CFPB Finalizes Rule to Implement Growth Act Escrow Exemption for Higher Priced Mortgages | Ballard Spahr srl
Like before reported, the Law on Economic Growth, Regulatory Relaxation and Consumer Protection (Growth Law), passed in June 2018, created an exemption from the obligation to maintain an escrow account in connection with a higher priced mortgage loan (HPML) for insured depository institutions and insured credit unions (insured creditors) that meet certain conditions. The CFPB recently adopted a final rule to implement the exemption. The CFPB has also published a summary of the to reign, and an updated version of TILA HPML Escrow Rule Small Entity Compliance To guide. The rule will take effect upon publication in the Federal Register, which the CFPB expects to have in February 2021.
The HPML provisions of Regulation Z require a creditor to establish an escrow account for certain first lien HPMLs. While the provisions of the LPPH already include an exemption for small creditors operating in rural or underserved areas who meet certain requirements, the exemption under the Growth Act is an additional exemption for eligible insured creditors. Insured creditors who meet the following conditions can benefit from the exemption:
- As of the previous December 31st the insured creditor had assets of $ 10 billion or less (this amount is subject to annual inflation adjustment). For requests received before April 1 of the current calendar year, this condition is met if the assets of the insured creditor do not exceed the threshold as of December 31.st of either of the two preceding calendar years. (The pre-existing small creditors exemption has an inflation-adjusted asset threshold of $ 2.23 billion.)
- During the previous calendar year, the insured creditor and its affiliates have jointly made no more than 1,000 transactions subject to the repayment capacity rule in Regulation Z (covered transactions) secured by a first lien on a home. main. For requests received before April 1 of the current calendar year, this condition is met if the insured creditor and its affiliates have carried out a maximum of 1,000 transactions covered by a first lien on a principal dwelling during one or the other of the two preceding calendar years.
- During the previous calendar year, the insured party extended at least one covered transaction that was secured by a first lien on a property located in a rural or underserved area. For requests received before April 1 of the current calendar year, this condition is met if, during either of the two preceding calendar years, the insured creditor has extended at least one covered transaction that was guaranteed by a first lien on a property located in a rural or poorly served area. Region.
- The insured creditor and its affiliates do not keep an escrow account for consumer credit transactions guaranteed by a building or a dwelling, with the exception of:
- Escrow accounts established after consumption as an accommodation for distressed consumers to help those consumers avoid default or foreclosure, or
- Escrow accounts established at a time when the insured creditor was required to do so by the provisions of the LHP. The initial HPML escrow account requirement came into effect for loan applications received on or after April 1, 2010. Insured creditors who meet the other requirements of the new exemption will be eligible for the new exemption if they cease to establish. escrow accounts for HPML loans for which applications are received on or after the 120th day following the effective date of the final rule implementing the new exemption.
Even if an insured creditor qualifies for exemption from the escrow account requirement, if a transaction is subject to a forward sale commitment to a buyer who does not qualify for an exemption from the escrow account requirement , an escrow account is required under the HPML provisions, unless the transaction is otherwise exempt from the requirement.