Supporting Statement for 3170-0023

BUREAU OF CONSUMER FINANCIAL PROTECTION
PAPERWORK REDUCTION ACT SUBMISSION
INFORMATION COLLECTION REQUEST
SUPPORTING STATEMENT PART A
HIGH-COST MORTGAGE AND HOMEOWNERSHIP
COUNSELINGAMENDMENTS TO THE TRUTH IN LENDING ACT
(REGULATION Z) 12 CFR 1026
(OMB CONTROL NUMBER: 3170-0023)
OMB TERMS OF CLEARANCE:
When the Office of Management and Budget (OMB) last approved this information collection request on
January 31, 2013, OMB provided the following terms of clearance:
The Burden for HOEPA has been transferred out of 3170-0015 (Regulation Z) to clarify burden
calculations for the public while multiple amendments to Regulation Z occur over several months. In the
future, CFPB may consolidate all HOEPA/Regulation Z under one control number following an internal
assessment of this option.
This assessment is ongoing as the Bureau considers the best way to account for the burdens under
regulation Z in a way that is most clear to the public.
Abstract:
The Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq., was enacted to foster comparison credit
shopping and informed credit decision making by requiring accurate disclosure of the costs and terms of
credit to consumers. Creditors are subject to disclosure and other requirements that apply to open-end
credit (e.g., revolving credit or credit lines) and closed-end credit (e.g., installment financing). TILA
imposes disclosure requirements on all types of creditors in connection with consumer credit, including
mortgage companies, finance companies, retailers, and credit card issuers, to ensure that consumers are
fully apprised of the terms of financing prior to consummation of the transaction and, in some instances,
during the loan term. It also imposes advertising disclosure requirements on advertisers of consumer
credit. TILA also establishes billing error resolution procedures for open-end credit and limits consumer
liability for the unauthorized use of credit cards.
An amendment to TILA, the Home Ownership and Equity Protection Act (HOEPA), imposes,
among other things, various disclosure and other requirements on certain creditors offering high-cost
mortgages to consumers. The CFPB promulgated its Regulation Z to implement TILA, as required by the
statute. The CFPB enforces TILA as to certain creditors and advertisers. TILA also contains a private right
of action for consumers and provides enhanced remedies to consumers in high-cost mortgages for
violations of HOEPA.

A. JUSTIFICATION
1. Circumstances Necessitating the Data Collection
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The Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq., was enacted to foster comparison credit
shopping and informed credit decision making by requiring accurate disclosure of the costs and terms of
credit to consumers. Creditors are subject to disclosure and other requirements that apply to open-end
credit (e.g., revolving credit or credit lines) and closed-end credit (e.g., installment financing). TILA
imposes disclosure requirements on all types of creditors in connection with consumer credit, including
mortgage companies, finance companies, retailers, and credit card issuers, to ensure that consumers are
fully apprised of the terms of financing prior to consummation of the transaction and, in some instances,
during the loan term. It also imposes advertising disclosure requirements on advertisers of consumer
credit.
An amendment to TILA, the Home Ownership and Equity Protection Act (HOEPA) was enacted in
1994 to address abusive practices in refinances and closed-end home equity loans with high interest rates
or high fees. Since HOEPA’s enactment, refinances and closed-end home equity mortgage loans meeting
any of the HOEPA’s high-cost coverage tests have been subject to special disclosure requirements and
restrictions on loan terms, and consumers with high-cost mortgages have obtained enhanced remedies for
violations of the law. In January 2013, CFPB issued a rule that implemented changes to HOEPA as
required by the Dodd-Frank Act. These changes have extended the coverage of the HOEPA to types of
loans that were previously not covered: mortgages for home purchase and open-end home equity loans (or
HELOC’s). In the current form, the HOEPA part of Regulation Z applies to almost any loans secured by a
consumer’s principal dwelling that meet high cost coverage tests, as specified in 12 CFR 1026.32(a)(2) .
Below we call such loans “HOEPA loans”. Exceptions include: reverse mortgages, construction loans, and
certain types of government sponsored loans.
Below we summarize information collection requirements imposed by HOEPA.
Disclosure
Creditors that extend HOEPA loans are required to provide a disclosure to borrowers in highcost mortgages three days prior to consummation of the loan, as specified in 12 CFR 1026.32(c) .The
disclosure includes a warning that the consumer could lose the home if the consumer fails to meet his or
her obligations under the transaction. The disclosure also includes certain other items of information
about the transaction, including, for example, the annual percentage rate, the regular payment amount,
and the single maximum payment amount for variable-rate transactions.
Counseling and certification requirements
Prior to extending credit under a high- cost mortgage, creditors must receive certification that a
consumer has obtained counseling on the advisability of the mortgage from a HUD-approved counselor,
or at the discretion of HUD’s Secretary, a State housing finance authority. Details on the content and
timing of the certification are provided in 12 CFR 1026.34(a)(5).
In order to help consumers obtain information about resources for counseling, creditors are
required to provide consumers who will receive a high-cost mortgage with a notice containing the
website addresses and telephone numbers of the CFPB and HUD for access to information about housing
counseling, and a list of five counselors or counseling organizations certified or approved by HUD to
provide high-cost mortgage counseling. Creditors are deemed to have complied with this requirement
by satisfying a separate homeownership counselor list requirement contained in Regulation X (12 CFR
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1024.20(a)), whereby lenders are required to provide applicants for a federally related mortgage loan a
list of five homeownership counselors or counseling organizations certified or otherwise approved by
HUD.2
Recordkeeping
Creditors are required to retain evidence of compliance with the regulation (other than the
advertising requirements) for two years after the date disclosures are required to be made or other action
is required to be taken. See 12 CFR 1026.25(a). Regulation Z also provides that administrative agencies
responsible for enforcing the TILA may require creditors under their jurisdictions to retain records for a
longer period if necessary to carry out their enforcement responsibilities under the TILA. The
recordkeeping requirement ensures that records that might contain evidence of violations of the TILA
remain available to agencies, as well as to private litigants.
2. Use of the Information
As noted above, consumers generally rely on the disclosures required by TILA and Regulation Z
to shop among options and to facilitate informed credit decision making. Without this information,
consumers would be severely hindered in their ability to assess the true costs and terms of financing
offered. Additionally, enforcement agencies and private litigants need the information in these
disclosures to enforce TILA and Regulation Z. See 15 U.S.C. 1607, 1640.
Requiring creditors to receive certification that consumers received required homeownership
counseling prior to extending credit will enhance consumers’ ability to make informed credit decisions
by ensuring that they received assistance from a federally-approved counselor or counseling organization
when evaluating whether to proceed with a high-cost mortgage transaction. Requiring creditors to
provide consumers with a list of homeownership counselors will help consumers to locate appropriate
counseling resources.
Federal and State enforcement agencies and private litigants use records retained under the
requirement of Regulation Z to ascertain whether accurate and complete disclosures of the cost of credit
have been provided to consumers prior to consummation of the credit obligation and, in some instances,
during the loan term. The information is also used to determine whether other actions required under
TILA have been met. The information retained provides the primary evidence of law violations in TILA
enforcement actions brought by federal agencies. Without the Regulation Z recordkeeping requirement,
the agencies’ ability to enforce TILA would be significantly impaired.
3. Use of Information Technology
Regulation Z contains rules to establish uniform standards for using electronic communication to
deliver disclosures required under Regulation Z, within the context of the Electronic Signatures in Global
and National Commerce Act (ESIGN), 15 U.S.C. 7001 et seq. 12 CFR 1026.5(a)(1)(iii), 1026.17(a)(1).
These rules enable businesses to utilize electronic disclosures and compliance, consistent with the
requirements of ESIGN.
Use of such electronic communications is consistent with the Government Paperwork Elimination
Act (GPEA), Title XVII of Pub. L. 105-277, codified at 44 U.S.C. 3504, note. ESIGN and GPEA serve to
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reduce businesses’ compliance burden related to federal requirements, including Regulation Z, by
enabling businesses to use more efficient electronic media for disclosures and compliance.
Regulation Z also permits creditors to retain records in electronic format.
Both HUD and CFPB both maintain websites that allow lenders to search for homeownership
counselors or counseling organizations in the area, which should minimize the burden associated
with compiling and transmitting the list to the borrower.
4. Efforts to Identify Duplication
Some of the information concerning credit cost in the statutorily-mandated HOEPA disclosure is
contained in other disclosures required by TILA and Regulation Z or contractual documents. However,
TILA mandates that creditors provide additional warnings and information to consumers in high-cost
mortgages. The creditor (and/or advertiser) is the only source of this information. No other federal law
mandates these disclosures. The CFPB is unaware of specific state laws that duplicate these
requirements, although some states have rules applicable to high-cost consumer credit transactions.
As discussed above, creditors are deemed in compliance with the Regulation Z requirements to
provide a list of housing counselors or counseling organizations to prospective borrowers in high-cost
mortgages by satisfying a separate homeownership counselor list requirement as a part of Regulation X.
This compliance method eliminates paperwork duplication while retaining the substantive requirements in
Regulation Z, which provides consumers a private right of action that is not available under Regulation X
and which provides, for high-cost mortgages, the additional remedies available to consumers for
violations of HOEPA.
5. Efforts to Minimize Burdens on Small Entities
TILA and Regulation Z recordkeeping and disclosure requirements are imposed on all creditors.
The recordkeeping requirement is mandated by Regulation Z. The disclosure requirements are
mandated jointly by TILA and Regulation Z.
Most creditors today use some degree of computerization in their business, and Regulation Z
permits businesses to rely on third parties to meet their recordkeeping and disclosure requirements. This
flexibility yields reduced recordkeeping and disclosure costs. Moreover, Regulation Z provides a model
form and clauses that may be used in compliance with the statutorily-required HOEPA disclosure.
Correct use of these forms and clauses insulates a creditor from liability as to proper format.
6. Consequences of Less Frequent Collection and Obstacles to Burden Reduction
The current record retention period of two years under Regulation Z supports private actions and
regulatory enforcement actions. If the retention period were shortened, consumers who sue under TILA,
and the administrative agencies, might find that creditor records needed to prove violations of TILA no
longer exist.
As noted, the disclosure requirements are needed to facilitate comparison cost shopping and to
spur informed credit decision making. Without these requirements, consumers would not have access to
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this critical information. Their right to sue under TILA would be undermined, and enforcement agencies
could not fulfill their mandate to enforce TILA.
7. Circumstances Requiring Special Information Collection
The collections of information in Regulation Z are consistent with the applicable guidelines
contained in 5 CFR 1320.5(d)(2).
8. Consultation Outside the Agency
In accordance with 5 CFR §1320.8(d)(1), the Bureau has published a notice at Federal Register
allowing the public 60 days to comment on this proposed the extension (renewal) of this currently
approved collection of information. No comments were received. Further and in accordance with 5
CFR §1320.5(a)(1)(iv), the Bureau also published a notice in the Federal Register allowing the public
30 days to comment on the submission of this information collection request to the Office of
Management and Budget.
9. Payments or Gifts to Respondents
No payments or gifts are provided to respondents.
10. Assurances of Confidentiality
The required recordkeeping and disclosures contain private financial information about persons
who use consumer credit that is protected by the Right to Financial Privacy Act, 12 U.S.C. 3401 et seq.
Such records may constitute confidential customer lists.
11. Justification for Sensitive Questions:
This regulation concerns the requirement to disclose certain material to buyers that meet the
regulation’s criteria, as such there are no questions asked by the Bureau and therefore no collection of
information of a sensitive nature.
12. Estimated Burden of Information Collection
Labor Hours: 85

Exhibit 1: Burden Hour Summary

No. of
Respondents

Annual
Responses

Average
Response
Time

Disclosure

307

1,279

0.03

42.6

$28.76

$1,226

List of counselors

307

1,279

0

0

0

0

Certification

307

1,279

0.03

42.6

$28.76

$1,226

Record keeping

307

1,279

0

0

0

0

Information Collection
Requirement

5

Annual
Burden
Hours

Hourly
Rate

Hourly
Costs

Total hours:
Total labor cost:
CFPB respondents
CFPB response share
CFPB responses
CFPB allocated hours
CFPB allocated labor cost

85
$2,452
55
14%
185
12
$355

The CFPB estimates that the total ongoing cost associated with HOEPA is 85 hours, and the
associated labor cost is $3,837. As of December 2014, there are 145 depository institutions (114
depository institutions with total assets of more than $10 billion and 31 affiliates) over which CFPB
has primary enforcement authority with respect to Regulation Z. According to CFPB’s estimates, only
seven of these entities originated high cost mortgages in 2014.
The CFPB and the FTC generally both have enforcement authority over non-depository
institutions for Regulation Z. Therefore, the CFPB has allocated to itself half of the estimated burden to
non-depository institutions. According to CFPB’s estimates, 48 non-depository institutions originated
high cost mortgages in 2014.
The combined CFPB share is estimated to be 14%, which the sum of all HOEPA loans originated
by depositary institutions under CFPB’s supervisory authority, and 50% of HOEPA loans originated by
non-depositary institutions, divided by the total number of HOEPA loans originated in 2014.
The data source used for estimating the count of HOEPA loans and the count of respondents is
HMDA 2014.
Other assumptions we used were that it would take two minutes of response time to deliver a
disclosure and obtain certification from the consumer about meeting with a housing counselor, but that
there is no burden for recordkeeping because disclosures are disclosures are generated and saved
electronically, and cost of storing certification is assumed to be minimal. Additionally, generating the
list of housing counselors falls under Regulation X, and as such counts for burden under the high-cost
supporting statement for that regulation, and not this one for Regulation Z. In all cases the burden is
borne on a loan officer, whose wage is $28.76/hr, the hourly median wage for loan officers in BLS 1.
13. Estimated Total Annual Cost Burden to Respondents or Recordkeepers
We estimate that the total materials cost burden is $0, as disclosures are delivered
electronically, cost of storing the certification from the consumer about meeting with a housing
counselor is assumed to be minimal, and lenders do not pay extra fees for HOEPA functionality
in loan document processing software.
14. Estimated Cost to the Federal Government

1

Hourly rate labor costs are the median hourly wages from the Bureau of Labor and Statistics (BLS) for affected occupational
groups. Occupational groups for the PRA burden of the HOEPA provisions of regulation Z are defined as loan officers
(http://www.bls.gov/ooh/business-and-financial/loan-officers.htm#tab-1).

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There are no additional costs to the Federal Government.
15. Program Changes or Adjustments
Total
Respondents
Total Annual Burden
Requested
Current OMB Inventory
Difference (+/-)
Program Change
Discretionary
New Statute
Violation
Adjustment

Annual Responses

55
408
-353
0
0
0
0
-353

Burden Hours

185
25,890
-25,705
0
0
0
0
-25,705

12
863
-851
0
0
0
0
-851

Cost Burden (O &
M)
$0
$0
$0
$0
$0
$0
$0
$0

The changes in burden and costs are the result of several changes. Primarily, it is the result of a
dramatic decline in the total volume of HOEPA originations between 2013 and 2014. To a lesser extent,
the previous supporting statement assumed burden for providing a list of housing counselors to high-cost
mortgage borrowers, which we are now assuming under the Regulation X supporting statement.
16. Plans for Tabulation, Statistical Analysis, and Publication
The results of the information collection will not be published.
17. Display of Expiration Date
There is no information collection instrument associated with this OMB number on which to
display the expiration date. The OMB control number and expiration date associated with this PRA
submission will be displayed on the Federal government’s electronic PRA docket at www.reginfo.gov.
18. Exceptions to the Certification Requirement
The Bureau certifies that this collection of information is consistent with the requirements of 5 CFR
1320.9, and the related provisions of 5 CFR 1320.8(b)(3) and is not seeking an exemption to these
certification requirements.

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