FDIC Federal Register Citations

[Federal Register: October 4, 2006 (Volume 71, Number 192)]

[Notices]

[Page 58672-58678]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr04oc06-110]

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket No. 06-12]

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

[Docket No. OP-1267]

FEDERAL DEPOSIT INSURANCE CORPORATION

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

[No. 2006-36]

NATIONAL CREDIT UNION ADMINISTRATION

Proposed Illustrations of Consumer Information for Nontraditional

Mortgage Products

AGENCIES: Office of the Comptroller of the Currency, Treasury (OCC);

Board of Governors of the Federal Reserve System (Board); Federal

Deposit Insurance Corporation (FDIC); Office of Thrift Supervision,

Treasury (OTS); and National Credit Union Administration (NCUA).

ACTION: Notice of proposed illustrations of consumer information with

request for comment.

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SUMMARY: The OCC, Board, FDIC, OTS, and NCUA (the Agencies), request

comment on these Proposed Illustrations of Consumer Information for

Nontraditional Mortgage Products. The illustrations are intended to

assist institutions in implementing the consumer protection portion of

the Interagency Guidance on Nontraditional Mortgage Product Risks

(Interagency Guidance), which is being published simultaneously with

this notice. The illustrations are not intended as model forms, and

institutions will not be required to use them. Rather, they are

provided at the request of commenters to the Interagency Guidance to

illustrate the type of information that the Interagency Guidance

contemplates.

DATES: Comments must be submitted on or before December 4, 2006.

ADDRESSES: The Agencies will jointly review all of the comments

submitted. Therefore, interested parties may send comments to any of

the Agencies and need not send comments (or copies) to all of the

Agencies. Please consider submitting your comments by e-mail or fax

since paper mail in the Washington area and at the Agencies is subject

to delay. Interested parties are invited to submit comments to:

OCC: You should include ``OCC'' and Docket Number 06-12 in your

comment. You may submit your comment by any of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

OCC Web site: http://www.occ.treas.gov. Click on ``Contact

the OCC,'' scroll down and click on ``Comments on Proposed

Regulations.''

E-Mail Address: regs.comments@occ.treas.gov.

Fax: (202) 874-4448.

Mail: Office of the Comptroller of the Currency, 250 E

Street, SW., Mail Stop 1-5, Washington, DC 20219.

Hand Delivery/Courier: 250 E Street, SW., Attn: Public

Information Room, Mail Stop 1-5, Washington, DC 20219.

Instructions: All submissions received must include the agency name

(OCC) and docket number for this notice. In general, the OCC will enter

all comments received into the docket without change, including any

business or personal information that you provide.

You may review comments and other related materials by any of the

following methods:

Viewing Comments Personally: You may personally inspect

and photocopy comments at the OCC's Public Information Room, 250 E

Street, SW., Washington, DC. You can make an appointment to inspect

comments by calling (202) 874-5043.

Viewing Comments Electronically: You may request that we

send you an electronic copy of comments via e-mail or mail you a CD-ROM

containing electronic copies by contacting the OCC at

regs.comments@occ.treas.gov.

Docket Information: You may also request available

background documents and project summaries using the methods described

above.

Board: You may submit comments, identified by Docket No. OP-1267,

by any of the following methods:

Agency Web site: http://www.federalreserve.gov

Follow the instructions for submitting comments at http://www.federalreserve.gov/.

.

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: Jennifer J. Johnson, Secretary, Board of Governors

of the Federal Reserve System, 20th Street and Constitution Avenue,

NW., Washington, DC 20551.

All public comments are available from the Board's Web site at

http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted,

unless modified for technical reasons. Accordingly, your comments will

not be edited to remove any identifying or contact information. Public

comments may also be viewed in electronic or paper form 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.

FDIC: You may submit comments by any of the following methods:

Agency Web site: http://www.FDIC.gov/regulations/laws/federal/propose.html.

Follow the instructions for submitting comments

on the Agency Web site.

E-Mail: Comments@FDIC.gov.

Mail: Robert E. Feldman, Executive Secretary, Attention:

Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,

Washington, DC 20429.

Hand Delivery/Courier: Guard station at the rear of the

550 17th Street Building (located on F Street) on business days between

7 a.m. and 5 p.m.

[[Page 58673]]

Instructions: All submissions received must include the agency

name. All comments received will be posted without change to

http://www.FDIC.gov/regulations/laws/federal/propose.html

including any personal information provided.

OTS: You may submit comments, identified by docket number 2006-36,

by any of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

E-mail address: regs.comments@ots.treas.gov. Please

include docket number 2006-36 in the subject line of the message and

include your name and telephone number in the message.

Fax: (202) 906-6518.

Mail: Regulation Comments, Chief Counsel's Office, Office

of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552,

Attention: No. 2006-36.

Hand Delivery/Courier: Guard's Desk, East Lobby Entrance,

1700 G Street, NW., from 9 a.m. to 4 p.m. on business days. Address

envelope as follows: Attention: Regulation Comments, Chief Counsel's

Office, Attention: No. 2006-36.

Instructions: All submissions received must include the agency name

and docket number for this proposed Guidance. All comments received

will be posted without change to the OTS Internet Site at

http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1

including any personal information provided.

Docket: For access to the docket to read background documents or

comments received, go to http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1.

In addition, you may inspect comments

at the OTS's Public Reading Room, 1700 G Street, NW., by appointment.

To make an appointment for access, call (202) 906-5922, send an e-mail

to public.info@ots.treas.gov, or send a facsimile transmission to (202)

906-7755. (Prior notice identifying the materials you will be

requesting will assist us in serving you.) We schedule appointments on

business days between 10 a.m. and 4 p.m. In most cases, appointments

will be available the next business day following the date we receive a

request.

NCUA: You may submit comments by any of the following methods:

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

NCUA Web site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html.

Follow the

instructions for submitting comments.

E-mail: Address to regcomments@ncua.gov. Include ``[Your

name] Comments on'' in the e-mail subject line.

Fax: (703) 518-6319. Use the subject line described above

for e-mail.

Mail: Address to Mary Rupp, Secretary of the Board,

National Credit Union Administration, 1775 Duke Street, Alexandria,

Virginia 22314-3428.

Hand Delivery/Courier: Same as mail address.

FOR FURTHER INFORMATION CONTACT: OCC: Michael S. Bylsma, Director,

Stephen Van Meter, Assistant Director, or Kathryn D. Ray, Special

Counsel, Community and Consumer Law Division, (202) 874-5750.

Board: Kathleen C. Ryan, Counsel, Division of Consumer and

Community Affairs, (202) 452-3667; or Andrew Miller, Counsel, Legal

Division, (202) 452-3428. For users of Telecommunications Device for

the Deaf (``TDD'') only, contact (202) 263-4869.

FDIC: April Breslaw, Acting Associate Director, Compliance Policy &

Exam Support Branch, (202) 898-6609, Division of Supervision and

Consumer Protection; or Richard Foley, Counsel, (202) 898-3784, Legal

Division.

OTS: Montrice G. Yakimov, Assistant Managing Director, Compliance

and Consumer Protection Division, (202) 906-6173; or Glenn Gimble,

Senior Project Manager, Compliance and Consumer Protection Division,

(202) 906-7158.

NCUA: Cory Phariss, Program Officer, Examination and Insurance,

(703) 518-6618.

SUPPLEMENTARY INFORMATION:

I. Background

On December 29, 2005, the Agencies published for comment proposed

Interagency Guidance on Nontraditional Mortgage Products, 70 FR 77249

(Dec. 29, 2005). The consumer protection section of the proposed

guidance set forth recommended practices to ensure that consumers have

clear and balanced information about nontraditional mortgages prior to

making a mortgage product choice, such as when lenders provide

promotional materials about nontraditional mortgages or during face-to-

face meetings when consumers are shopping for a mortgage. Additionally,

the proposed guidance recommended that monthly statements given with

payment option mortgages provide information that enables consumers to

make informed payment choices. The Agencies have revised the proposed

guidance based on the comments received, and today are publishing the

final Interagency Guidance in a separate Federal Register notice.

The Interagency Guidance, including the consumer protection

portion, is a set of recommended practices to assist institutions in

addressing particular risks raised by nontraditional mortgage products.

Several commenters to the proposal, including industry trade

associations, encouraged the Agencies to include model or sample

disclosures or other descriptive materials as part of the Interagency

Guidance.

In response to commenters, the Agencies believe that illustrations

of consumer information may be useful to institutions as they seek to

implement the consumer information recommendations of the Interagency

Guidance. The Agencies also believe that it would be desirable to seek

public comment before issuing illustrations of the recommended

practices, to determine the types of illustrations that would be most

useful to consumers and institutions.

II. Proposed Illustrations

The Agencies appreciate that some institutions, including community

banks, may prefer not to incur the costs and other burdens of

developing their own consumer information documents to address the

issues raised in the Interagency Guidance, and could benefit from

illustrations like those below.

Use of the proposed illustrations would be entirely voluntary.

Accordingly, there is no Agency requirement or expectation that

institutions must use the illustrations in their communications with

consumers.

Institutions seeking to follow the recommendations set forth in the

Interagency Guidance could, at their option, elect to:

Use or not use the illustrations;

Provide information based on the illustrations, but

expand, abbreviate, or otherwise tailor any information in the

illustrations as appropriate to reflect, for example:

[cir] The institution's product offerings, such as by deleting

information about loan products and loan terms not offered by the

institution and by revising the illustrations to reflect specific terms

currently offered by the institution;

[cir] The consumer's particular loan requirements;

[cir] Current market conditions, such as by changing the loan

amounts, interest rates, and corresponding payment amounts to reflect

current local market circumstances; and

[[Page 58674]]

[cir] Other information, consistent with the Interagency Guidance,

such as the payment and loan balance information for monthly statements

discussed in connection with Illustration 3 or information about when a

prepayment penalty may be imposed; or

Provide the information described in the Interagency

Guidance, as appropriate, in an alternate format.

Whether or not an institution chooses to use the proposed

illustrations, the Interagency Guidance recommends that promotional

materials and other product descriptions provide consumers with

information about the costs, terms, features, and risks of

nontraditional mortgage products that can assist consumers in their

product selection decisions. This includes information about potential

payment shock and negative amortization and, where applicable,

information about prepayment penalties and the costs of reduced

documentation loans. The recommended information could be presented in

a brief narrative format as shown in Illustration 1 and/or in a chart

with examples as shown in Illustration 2.

Set forth below are three illustrations that show how important

information about nontraditional mortgages could be provided to

consumers in a concise and focused manner and format. The Agencies

request comment on all aspects of these illustrations. We encourage

specific comment on whether the illustrations, as proposed, would be

useful to institutions, including community banks, seeking to implement

the ``Communications with Consumers'' portion of the Interagency

Guidance, or whether changes should be made to them. We also encourage

specific comment on whether the illustrations, as proposed, would be

useful in promoting consumer understanding of the risks and material

terms of nontraditional mortgage products, as described in the

Interagency Guidance, or whether changes should be made to them.

Finally, we seek comment on whether there are other illustrations

relating to nontraditional mortgages that would be useful to

institutions and consumers.

The Agencies are aware that individual institutions and industry

associations have developed and are likely to continue developing

documents that can be effective in conveying critical information

discussed in the ``Communications with Consumers'' portion of the

Interagency Guidance. These illustrations are not intended to dissuade

institutions and trade associations from developing their own means of

delivering important information about nontraditional mortgages to

consumers. In this regard, the Agencies note that they have not

conducted any consumer testing to assess the effectiveness of any

existing documents currently used by institutions, or of the proposed

illustrations set forth below. Commenters are specifically invited to

provide information on any consumer testing they have conducted in

connection with comparable disclosures.

[[Page 58675]]

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[[Page 58676]]

Illustration 2

Some of the information recommended by the guidance--in particular,

some of the more detailed information about payment shock and negative

amortization--may be conveyed most effectively through quantitative

illustrations. The Interagency Guidance expressly contemplates

hypothetical loan examples to aid consumer understanding. This

information also could be incorporated into a narrative format as shown

in Illustration 1. Illustration 2 shows another way in which this

information could be presented. The chart and the narrative explanation

may also be combined into a two-page document that both explains and

illustrates the key facts about nontraditional mortgage products.

BILLING CODE 7535-01-P

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[[Page 58678]]

Illustration 3

The Interagency Guidance also recommends that if institutions

provide monthly statements to consumers on payment option mortgages,

those statements should provide information that enables consumers to

make informed payment choices, including an explanation of each payment

option available and the impact of that choice on loan balances. The

following illustration shows one way in which this information could be

presented. It is important to note this illustration is not intended to

set forth all of the information that may be useful, and could be

provided, to consumers on their monthly statement, such as the current

loan balance, an itemization of the payment amount devoted to interest

and to principal, and whether the loan balance has increased.

[GRAPHIC] [TIFF OMITTED] TN04OC06.012

III. Request for Comment

As noted above, the Agencies request comment on all aspects of the

proposed illustrations. Comments are specifically requested on the

usefulness of the illustrations, as proposed, for consumers and for

institutions, or whether changes should be made; whether the

information is set forth in a clear manner and format; whether these

illustrations or a modified form should be adopted by the Agencies; and

whether there are other illustrations relating to nontraditional

mortgages that would be useful to consumers and institutions in

addition to these.

Dated: September 25, 2006.

John C. Dugan,

Comptroller of the Currency.

By order of the Board of Governors of the Federal Reserve

System, September 27, 2006.

Jennifer J. Johnson,

Secretary of the Board.

Dated at Washington, DC, this 27th day of September, 2006.

By order of the Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

Dated: September 28, 2006.

By the Office of Thrift Supervision.

John M. Reich,

Director.

By the National Credit Union Administration on : Thursday,

September 28, 2006.

JoAnn M. Johnson,

Chairman.

[FR Doc. 06-8479 Filed 10-3-06; 8:45 am]

BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6720-01-P; 7535-01-C