HRM Supp Proposal PRA Supporting Statement-final

CONSUMER FINANCIAL PROTECTION BUREAU INFORMATION COLLECTION
REQUEST – SUPPORTING STATEMENT
HIGHER-RISK MORTGAGE APPRAISALS
TRUTH IN LENDING ACT (REGULATION Z) – APPRAISALS FOR HIGHER-PRICED
MORTGAGE LOANS - SUPPLEMENTAL PROPOSAL 12 CFR 1026.35
(OMB CONTROL NUMBER: 3170-0026 / RIN 3170-AA11)
The Consumer Financial Protection Bureau (Bureau) is dividing certain proposals to amend the
Bureau’s Regulations X and Z into separate Information Collection Requests (ICRs) in the Office of
Management and Budget (OMB) system (accessible at www.reginfo.gov) to ease the public’s ability
to view and understand the individual proposals. Subsequent to the finalization of the rules, the
Bureau anticipates that it will recombine the portions of Regulations Z and X that are broken out in
the reginfo.gov system into the existing control numbers for Regulations X and Z. Bureau
respondents should continue to use the 3170-0015 control number for Regulation Z and 3170-0016
control number for Regulation X throughout this time.
TERMS OF CLEARANCE: N/A
A. JUSTIFICATION
1. Circumstances Necessitating the Data Collection
In response to the recent mortgage crisis, Congress amended the Truth in Lending Act
(TILA) to require creditors originating mortgages with an annual percentage rate that exceeds the
average prime offer rate by a specified percentage (higher-risk mortgage loans) to obtain an appraisal
or appraisals meeting certain specified standards, provide applicants with a notification regarding the
use of appraisals, and give applicants a copy of written appraisals used. These changes were enacted
as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), Pub.
L. 111-203, § 1471, 124 Stat. 1376, 2185 (2010). Section 1471 of the Dodd-Frank Act adds a new
section to TILA, section 129H, addressing appraisal requirements for higher-risk mortgage loans.
Responsibility for rulemaking under TILA generally rests with the Bureau.1 However, section
129H authorizes six agencies to jointly prescribe implementing regulations regarding appraisals for
higher-risk mortgage loans: the Board of Governors of the Federal Reserve System, the Office the
Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union
Administration, the Federal Housing Finance Agency, and the Bureau (the Agencies). Pursuant to
section 129H, the Agencies jointly developed and issued a final rule on January 18, 2013 (the HPML
Appraisals Rule), which was the subject of a supporting statement that the Bureau submitted to the
OMB in February 2013. In addition to amending other portions of the Code of Federal Regulations,
the rule amends the Bureau’s Regulation Z and its Official Interpretations. 12 CFR Part 1026. To
ease compliance burdens, the final rule adopts the term “higher-priced mortgage loan” instead of
“higher-risk mortgage loan,” as higher-priced mortgage loan is a term already used in other
provisions of Regulation Z.
The information collections under the rule include (1) requiring creditors to obtain a written
appraisal meeting certain standards for covered higher-priced mortgage loans and provide a free copy
1

The Board of Governors of the Federal Reserve System has rulemaking authority under TILA for motor vehicle
dealers as defined in section 1029 of the Dodd-Frank Act. 15 U.S.C. 5519; 15 U.S.C. 1604(a).

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of the appraisal to consumers (Written Appraisal); and (2) requiring an additional written appraisal
for transactions involving the purchase of properties the seller acquired within the last 180 days,
when certain price increases have occurred, and providing free copies of this appraisal to consumers
(Additional Written Appraisal). The information collections are required by statute, are necessary to
protect consumers, and promote the safety and soundness of creditors covered making higher-priced
mortgage loans. The final rule also requires providing a disclosure to the consumer applying for a
covered higher-priced mortgage loan within three days of application that informs the consumer
regarding the purpose of the appraisal, that the creditor will provide the consumer a copy of any
appraisal, and that the consumer may choose to have a separate appraisal conducted at the expense of
the consumer (Initial Appraisal Disclosure). As previously noted in the supporting statement
submitted in February 2013 and as reiterated below, the Initial Appraisal Disclosure is not an
information collection requirement because it meets the criteria for the warning label exception.
2. Use of the Information
For higher-priced mortgage loans that fall within section 129H and the final rule which are
not eligible for an exemption, creditors will be required to obtain a Written Appraisal that meets
certain standards. Creditors will also be required to obtain an Additional Written Appraisal when the
higher-priced mortgage loan is used to purchase a principal dwelling that the seller has acquired
within the last 180 days, if certain price increase thresholds are met (an increase of more than 10% if
the seller acquired the property within the past 90 days, or an increase of more than 20% if the seller
acquired the property within the past 91 to 180 days). The Bureau anticipates that creditors will use
these appraisals to determine the value of the collateral for covered higher-priced mortgage loans,
and that these appraisals will assist in preventing potential mortgage fraud by sellers, borrowers and
other participants in a residential real estate transaction. Creditors will be required to provide copies
of written appraisals obtained by the creditor for covered higher-priced mortgage loans to consumers.
The Bureau anticipates that this information will assist consumers in understanding valuations of
property securing higher-priced mortgage loans. The Written Appraisal and Additional Written
Appraisal are not submitted to the federal government; the Initial Appraisal Disclosure also is not
submitted to the federal government.
3. Use of Information Technology
The Initial Appraisal Disclosure and copies of written appraisals may be provided to
applicants in electronic form, subject to compliance with the consumer consent and other applicable
provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act), 15
U.S.C. 7001 et seq. Additionally, most disclosures are computer generated. The Bureau expects that
creditors will be able transmit the required copies to applicants either electronically or in hard copy.
4. Efforts to Identify Duplication
This information collection does duplicate, in part, two other Federal efforts. Specifically, the
information collection requirement duplicates in part the requirement the Bureau has adopted under
the Equal Credit Opportunity Act (ECOA)’s Regulation B to provide free copies of written appraisals
to applicants. 15 U.S.C. 1691(e). In addition, the requirement also duplicates in part the National
Credit Union Administration’s regulation requiring national credit unions to provide copies of
appraisal reports to loan applicants upon request. 12 CFR 701.31(c)(5). However, where duplicative
requirements apply, a lender need only provide an applicant one copy of each written appraisal to

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comply with all three requirements. The initial appraisal disclosure required under ECOA also can be
used to satisfy the Initial Appraisal Disclosure requirement in this rule.
5. Efforts to Minimize Burdens on Small Entities
Of the estimated 14,000 depository institutions and independent mortgage banks that
originate mortgage loans, 10,000 are estimated to fall below the small entity thresholds of $175
million in assets for depository institutions and $7 million in assets for independent mortgage banks.
The Bureau estimates that a high proportion of higher-priced mortgage loans will be qualified
mortgages under the Bureau’s 2013 ATR Final Rule. By statute, this final rule exempts qualified
mortgages from its requirements. Therefore, the qualified mortgage exemption leads to a significant
reduction in burden for all depository institutions and independent mortgage banks, including small
entities. The rule also further reduces burden by exempting loans for initial construction, bridge loans
for less than 12 months, reverse mortgages, loans secured by new manufactured homes, and loans
secured by boats, trailers, or mobile homes other than manufactured homes. The supplemental
proposal the Agencies are now issuing would further reduce burden by exempting loans that are
secured by existing manufactured homes but not land, certain refinances of first-lien mortgages with
no cash out except for closing costs, and transactions in an amount of $25,000 or less (indexed to
inflation). Further, the rule as previously adopted already exempts a series of loans from the
requirement to obtain an Additional Written Appraisal, including for properties located in rural areas,
and other types of transactions specified in the final rule. These exemptions in the final rule as well
as in the supplemental proposal were developed by the Agencies after careful consideration of the
comments filed on the proposed rule including its ICRs.
As discussed in the supporting statement submitted with the HPML Appraisals Rule, based
on its outreach, the Bureau believes that it is routine business practice for appraisals to be performed
for 95% of first lien transactions that are purchases and 90% of first lien transactions that are
refinances, and sent to consumers for all first lien transactions that result in an origination.
Government-sponsored enterprises also require copies of appraisals be sent to consumers. These preexisting practices minimize the additional burden generated by the rule, as only a portion of
appraisals conducted each year will have been caused by the rule (as opposed to pre-existing
practices). These pre-existing practices also reduce the time and resources necessary to compile and
distribute the copies of written appraisals the rule requires.
6. Consequences of Less Frequent Collection and Obstacles to Burden Reduction
This information is not submitted to the federal government. These disclosures are required
by statute, 15 U.S.C. 1639h. The burdens on respondents are the minimum necessary to comply with
the statute, to assist consumers in obtaining information about how the property’s value was
determined by the creditor in covered higher-priced mortgage loan transactions, and to promote safe
and sound lending with respect to covered higher-priced mortgage loans.
7. Circumstances Requiring Special Information Collection
Information is not reported to the Bureau. There are no special circumstances. The collection
of information requirements in the changes to Regulation Z are consistent with the applicable
guidelines contained in 5 CFR 1320.5(d)(2)
8. Consultation Outside the Agency

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Prior to issuing the final rule in January 2013, the Agencies published a notice of proposed
rulemaking in the Federal Register for public comment. Prior to that proposal, the Agencies
conducted outreach with industry and also relied upon certain testing of consumer disclosures carried
out by the Bureau in connection with the development of the proposed Loan Estimate form in its
2012 TILA-RESPA Proposal. The Agencies issued the 2012 proposal and the 2013 final rule jointly
and consulted extensively prior to publishing the proposal and before finalizing the rule. The Bureau
also consulted with the Department of Housing and Urban Development and the Federal Trade
Commission consistent with section 1022 of the Dodd-Frank Act.
The comment period for the Paperwork Reduction Act analysis expired on October 22, 2012.
The Agencies jointly reviewed comments received on the rule, including on its ICRs.
The Agencies received only one public comment specific to Paperwork Reduction Act compliance.
The comment questioned the burden estimates for the reading the final rule and training staff for
compliance. As explained in the supporting statement submitted to OMB in February 2013, the
Bureau responded that the burden estimates are averages across many types and sizes of financial
institutions, and that the exact amount of time may vary from institution to institution. Footnotes 131
and 141 in the Section 1022 analysis of the final rule addressed this comment in further detail.
In developing the supplemental proposal, the Agencies have conducted additional outreach
relating to valuation practices, primarily in the manufactured housing segment. The Bureau also has
consulted or offered to consult with the Department of Housing and Urban Development, the U.S.
Department of Agriculture, the Veteran’s Administration, and the Federal Trade Commission
consistent with section 1022 of the Dodd-Frank Act.
Additionally, pursuant to 5 CFR 1320.11(a), 1320.5(a)(1)(iv), and 1320.8(d)(1) the
supplemental proposal provides the public and other interested parties 60 days to comment on the
information collection requirements as contained therein.
9. Payments or Gifts to Respondents
No payments or gifts are provided to respondents.
10. Assurances of Confidentiality
There are no assurances of confidentiality provided to respondents.
11. Justification for Sensitive Questions
This information collection does not include questions of a sensitive nature.
12. Estimated Burden of Information Collection
TABLE 1
Information collection

Est. Number
of
Respondents

4

Est.
Number of
Appraisals
per

Est.
Average
Burden
Hours per

Est. Total
Annual
Burden
Hours

Respondent

Appraisal

Providing Written Appraisal
Depository Inst. > $10B in total
132
3.73
.25
assets + Affiliates
Non-Depository Inst. & Credit
2,853
.23
.25
Unions
Sub-total:
2,985 ///////////////// //////////////////
Verify Requirement of Additional Written Appraisal
Depository Inst. > $10B in total
132
20.05
.25
assets + Affiliates
Non-Depository Inst. & Credit
2,853
1.22
.25
Unions
Sub-total:
2,985 ///////////////// //////////////////
Review and Provide Copy of Additional Written Appraisal
Depository Inst. > $10B in total
132
.64
.25
assets + Affiliates
Non-Depository Inst. & Credit
2,853
.04
.25
Unions
Sub-total:
2,985 ///////////////// //////////////////
One-time Burden – Review Legal Requirements of Final Rule
Depository Inst. > $10B in total
assets + Affiliates / NonDepository Inst. & Credit Unions
2,985 /////////////////
CFPB Total On-going Burden:

2,985

123
822
205
662
435
1,097
21
14
35

12

36,383

//////////////////

1,337*

CFPB GRAND TOTAL:

37,720*

85,192

*As a practical matter, the burden hours are rounded to 1,300 hours for on-going burden hours and 37,000 for total
annual burden hours.

Creditors will be required to provide an Initial Appraisal Disclosure, investigate and verify
the applicability of the requirement for an Additional Written Appraisal, and review and provide
copies of written appraisals obtained by the creditor for higher-priced mortgage loans to consumers,
to the extent exemptions under the final rule do not apply.
In the Initial Appraisal Disclosure, the creditor will be required to provide a short, written
disclosure; this disclosure must be provided within three business days of application. This disclosure
is provided by the Bureau and must be given, verbatim, to the applicant. The public disclosure of
information originally supplied by the Federal government to the recipient for the purpose of
disclosure to the public is not included within the definition of “collection of information” in 5 CFR
1320.3(c)(2) and therefore has no burden under the PRA. Accordingly, the Bureau does not consider
the Initial Appraisal Disclosure an information collection and calculates no burden for that
disclosure.
2

The Bureau assumes half of the burden for the IMBs and the credit unions supervised by the Bureau. The FTC
assumes the burden for the other half.

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The estimated burden for the Written Appraisal requirements includes the creditor’s burden
of reviewing the Written Appraisal in order to satisfy the safe harbor criteria set forth in the rule and
providing a copy of the Written Appraisal to the consumer. Additionally, as discussed above, an
Additional Written Appraisal containing additional analyses is required in certain circumstances. The
Additional Written Appraisal must meet the standards of the Written Appraisal. The Additional
Written Appraisal is also required to be prepared by a certified or licensed appraiser different from
the appraiser performing the Written Appraisal, and a copy of the Additional Written Appraisal must
be provided to the consumer. The creditor must separately review the Additional Written Appraisal
in order to qualify for the safe harbor provided in the final rule.
The Agencies estimate that respondents will take, on average, 15 minutes for each higherpriced mortgage loan that is subject to the rule to review the Written Appraisal and to provide a copy
of the Written Appraisal. The Agencies estimate further that respondents will take, on average, 15
minutes for each higher-priced mortgage loan that is subject to the rule to investigate and verify the
need for an Additional Written Appraisal and, where applicable, an additional 15 minutes to review
the Additional Written Appraisal and to provide a copy of the Additional Written Appraisal. For the
small fraction of loans requiring an Additional Written Appraisal, the burden is similar to that of the
Written Appraisal.
The associated on going labor costs of complying with the information collection
requirements in this rule are estimated to be the total cost per year is estimated to be $64,563.73 in
ongoing costs and (rounded to the nearest thousand). And $3,058,354.98 in one-time labor costs
to review the regulation3
As discussed above, the Bureau shares the burden associated with Regulation Z with other
prudential regulators. For reference, the partner agencies and pertinent OMB control numbers are
listed below (see Table 2):
TABLE 2
Agency

Regulatory Citation

Department of Treasury, Office of the Comptroller of
the Currency
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
National Credit Union Administration

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12 CFR Part 34

OMB Control
Number
1557-0313

12 CFR Part 226
12 CFR 34.203(c)
12 CFR 722.3

7100-0199
3064-0188
3133-0186

For complying with the regulations themselves, the hourly wage rate is based on the higher of
the loan officer wages at depository institutions of $31.69 and at non-depository institution of
$32.16. Wages comprised 66.6 percent of compensation for employees in credit intermediation
and related fields in Q4 2011, according to the Bureau of Labor Statistics, available at
http://www.bls.gov/ncs/ect/#tables for a total hourly rate of $48.29 per hour. All the hourly wage
rates are computed similarly from the same source. For reviewing the regulations the bureau
assumes this will be done by a combination of attorneys with an hourly rate of $116.08 and
compliance officers with an hourly rate of 52.04 for a blended hourly average rate of $84.06

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Agency

Regulatory Citation

Consumer Financial Protection Bureau

12 CFR Part 1026

OMB Control
Number
3170-0015 /
3170-0026

13. Estimated Total Annual Cost Burden to Respondents or Recordkeepers
The Bureau has not determined that there are any capital or start-up costs other than those
captured in item 12 of the supporting statement.
14. Estimated Cost to the Federal Government
As the Bureau does not collect any information, there are no costs to the Bureau associated
with this information collection.
15. Program Changes or Adjustments
The Bureau’s rule implements in Regulation Z the information collection requirements
described above. These are new information collections created to enact the amendments made to 12
CFR 1026 which implement the statutory requirements of section 129H of the Truth in Lending Act
which was amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act), Pub. L. 111-203, § 1471, 124 Stat. 1376, 2185 (2010). Section 1471.
As illustrated in Table 1 above, if the supplemental proposal were to be adopted, then the
total annualized on-going hour burden allocated to the Bureau for the depository institutions and
credit unions with more than $10 billion in assets (including their depository affiliates) that originate
mortgage loans is estimated to be roughly 800 hours (reduced by 100 hours from the 900 hours
estimated without the supplemental proposal) and the annualized ongoing burden for all nondepository institutions that originate mortgage loans is estimated to be 500 hours (reduced by 100
hours from the 600 hours estimated without the supplemental proposal). As discussed in the
supporting statement submitted with the HPML Appraisals Rule in February 2013, the Bureau
continues to estimate that these respondents will incur an additional 36,000 hours in one-time burden,
collectively.
Therefore, the Bureau estimates that the changes contained in this supplemental proposal
could results in an on-going burden reduction in the form of a program change of approximately, 200
hours (from 1,500 to 1,300). The Bureau estimates the 36,000 hours of the one-time burden to read
understand the legal requirements of final rule remains unchanged.

OMB's inventory shows a net increase in burden of about 221 hours. This results in the
Bureau making an adjustment to the total estimated number of respondents (from 2,640 to
2,985). A 200 hour reduction in form of a program change is result of the qualified mortgage
exemption as provided in the proposed rule.

16. Plans for Tabulation, Statistical Analysis, and Publication

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The results of the information collection will not be published.
17. Display of Expiration Date
We believe that displaying the OMB expiration date is inappropriate because it could cause
confusion by leading consumers to believe that the regulation sunsets as of the expiration date.
Consumers are not likely to be aware that the Bureau intends to request renewal of OMB approval
and obtain a new expiration date before the old one expires. The Bureau will, however, publish a
separate notice in the Federal Register informing the public of OMB’s decision on the information
collection request that the Bureau will submit to OMB at the final rulemaking stage.
18. Exceptions to the Certification Requirement
None.

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