CFPB Issues Proposed Rule on Reg Z Escrow Exemptions

The Consumer Financial Protection Bureau on Thursday issued a notice of proposed rulemaking 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 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 generally 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 of the Economic Growth, Regulatory Relief and Consumer Protection Act by reducing costs associated with escrow requirements.   

To read the NPRM click https://files.consumerfinance.gov/f/documents/cfpb_proposed-rule_hpml-escrow-exemption_2020-07.pdf.

In issuing the NPRM, the Bureau said it represents its last mandatory rulemaking to implement EGRRCPA.