Mandatory Escrow Requirements Effective June 1, 2013
The Escrow Requirements under the Truth-in-Lending Act (Regulation Z) Final Rule (Final Rule) will be effective June 1, 2013.
HPML determination and audit messages
►Currently, the definition of “Higher-Priced Mortgage Loan” or “HPML” is the same for all first lien loans: A loan secured by the consumer’s principal dwelling is an HPML if the annual percentage rate (APR) exceeds the annual prime offer rate (APOR) by 1.5 percent or more. Effective June 1, 2013, the definition of HPML will change to incorporate a separate HPML threshold for jumbo loans. A jumbo loan is an HPML if the APR exceeds the APOR by 1.5 percent or more.
►The current regulation includes two thresholds for whether or not a first-lien HPML is required to have a mandatory escrow account—a threshold that applies to jumbo loans, and a threshold that applies to all other loans. Effective June 1, the mandatory escrow account requirement will apply to all first-lien HPMLs, regardless of whether the loan is a jumbo loan.
The regulatory changes described above simplify the determination of whether or not a loan is an HPML that is subject to enhanced compliance requirements.
Prohibition on financing credit insurance premiums delayed
On May 7, 2013, the Consumer Financial Protection Bureau (CFPB) issued a proposal to temporarily delay the effective date of a prohibition on creditors financing single-premium credit insurance in connection with consumer credit transactions secured by a dwelling. The prohibition, described here, was included in the Loan Originator Compensation Requirements under the Truth-in-Lending Act (Regulation Z) Final Rule, and originally had an effective date of June 1, 2013. The proposed delay will allow the CFPB to address questions that have arisen since the publication of the final rule in January. Specifically, industry stakeholders have requested clarification regarding the applicability of the prohibition to transactions in which credit insurance premiums are charged periodically.
Comments were to have been received on the proposal on or before May 25, 2013.
Laurie Spira is chief compliance officer with Torrance, Calif.-based DocMagic Inc. She may be reached by phone at (800) 649-1362, ext. 6446 or e-mail [email protected]