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Federal Register / Vol. 86, No. 227 / Tuesday, November 30, 2021 / Rules and Regulations exempt under 226.3b based on the creditors firm commitment to extend $55,000 in credit. If the threshold amount is $56,000 on January 1 of year six as a result of increases in the CPI
W, the account remains exempt.
However, if the creditor reduces its firm commitment to $54,000 on July 1 of year six, the account ceases to be exempt under 226.3b.
B. Initial extension of credit. If an open-end account qualifies for a 226.3b exemption at account opening based on a firm commitment, that account may also subsequently qualify for a 226.3b exemption based on an initial extension of credit. However, that initial extension must be a single advance in excess of the threshold amount in effect at the time the extension is made. In addition, the account must continue to qualify for an exemption based on the firm commitment until the initial extension of credit is made. For example:
1 Assume that, at account opening in year one, the threshold amount in effect is $50,000 and the account is exempt under 226.3b based on the creditors firm commitment to extend $55,000 in credit. The account is not used for an extension of credit during year one. On January 1 of year two, the threshold amount is increased to $51,000 pursuant to 226.3b1ii as a result of an increase in the CPIW. On July 1 of year two, the consumer uses the account for an initial extension of $52,000. As a result of this extension of credit, the account remains exempt under 226.3b even if, after July 1 of year two, the creditor reduces the firm commitment to $51,000 or less.
2 Same facts as in paragraph 4.iv.B1 of this section except that the consumer uses the account for an initial extension of $30,000 on July 1 of year two and for an extension of $22,000 on July 15 of year two. In these circumstances, the account is not exempt under 226.3b based on the $30,000 initial extension of credit because that extension did not exceed the applicable threshold amount $51,000, although the account remains exempt based on the firm commitment to extend $55,000 in credit.
3 Same facts as in paragraph 4.iv.B1 of this section except that, on April 1 of year two, the creditor reduces the firm commitment to $50,000, which is below the $51,000 threshold then in effect. Because the account ceases to qualify for a 226.3b exemption on April 1 of year two, the account does not qualify for a 226.3b exemption based on a $52,000 initial extension of credit on July 1 of year two.
5. Closed-end credit.

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i. Qualifying for exemption. A closedend loan is exempt under 226.3b unless the extension of credit is secured by any real property, or by personal property used or expected to be used as the consumers principal dwelling; or is a private education loan as defined in 226.46b5, if either of the following conditions is met.
A. The creditor makes an extension of credit at consummation that exceeds the threshold amount in effect at the time of consummation. In these circumstances, the loan remains exempt under 226.3b even if the amount owed is subsequently reduced below the threshold amount such as through repayment of the loan.
B. The creditor makes a commitment at consummation to extend a total amount of credit in excess of the threshold amount in effect at the time of consummation. In these circumstances, the loan remains exempt under 226.3b even if the total amount of credit extended does not exceed the threshold amount.
ii. Subsequent changes. If a creditor makes a closed-end extension of credit or commitment to extend closed-end credit that exceeds the threshold amount in effect at the time of consummation, the closed-end loan remains exempt under 226.3b regardless of a subsequent increase in the threshold amount. However, a closed-end loan is not exempt under 226.3b merely because it is used to satisfy and replace an existing exempt loan, unless the new extension of credit is itself exempt under the applicable threshold amount. For example, assume a closed-end loan that qualified for a 226.3b exemption at consummation in year one is refinanced in year ten and that the new loan amount is less than the threshold amount in effect in year ten. In these circumstances, the creditor must comply with all of the applicable requirements of this part with respect to the year ten transaction if the original loan is satisfied and replaced by the new loan, which is not exempt under 226.3b. See also comment 3b6.
6. Addition of a security interest in real property or a dwelling after account opening or consummation.
i. Open-end credit. For open-end accounts, if, after account opening, a security interest is taken in real property, or in personal property used or expected to be used as the consumers principal dwelling, a previously exempt account ceases to be exempt under 226.3b and the creditor must begin to comply with all of the applicable requirements of this part within a reasonable period of time.
See comment 3b4.ii. If a security
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interest is taken in the consumers principal dwelling, the creditor must also give the consumer the right to rescind the security interest consistent with 226.15.
ii. Closed-end credit. For closed-end loans, if, after consummation, a security interest is taken in any real property, or in personal property used or expected to be used as the consumers principal dwelling, an exempt loan remains exempt under 226.3b. However, the addition of a security interest in the consumers principal dwelling is a transaction for purposes of 226.23, and the creditor must give the consumer the right to rescind the security interest consistent with that section. See 226.23a1 and the accompanying commentary. In contrast, if a closed-end loan that is exempt under 226.3b is satisfied and replaced by a loan that is secured by any real property, or by personal property used or expected to be used as the consumers principal dwelling, the new loan is not exempt under 226.3b and the creditor must comply with all of the applicable requirements of this part. See comment 3b5.
7. Application to extensions secured by mobile homes. Because a mobile home can be a dwelling under 226.2a19, the exemption in 226.3b does not apply to a credit extension secured by a mobile home that is used or expected to be used as the principal dwelling of the consumer.
See comment 3b6.
8. Transition rule for open-end accounts exempt prior to July 21, 2011.
Section 226.3b2 applies only to openend accounts opened prior to July 21, 2011. Section 226.3b2 does not apply if a security interest is taken by the creditor in any real property, or in personal property used or expected to be used as the consumers principal dwelling. If, on July 20, 2011, an openend account is exempt under 226.3b based on a firm commitment to extend credit in excess of $25,000, the account remains exempt under 226.3b2
until December 31, 2011 unless the firm commitment is reduced to $25,000
or less. If the firm commitment is increased on or before December 31, 2011 to an amount in excess of $50,000, the account remains exempt under 226.3b1 regardless of subsequent increases in the threshold amount as a result of increases in the CPIW. If the firm commitment is not increased on or before December 31, 2011 to an amount in excess of $50,000, the account ceases to be exempt under 226.3b based on a firm commitment to extend credit. For example:

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