The CFPB has issued a proposed rule clarifying and making technical amendments to the 2013 Escrows Final Rule issued by the Bureau in  January 2013. This is the first of the CFPB’s planned issuances to clarify and provide additional guidance about the mortgage rules it issued in January.

The proposal has two primary purposes.  First, the 2013 Escrows Final Rule amends an existing rule that also provides protections regarding assessments of consumers’ ability to repay and prepayment penalties on certain “higher-priced” mortgage loans. The Dodd-Frank Act and certain of the other mortgage regulations the CFPB issued in January expands and strengthens the requirements concerning ability to repay and prepayment penalties. However, the 2013 Escrows Final Rule as adopted in January can be read to cut off the old protections before the new expanded protections take effect. This would create a six-month period when those consumer protections would not apply, which the amendments propose to fix.

Second, the CFPB is proposing to clarify how to determine whether or not a county is considered “rural” or “underserved” for purposes of applying an exemption in the escrows rule and special provisions adopted in three other Dodd-Frank Act mortgage rules the CFPB issued in January. The CFPB also proposes illustrations of how to do the determinations to facilitate compliance. The determinations are made based on currently applicable Urban Influence Codes or UICs, which are established by the USDA’s Economic Research Service (for “rural”), or based on HMDA data (for “underserved”).

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