnotes 36d and 36e, respectively. 3. In § 226.15, a new paragraph (e)(4) and footnote 36c are added to read as follows: § 226.15 Right of rescission. * * * * * (e) * * * (4) The consumer’s need to obtain funds immediately shall be regarded as a bona fide personal financial emergency provided that the dwelling securing the extension of credit is located in an area declared during October 1994 to be a major disaster area, pursuant to 42 U.S.C. 5170, because of 3(xA list of the affected areas will be maintained and published by the Board. Such areas now include the following counties in Texas: Angelina, Austin, Bastrop, Brazos, Brazoria, Burleson, Chambers, Fayette, Fort Bend, Galveston, Grimes, Hardin, Harris, Houston, Jackson, Jasper, Jefferson, Lee, Liberty, Madison, Matagorda, Montgomery, Nacagdoches, Orange, Polk, San Augustine, San Jacinto, Shelby, Trinity, Victoria, Washington, Waller, Walker, and Wharton. 4,10A list of the affected areas will be maintained and published by the Board. Such areas now include the following counties in Texas: Angelina, Austin, Bastrop, Brazos, Brazoria, Burleson, Chambers, Fayette, Fort Bend, Galveston, Grimes, Hardin, Harris, Houston, Jackson, Jasper, Jefferson, Lee, Liberty, Madison, Matagorda, Montgomery, Nacagdoches, Orange, Polk, San Augustine, San Jacinto, Shelby, Trinity, Victoria, Washington. Waller, Walker, and Wharton. Corporation; Office of Thrift Supervision, Treasury; and National Credit Union Administration. ACTION: Statement and Order; temporary exceptions. Section 2 of the Depository Institutions Disaster Relief Act of 1992 (DIDRA), authorizes the Federal financial institutions regulatory agencies to make exceptions to statutory and regulatory requirements relating to appraisals for certain transactions. The exceptions are available for transactions that involve real property in major disaster areas when the exceptions would facilitate recovery from the disaster and would be consistent with safety and soundness. Expiration dates for certain transactions are set out in the SUPPLEMENTARY INFORMATION section. DATES: This order is effective on December 6,1994, and expires for specific areas on the dates indicated in the SUPPLEMENTARY INFORMATION section. SUMMARY: FOR FURTHER INFORMATION CONTACT: DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12CFR Part 34 FEDERAL RESERVE SYSTEM 12CFR Part 225 FEDERAL DEPOSIT INSURANCE CORPORATION 12CFR Part 323 DEPARTMENT OF THE TREASURY Office of Thrift Supervision 12CFR Part 564 NATIONAL CREDIT UNION ADMINISTRATION 12 CFR Part 722 Real Estate Appraisal Exceptions in Major Disaster Areas Office of the Comptroller of the Currency, Treasury; Board of Governors of the Federal Reserve System; Federal Deposit Insurance AGENCIES: Office of the Comptroller of the Currency (OCC) William C. Kerr, National Bank Examiner or Thomas E. Watson, National Bank Examiner (202) 8745170, Office of the Chief National Bank Examiner; or Peter C. Liebesman, (202) 874-5300, Assistant Director, Bank Activities and Structure Division, 250 E Street, S.W., Washington, DC 20219. Board of Governors of the Federal Reserve System (Board) Rhoger H. Pugh, Assistant Director, (202) 728-5883, Stanley B. Rediger, Supervisory Financial Analyst, (202) 452-2629, Virginia M. Gibbs, Supervisory Financial Analyst, (202) 452-2521, Division of Banking Supervision and Regulation; or Deneen Donnley-Evans, Staff Attorney, (202) 736-5567, Legal Division. For the hearing impaired only, contact Dorothea Thompson, Telecommunications Device for the Deaf (TDD), (202) 452-3544, 20th and C Streets, N.W., Washington, DC 20551. Federal Deposit Insurance Corporation (FDIC) Robert F. Miailovich, Associate Director, (202) 898-6918, James D. Leitner, Examination Specialist, (202) 898-6790, Division of Supervision; or Dirck A. Hargraves, Attorney, (202) 8987049, Legal Division, 550 17th Street, N.W., Washington, DC 20429. Office of Thrift Supervision, Treasury (OTS) William J. Magrini, Project Manager, (202) 906-5744; Diana Garmus, Deputy PRINTED IN NEW YORK, FROM FEDERAL REGISTER, VOL. 59, NO. 233, pp. 62562-63 Assistant Director, Corporate Activities, (202) 906-5683; Ellen J. Sazzman, Attorney, Regulations and Legislation Division, Chief Counsel’s Office, (202) 907-7133; 1700 G Street N.W., Washington, DC 20552. National Credit Union Administration (NCUA) Michael J. McKenna, Office of General Counsel, (703) 518-6540, or Herb Yolles, Office of Examination and Insurance, (703) 518-6360,1775 Duke Street, Alexandria, VA 22314. SUPPLEMENTARY INFORMATION: Statement Section 2 of DIDRA, 12 U.S.C. 3352, authorizes the agencies to make exceptions to statutory and regulatory appraisal requirements for transactions with respect to real property located in areas in which the President has determined, pursuant to section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5170, that a major disaster exists, provided that the exception would facilitate recovery from the major disaster and is consistent with safety and soundness.1Such exceptions expire not later than three years after the date of the President’s determination that a major disaster exists in the area. Since October 18,1994, and continuing, the President has declared several areas as Major Disaster Areas in certain Texas counties because of the extensive flooding that occurred and is continuing. The agencies believe that granting relief from the appraisal requirements for certain real estate transactions in all such areas affected by this flooding is consistent with the provisions of the DIDRA. The agencies have determined that the disruption of real estate markets in all such affected areas interferes with the ability of depository institutions to obtain appraisals that comply with statutory and regulatory requirements and, therefore, may impede institutions in making loans and engaging in other transactions that would aid in the reconstruction and rehabilitation of the affected area. Accordingly, the agencies have determined that recovery from this major disaster would be facilitated by excepting transactions involving real estate located in the area directly affected by the flooding from the real estate appraisal requirements of Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 1 The agencies must make the exception no later than 30 months after the date on which the President determines that a major disaster exists in the area. (FIRREA) as amended, 12 U.S.C. 3331 et seq., and regulations promulgated thereto. This has the effect of excepting certain transactions from the definition of “federally related transactions.” The agencies have also determined that safety and soundness would not be adversely affected by such exceptions so long as the depository institution’s records relating to any such excepted transaction clearly indicate either that the property involved was directly affected by the major disaster or that the transaction would facilitate recovery from the disaster and there is a binding commitment to fund the transaction within three years after the date the major disaster was declared. In addition, the transaction must continue to be subject To review by management and by the agencies in the course of examination of the institution under normal supervisory standards relating to safety and soundness, though the transactions need not comply with the specific requirements of Title XI of FIRREA and the agencies’ appraisal regulations. Expiration Dates Any exceptions provided under the order shall expire not later than three years after the date on which the President determines, pursuant to 42 U.S.C. 5170, that a major disaster exists in the area. Accordingly, exceptions for the major disasters declared due to the flooding expire on October 18,1997. Exceptions for any ether counties that have been declared major disasters by the President as a result of the flooding that began in Texas on or about October 11,1994, expire three years after the date of such declaration. Order (2) (a) The real property involved was directly affected by the major disaster, or (b) The real property involved was not directly affected by the major disaster but the institution’s records explain how the transaction would facilitate recovery from the disaster; (3) There is a binding commitment to fund a transaction within three years after the date the major disaster was declared by the President; and (4) The institution retains in its files, for examiner review, appropriate documentation supporting the property’s valuation. Appendix to Order Texas: Angelina, Austin, Bastrop, Brazos, Brazoria, Burleson, Chambers, Fayette, Fort Bend, Galveston, Grimes, Hardin, Harris, Houston, Jackson, Jasper, Jefferson, Lee, Liberty, Madison, Matagorda, Montgomery, Nacagdoches, Orange, Polk, San Augustine, San Jacinto, Shelby, Trinity, Tyler, Victoria, Washington, Waller, Walker, Wharton. Dated: November 7,1994. Eugene A. Ludwig, Comptroller o f the Currency. Dated: November 23,1994. By order of the Board of Governors of the Federal Reserve System. William W. Wiles, Secretary o f the Board. Dated: November 18,1994. Federal Deposit Insurance Corporation. Robert E. Feldman, Acting Executive Secretary. Dated: November 23,1994. By the Office of Thrift Supervision. Jonathan L. Fiechter, Acting Director. Dated: November 8, 1994. Becky Baker, Secretary o f the Board, National Credit Union In accordance with section 2 of Administration. DIDRA, relief is hereby granted from the (FR Doc. 94-29959 Filed 12-5-94; 8:45 am] provisions of Title XI of FIRREA and the BILLING COOES OCC, 4810-33-P (20%). BOARD 6210agencies’ appraisal regulations for any 01-P (20%), R3IC 6714-01-P (20%), OTS 6720-01-P (20%), NCUA 7535-01-P (20%) real estate-related financial transaction that requires the services of an appraiser under those provisions, provided.that: (1) The transaction involves real estate located in an area that the President has determined, pursuant to 42 U.S.C. 5170, is a major disaster area as a result of the October 1994 flooding in Texas, and has been designated eligible for Federal assistance by the Federal Emergency Management Agency (FEMA);2 2 The Texas counties affected are listed in the appendix to this order. The exception would also include any other such areas that the President subsequently declares are major disaster areas as a result of the flooding.
@FedFRASER