Better late than never. The Federal Reserve Board has acknowledged what many bankers have been telling it — that it does not make sense (or as the Fed put it, would not be in the public interest) to proceed with its 2009 and 2010 Regulation Z proposals, given the scheduled July 21 transfer of general rulemaking authority for the Truth-in-Lending Act to the Consumer Financial Protection Bureau (CFPB) under the Dodd-Frank Act.

Moreover, Dodd-Frank requires that the CFPB issue a proposal within 18 months after the transfer date to combine, in a single form, the mortgage disclosures required by TILA and the disclosures required by the Real Estate Settlement Procedures Act (RESPA).

The Fed officially announced, on February 1, that it no longer expects to finalize three pending Reg. Z rulemakings.

The proposed rules were published as part of the Board’s comprehensive review of its mortgage lending regulations under TILA. The first phase of the review consisted of two proposals issued in August 2009. These proposals would have reformed the consumer disclosures under TILA for closed-end mortgage loans and home equity lines of credit

The third proposal, which was issued in September 2010, included changes to the disclosures consumers receive to explain their right to rescind certain loans and would have clarified the responsibilities of the creditor if a consumer exercises this rescission right. It also included changes to the disclosures for reverse mortgages, proposed new disclosures for loan modifications, restrictions on certain advertising and sales practices for reverse mortgages, and changes to the disclosure obligations of loan servicers.

The American Bankers Association called the move a “long-sought victory” for bankers, as the Fed has now bought into arguments the industry has been making for some time. The Fed acknowledged that although “there are specific provisions in the proposals that would not be affected by the CFPB’s development of joint TILA-RESPA disclosures, adopting those portions of the Board’s proposals in a piecemeal fashion would be of limited benefit, and the issuance of multiple rules with different implementation periods would create compliance difficulties.”