Topics In This Issue
• Federal Issues
• Firm News
• Consumer Finance
• E-Financial Services
• Privacy/Data Security
• Criminal Enforcement Action
Excerpt from "Federal Issues"
Federal Reserve Board Announces Final Rule and Requests Public Comment on Second Rule to Revise Regulation Z Escrow Account Requirements. On February 23, the Board of Governors of the Federal Reserve System (Board) issued a final rule and requested public comment on a second rule that will revise the escrow account requirements for certain home mortgage loans under Regulation Z, which implements the Truth in Lending Act (TILA). The revisions are being made pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The final rule implements a provision of the Dodd-Frank Act that increases the annual percentage rate (APR) threshold for determining whether a mortgage lender must establish an escrow account for property taxes and insurance for first-lien, "jumbo" mortgage loans are higher-priced mortgage loans for which an escrow account must be established. As revised, the threshold for coverage of the escrow requirement for first-lien, jumbo loans is 2.5 percentage points in excess of the average prime offer rate, as of the date the transaction’s rate is set. The threshold was previously 1.5 percentage points. This final rule does not change the APR threshold for non-jumbo loans, and it does not apply to open-end credit plans or to loans to finance the initial construction of a dwelling, temporary or "bridge" loans with a term of 12 months or less, or reverse mortgages. The final rule is effective on April 1, 2011, for covered loans for which the creditor receives an application on or after that date. In addition to the final rule, the Board published a proposed rule that would (i) expand the minimum period for mandatory escrow accounts for first-lien, higher-priced mortgage loans from one to five years, and under certain circumstances longer, (ii) extend the partial exemption for certain loans secured by a condominium unit to planned unit developments and certain other, similar properties, and (iii) provide an exemption from the escrow requirement for certain creditors that operate primarily in "rural or underserved" counties, have annual originations of 100 or fewer first-lien mortgage loans, and do not escrow for any mortgage transaction it services. In addition, the proposed rule would implement new disclosure requirements contained in the Dodd-Frank Act. The Board is soliciting comment on the proposed rule for 60 days after publication in the Federal Register, which is expected shortly.
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