The Consumer Financial Protection Bureau (CFPB) issued a notice of proposed rulemaking (NPRM)
that would amend Regulation Z to provide a new exemption available to certain insured depository institutions and insured credit unions from the requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs). In issuing the NPRM, the CFPB commenced its last mandatory rulemaking to implement the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA).
HPMLs are closed-end consumer credit transactions secured by the consumer’s principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction by specific amounts as of the date the interest rate is set. For the most part, first-lien HPMLs must have escrow accounts.
The proposed amendment
would 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 EGRRCPA by reducing costs associated with escrow requirements.