The CFPB has issued final “clarifying and technical” amendments to its final mortgage escrow account rule dealing with the establishment of mandatory escrow accounts on higher-priced mortgage loans (HPML).
The final escrow rule contains exemptions for certain creditors operating primarily in “rural” or “underserved” areas. Such creditors are also the subject of (1) a provision allowing balloon payment mortgages in the final ability-to-repay rule, (2) an exemption from the balloon payment prohibition on high-cost mortgages in the 2013 final HOEPA rule, and (3) an exemption from a requirement to obtain a second appraisal for certain HPMLs in the 2013 interagency final appraisals rule. These rules rely on the criteria for “rural” and “underserved” areas in the final escrow rule.
The final amendments clarify how to determine whether a county is considered “rural” or “underserved” for purposes of the escrow rule and three other rules. Concurrently with the amendments, the CFPB released a final list of “rural” or “underserved” counties which, according to the CFPB, is identical to the preliminary list it issued in March 2013. For purposes of the escrow rule and other relevant rules, the CFPB has indicated that creditors may rely on this list as a safe harbor to determine whether a county is “rural” or “underserved” for loans made from June 1, 2013, through December 31, 2013. The CFPB plans to issue an official list for 2014 when the necessary data becomes available.
The final amendments also include a temporary provision to keep in place existing requirements concerning the assessment of a consumer’s ability to repay an HPML and limitations on prepayment penalties for HPMLs. The final escrow rule had removed the regulatory text containing these provisions for HPMLs. The Title XIV rules which become effective on January 10, 2014 expanded these requirements and limitations to cover most mortgage loans. The final amendments keep the existing requirements and limitations in place for HPMLs until January 10, 2014.
The CFPB describes the escrow rule amendments as “the first final rule in connection with our planned issuances to clarify and provide additional guidance about the mortgage rules we issued in January.” The CFPB has also issued proposed clarifications to its ability to repay/qualified mortgage and servicing rules. Because the final escrow rule is effective June 1, 2013, the CFPB gave priority to finalizing the escrow rule amendments.
In another mortgage-related development, on May 15, 2013, the CFPB posted videos on the mortgage rules it finalized in January 2013. In March 2013, the CFPB said that it planned to publish plain-language guides to the regulations in both written and video form to assist smaller businesses with limited compliance staff.