CFPB publishes escrow exemption rules for higher priced mortgages – NMP
The Consumer Financial Protection Bureau has issued a final rule that implements a requirement of the Economic Growth, Regulatory Relaxation and Consumer Protection Act. The rule exempts certain deposit-taking institutions and insured credit unions from the obligation to establish escrow accounts for certain high-priced mortgages.
“The final rule takes effect upon publication in the Federal Register and exempts from the obligation of HPML escrow any loan made by an insured depository institution or a credit union insured and secured by a first lien on the principal home of a consumer if (1) the institution has assets of $ 10 billion or less; 2 ° the institution and its affiliates have taken out 1,000 or less loans secured by a first lien on a principal dwelling during the preceding calendar year; and (3) some of the existing HPML escrow exemption criteria are met, ”according to a press release.
According to the CFPB’s context for establishing the rule, prior to the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Board of Governors of the Federal Reserve System (Council) a issued a rule requiring, among other things, the establishment of escrow accounts for the payment of property taxes and the insurance of certain “higher priced mortgages”, a category that Council defined to capture what it considered to be subprime loans.
“The Board explained that this rule was intended to reduce systemic and consumer risks by forcing the subprime market to structure loans and disclose their pricing in the same way as the main market,” according to the press release. “In 2010, Congress enacted the Dodd-Frank Act, which amended TILA and transferred regulatory authority from TILA and other functions from the Board of Directors to the Bureau. The Dodd-Frank Act added Section 129D (a) of the TILA, which passed the council rule requiring creditors to establish an escrow account for higher priced mortgages. The Dodd-Frank Act also excluded certain loans, such as reverse mortgages, from this escrow requirement. “
The Act also gave the Bureau the power to structure an exemption based on asset size and mortgage lending activity for creditors operating primarily in rural or underserved areas.
“In 2013, the Bureau exercised this power to exempt from the obligation of escrow creditors with less than $ 2 billion in assets and meeting other criteria,” according to the CFPB.
Click here to learn more about the Higher Priced Mortgage Escrow Exemption.