There is a common rummor that the government mandates that new
automobiles sold in the US be painted with waterborne or water based
paints (not sure which).

My question is:

- Is there any such regulation and if so, where can I actually read it?
- If not, where can I find the regulations that govern how and with
what kind of paints auto manufacturers paint cars at the factory?

I have searched google and the epa website for the following terms in
multiple combinations:

waterborne
water based
paints
automotive manufacturer
epa
regulations
coatings
automotive coatings

These EPA documents may be of interest:

http://www.epa.gov/fedrgstr/EPA-AIR/1996/April/Day-30/pr-23284.html

http://www.epa.gov/fedrgstr/EPA-AIR/1998/September/Day-11/a22657.htm

http://www.epa.gov/ttn/atw/183e/arc/fautobid.pdf

http://www.epa.gov/ttn/atw/auto/autoresptocomment.pdf

There is a set of books in your local law library called "Code of
Federal Regulations" or CFR for short.  This mass of information can
be accessed online at findlaw.com in the attorney's section under
cases and codes.