FRB Hearings on TIL

The Federal Reserve Board has scheduled public hearings in three cities: Los Angeles, CA on June 3, Atlanta, GA on June 5, and Washington, D.C. on June 17. All hearings are scheduled from 8:15 a.m. to 4:30 p.m. The hearings will all be held in Federal Reserve facilities.

The Home Ownership Equity Protection Act of 1994 ("HOEPA") directs the FRB to hold hearings on home equity lending no later than September 1997. In addition to this mandate, Congress has directed the FRB to study and review several other aspects of Truth in Lending, including the elements of the finance charge, and ways TIL disclosures could be combined with RESPA disclosures to reduce regulatory burden. The FRB is soliciting testimony and comment on each of these topics at the three hearings.

HOEPA requires the Board to hold public hearings to learn about home equity loans and trends in the market place. The key question is whether there is a high-cost loan product for open end lines of credit that is comparable to the closed-end loans defined in section 226.32 of Regulation Z. The FRB is particularly interested in any impact of such products on low-income customers.

The Board is specifically requesting testimony and comment on several issues:
The effect of HOEPA on home owners seeking home equity credit;
Whether current disclosures are adequate;
Whether any products or categories of mortgages should be exempted;
Whether the Board should prohibit any acts or practices that would be considered to be unfair, deceptive, or designed to evade the law;
How Truth in Lending could be revised to provide a more meaningful cost disclosure; and
What should be included in the cost of credit and the APR.

It has been almost two decades since Truth in Lending was "simplified." These hearings are part of a process to review Truth in Lending and RESPA that may prove to be as extensive as the "simplification" of Truth in Lending. FRB officials have repeatedly emphasized that the review is serious and that the FRB may recommend significant changes to Regulation Z.

The hearings are an opportunity to provide information and ideas, to shape the future Regulation Z. In addition, the hearings should be an excellent opportunity to learn.

ACTION STEPS

Review Regulation Z and RESPA. Talk with your lending staff about how the disclosures could be changed to be easier to prepare and to provide better information to customers.
Consider attending the Board's hearings, especially if you are located in Atlanta, Los Angeles, or Washington, D.C.
Use the questions posed by the FRB to structure your comment letter.
Consider the issues raised by the home equity cost issues in the context of your bank's CRA program.
Look for ways to strengthen your program that are "politically correct."