OCC Bulletin 2021-51| October 28, 2021

Truth in Lending Act: Revised Interagency Examination Procedures and Rescissions

To

Chief Executive Officers of All National Banks, Federal Savings Associations, and Federal Branches and Agencies; Department and Division Heads; All Examining Personnel; and Other Interested Parties

Summary

The Task Force on Consumer Compliance of the Federal Financial Institutions Examination Council1 (FFIEC) has adopted revised interagency examination procedures for the Truth in Lending Act (TILA), implemented by Regulation Z. The revised interagency procedures reflect amendments to Regulation Z published in the Federal Register through May 30, 2021.

Rescissions

With the issuance of this bulletin, the following have been rescinded:

  • OCC Bulletin 2020-84, “Truth in Lending Act: Revised Interagency Examination Procedures”
  • The 2020 interagency examination procedures conveyed by OCC Bulletin 2020-84

Note for Community Banks

These interagency procedures apply to examinations of all OCC-supervised community banks covered by TILA.2

Highlights

The FFIEC members developed these procedures to promote consistency in the examination process and communication of supervisory expectations and to reflect the following changes to Regulation Z:

  • The new general qualified mortgage (QM) definition.
  • A new category of QMs called seasoned QMs.
  • An extension of the sunset date for the temporary government-sponsored enterprise QM.
  • A delay in the mandatory compliance date for the new general QM definition until October 1, 2022.

Background

On December 29, 2020, the Consumer Financial Protection Bureau finalized a new definition for general QMs (December rule).3 The new general QM definition replaces the existing 43 percent debt-to-income ratio limit with new price-based thresholds. Specifically, a loan of $110,260 or more is a QM if its annual percentage rate is less than 2.25 percent above the average prime offer rate; different thresholds apply to small loan amounts, loans for manufactured housing, and subordinate lien transactions. The December rule also removed appendix Q of 12 CFR 1026. The December rule with a new general QM definition became effective March 1, 2021. The mandatory compliance date for the new general QM is October 1, 2022, after a subsequent rulemaking.4 After the effective date of the December rule, but before the mandatory compliance date, QMs can be made under the former general QM definition (i.e., the 43 percent debt-to-income ratio limit and appendix Q) or the new general QM.

Also, on December 29, 2020, the CFPB finalized a rule that created a new seasoned QM category.5 A loan would be a seasoned QM if it

  • is a first-lien, fixed-rate covered transaction that has met certain performance requirements over a seasoning of at least 36 months.
  • is held in portfolio by the originating creditor or first purchaser until the end of the seasoning period.
  • complies with general restrictions on product features and points and fees.
  • meets certain underwriting requirements.

Seasoned QMs could first be originated beginning on March 1, 2021.

On October 26, 2020, the Consumer Financial Protection Bureau finalized an extension of the temporary government-sponsored enterprise (GSE) QM, which was set to expire in January 2021.6 The temporary GSE QM will expire upon the earlier of the GSEs’ exit from conservatorship or the mandatory compliance date for the general QM loan definition.7 As noted, the mandatory compliance date for the general QM definition was extended to October 1, 2022; therefore the temporary GSE QM will sunset on that date unless a GSE exits from conservatorship before then.

Further Information

Please contact Paul R. Reymann, Director for Consumer Compliance Policy, at (202) 649-5470.

 

Grovetta N. Gardineer
Senior Deputy Comptroller for Bank Supervision Policy

Related Link

1 The FFIEC consists of the following six voting members: a member of the Board of Governors of the Federal Reserve System; the Chair of the Federal Deposit Insurance Corporation; the Director of the Consumer Financial Protection Bureau; the Comptroller of the Currency; the Chair of the National Credit Union Administration; and the Chair of the State Liaison Committee.

2 “Banks” refers to national banks, federal savings associations, and federal branches and agencies of foreign banking organizations. The OCC has TILA/Regulation Z supervisory authority only for banks with $10 billion or less in assets. The Consumer Financial Protection Bureau has TILA/Regulation Z supervisory authority for banks with more than $10 billion in assets. Refer to 12 CFR 1026.1(c), “Coverage,” for details about banks covered by TILA.

3 Refer to 85 Fed. Reg. 86308 (December 29, 2020).

4 Refer to 86 Fed. Reg. 22844 (April 30, 2021). The original mandatory compliance date set in the December general QM rule was July 1, 2021.

5 Refer to 85 Fed. Reg. 86402 (December 29, 2020).

6 Refer to 85 Fed. Reg. 67938 (October 26, 2020).

7 Separately, the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Veterans Affairs (VA), and U.S. Department of Agriculture (USDA) have issued definitions for QMs for loans that they insure, guarantee, or provide under applicable law. These definitions may be found under 24 CFR 201.7 and 203.19 (HUD), 38 CFR 36.4300 and 36.4500 (VA), and 7 CFR 3555.109 (USDA). These QMs do not sunset.