CFPB Issues Final Rule on Higher-Priced Mortgage Loan Escrow Exemption

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The CFPB recently issued a final rule to amend Regulation Z to exempt certain insured depository institutions and insured credit unions from the requirement to establish escrow accounts for certain higher-priced mortgage loans.

The Truth in Lending Act, as implemented by Regulation Z, requires that creditors establish an escrow account for certain higher-priced mortgage loans.  Among other things, the final rule exempts insured depository institutions or insured credit unions making first lien loans secured by a borrower’s principal residence from the escrow requirement if: (i) the institution has assets of $10 billion or less as of the preceding December 31 (or, if the application is taken before April 1 of the current calendar year, as of December 31 for either of the two preceding years); (ii) the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year (or during either of the two preceding calendar years if the application is taken before April 1 of the current calendar year); (iii) existing high-priced mortgage loans escrow exemption criteria found at 12 C.F.R. § 1026.35(b)(2)(iii)(A) (generally dealing with originating loans in rural or underserved areas) are met; and (iv) the institution or its affiliate does not maintain any escrow accounts for the payment of property taxes or mortgage-related insurance on any mortgage loans they service, except as provided in 12 C.F.R. § 1026.35 (b)(2)(iii)(D).

The final rule will become effective upon publication on the Federal Register.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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