Passage of the 2010 Dodd-Frank Act mandated a new rule -- "Regulation Z" -- also known as the Truth in Lending Act (TILA). Now the Board of Governors of the Federal Reserve System are proposing a rule amendment that would expand Regulation Z.

The Board is looking for public comments on their proposed rule amendments to Regulation Z. Currently, Regulation Z prohibits a creditor from making a higher-priced mortgage loan without regard to the consumer's ability to repay the loan. The proposed change would expand the scope of the Regulation's "ability-to-repay" requirement to cover any consumer credit transaction secured by a dwelling (excluding an open-end credit plan, timeshare plan, reverse mortgage, or temporary loan).

In addition, the proposal would:

* Establish standards for complying with the ability-to-repay requirement, including a "qualified mortgage'' standard.
* Implement limits on prepayment penalties.

* Require creditors to retain evidence of compliance with the rule for three years after a loan is consummated.

General rulemaking authority for TILA is scheduled to transfer to the Consumer Financial Protection Bureau (CFPB) on July 21, 2011.

Comments on the proposed rule must be received on or before July 22, 2011. All comment letters will be transferred to the CFPB.