The Consumer
Financial Protection Bureau (Bureau) today issued a notice of proposed
rulemaking (NPRM) that would amend Regulation Z of the Truth-in-Lending
(TIL) Act.
The rule would provide a new exemption
for some insured depository institutions and insured credit unions from the
requirement to establish escrow accounts
for certain higher-priced mortgage
loans (HPMLs). 

Under Regulation Z, some insured depository
institutions and credit unions are required to set up escrow accounts for specified
higher-priced mortgage loans (HPMLs). These are closed-end residential loan
transactions with an annual percentage rate that
exceeds the current average prime offer rate for a comparable transaction by
specific amounts. In setting up this escrow requirement, the 2008 Dodd-Frank
Act generally adopted a similar rule the Federal Reserve had made in 2005 specifically
targeting subprime loans. However Dodd-Frank excluded certain loans, such as
reverse mortgages, from the escrow requirement and gave the Consumer Financial
Protection Bureau (CRPF), which had rule-making authority, permission to exempt
smaller creditors and those operating “predominantly” in rural or underserved
areas.

Over the next few
years Congress gave CFPB authority to create additional exceptions. In 2013 the
Bureau exempted creditors with under $2 billion in assets from the escrow requirement
and in 2015 Congress amended TILA section 129D by striking the term
“predominantly” for creditors operating in rural or underserved areas.

Today’s proposed
amendment would generally exempt from the Regulation Z HPML escrow requirement
any loan made by an insured depository institution or insured credit union and
secured by a first lien on the principal dwelling of a consumer if (1) the
institution has assets of $10 billion or less; (2) 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; and (3) certain other
criteria are met. 
The proposed amendment would further the goals of the
2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA)
by reducing costs associated with escrow requirements. 

CFPB is inviting
public comment on the proposed rule within 60 days of its publication in the
Federal Register. In issuing the NPRM the Bureau has commenced its last
mandatory rulemaking to implement EGRRCPA. The entire rule can be read here.

By Jann Swanson , dated 2020-07-06 09:43:12

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Courtesy of Mortgage News Daily

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