CFPB proposes amendments to final mortgage escrow account rule

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The CFPB has proposed amendments to its final mortgage escrow account rule dealing with the establishment of mandatory escrow accounts on higher-priced mortgage loans (HPML). According to the proposal’s supplementary information, the proposal is the “first publication of additional guidance and updates regarding the Title XIV Final Rules.” It further states that because the final rule is effective June 1, 2013, the CFPB gave priority to issuing the proposal. It also indicates that another update affecting Title XIV final rules that are effective in January 2014 “will be proposed shortly.”

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 three rules rely on the criteria for “rural” and “underserved” areas in the final escrow rule.

The proposal is intended to clarify how to determine whether a county is considered “rural” or “underserved” for purposes of the four rules. Previously the CFPB issued a preliminary list of “rural” or “underserved” counties and indicated that it would propose amendments to the escrow rule to conform with the methodology used by the CFPB in developing the list.

The proposal also includes provisions 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 are effective in January 2014 expanded these requirements and limitations to cover most mortgage loans. The proposal would establish a temporary provision to keep the requirements and limitations in place for HPMLs until the expanded provisions take effect in January 2014.

Comments on the proposal will be due 15 days after its publication in the Federal Register.