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Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Rules and Regulations extended during 2015 a first-lien covered transaction that is located in a rural or underserved area. Assume further that the creditor consummates a higher-priced mortgage loan in 2017 for which the application was received in November 2017. Because the creditor did not extend during 2016 a first-lien covered transaction secured by a property that is located in a rural or underserved area, and the application was received on or after April 1, 2017, the creditor does not meet this condition for exemption. However, assume instead that the creditor consummates a higher-priced mortgage loan in 2017 based on an application received in February 2017. The creditor meets this condition for exemption for this loan because the application was received before April 1, 2017, and the creditor extended during 2015 a firstlien covered transaction that is located in a rural or underserved area.
ii. The creditor and its affiliates together extended no more than 2,000
covered transactions, as defined in 1026.43b1, secured by first liens, that were sold, assigned, or otherwise transferred by the creditor or its affiliates to another person, or that were subject at the time of consummation to a commitment to be acquired by another person, during the preceding calendar year or during either of the two preceding calendar years if the application for the loan was received before April 1 of the current calendar year. For purposes of 1026.35b2iiiB, a transfer of a first-lien covered transaction to another person includes a transfer by a creditor to its affiliate.
A. In general, whether this condition is satisfied depends on the creditors activity during the preceding calendar year. However, if the application for the loan in question is received before April 1 of the current calendar year, the creditor may instead meet this condition based on activity during the next-to-last calendar year. This provides creditors with a grace period if their activity falls at or below the threshold in one calendar year but exceeds it in the next calendar year.
B. For example, assume that in 2015
a creditor and its affiliates together extended 1,500 loans that were sold, assigned, or otherwise transferred by the creditor or its affiliates to another person, or that were subject at the time of consummation to a commitment to be acquired by another person, and 2,500
such loans in 2016. Because the 2016
transaction activity exceeds the threshold but the 2015 transaction activity does not, the creditor satisfies this condition for exemption for a
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higher-priced mortgage loan consummated during 2017 if the creditor received the application for the loan before April 1, 2017, but does not satisfy this condition for a higher-priced mortgage loan consummated during 2017 if the application for the loan was received on or after April 1, 2017.
C. For purposes of 1026.35b2iiiB, extensions of first-lien covered transactions, during the applicable time period, by all of a creditors affiliates, as affiliate is defined in 1026.32b5, are counted toward the threshold in this section.
Affiliate is defined in 1026.32b5
as any company that controls, is controlled by, or is under common control with another company, as set forth in the Bank Holding Company Act of 1956 12 U.S.C. 1841 et seq.. Under the Bank Holding Company Act, a company has control over a bank or another company if it directly or indirectly or acting through one or more persons owns, controls, or has power to vote 25 per centum or more of any class of voting securities of the bank or company; it controls in any manner the election of a majority of the directors or trustees of the bank or company; or the Federal Reserve Board determines, after notice and opportunity for hearing, that the company directly or indirectly exercises a controlling influence over the management or policies of the bank or company. 12 U.S.C. 1841a2.
iii. As of the end of the preceding calendar year, or as of the end of either of the two preceding calendar years if the application for the loan was received before April 1 of the current calendar year, the creditor and its affiliates that regularly extended covered transactions secured by first liens, together, had total assets that are less than the applicable annual asset threshold.
A. For purposes of 1026.35b2iiiC, in addition to the creditors assets, only the assets of a creditors affiliate as defined by 1026.32b5 that regularly extended covered transactions as defined by 1026.43b1 secured by first liens, are counted toward the applicable annual asset threshold. See comment 35b2iii1.ii.C for discussion of definition of affiliate.
B. Only the assets of a creditors affiliate that regularly extended first-lien covered transactions during the applicable period are included in calculating the creditors assets. The meaning of regularly extended is based on the number of times a person extends consumer credit for purposes of the definition of creditor in 1026.2a17. Because covered
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transactions are transactions secured by a dwelling, consistent with 1026.2a17v, an affiliate regularly extended covered transactions if it extended more than five covered transactions in a calendar year. Also consistent with 1026.2a17v, because a covered transaction may be a high-cost mortgage subject to 1026.32, an affiliate regularly extends covered transactions if, in any 12-month period, it extends more than one covered transaction that is subject to the requirements of 1026.32 or one or more such transactions through a mortgage broker. Thus, if a creditors affiliate regularly extended first-lien covered transactions during the preceding calendar year, the creditors assets as of the end of the preceding calendar year, for purposes of the asset limit, take into account the assets of that affiliate. If the creditor, together with its affiliates that regularly extended firstlien covered transactions, exceeded the asset limit in the preceding calendar yearto be eligible to operate as a small creditor for transactions with applications received before April 1 of the current calendar yearthe assets of the creditors affiliates that regularly extended covered transactions in the year before the preceding calendar year are included in calculating the creditors assets.
C. If multiple creditors share ownership of a company that regularly extended first-lien covered transactions, the assets of the company count toward the asset limit for a co-owner creditor if the company is an affiliate, as defined in 1026.32b5, of the co-owner creditor. Assuming the company is not an affiliate of the co-owner creditor by virtue of any other aspect of the definition such as by the company and co-owner creditor being under common control, the companys assets are included toward the asset limit of the co-owner creditor only if the company is controlled by the co-owner creditor, as set forth in the Bank Holding Company Act. If the co-owner creditor and the company are affiliates by virtue of any aspect of the definition, the coowner creditor counts all of the companys assets toward the asset limit, regardless of the co-owner creditors ownership share. Further, because the co-owner and the company are mutual affiliates the company also would count all of the co-owners assets towards its own asset limit. See comment 35b2iii1.ii.C for discussion of the definition of affiliate.
D. A creditor satisfies the criterion in 1026.35b2iiiC for purposes of any higher-priced mortgage loan consummated during 2016, for example,
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