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

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.