CFPB Proposes Clarifying Changes to Final Escrow Rule

The Consumer Financial Protection Bureau (CFPB) has released a set of clarifying and technical amendments to one of the several rules it released in January under authority of the Dodd-Frank Wall Street Reform and Consumer Protection Act.   The specific rule for which clarifications and amendments are proposed is the Escrow Requirements Under the Truth in Lending Act (Regulation Z).  CFPB is inviting public comment on the proposed changes.

The Escrow Regulations rule expanded on an existing Regulation Z requirement that creditors maintain escrow accounts for higher-priced mortgage loans (HPMLs) but created an exception for loans made by creditors that operate predominantly in "rural" or "underserved" areas, an exception also made in three of the other CFPB rules issued in January. 

The proposed amendments address how to determine whether a county meets the definitions of rural or underserved for the applications of the escrow requirements and other Dodd-Frank Act regulations.  The changes would utilize currently applicable Urban Influence Codes (UICs) established by the Department of Agriculture's Economic Research Service (USDA-ERS) to define "rural" and the Home Mortgage Disclosure Act (HMDA) data for defining "underserved."

The proposed amendments would also restore certain existing Regulation Z requirements related to the consumer's ability to repay and prepayment penalties for HPMLS.  These were expanded to apply to most mortgage transactions in the 2013 Escrows Final Rule and in doing so the regulatory text providing these protections solely to HPMLs was removed and there is a time difference in when the rules are to be implemented.  To prevent any interruption in applicable protections the proposal would establish a temporary provision to ensure that the protections remain in place for HPMLs until the expanded provisions take effect in January 2014.