CFPB Proposes Escrow Rule Amendments, Publishes Escrow Rule Compliance Guide

CFPB Community Banks Escrow

On April 12, the CFPB proposed a rule to amend aspects of its January 10, 2013 final rule on escrow account requirements for first-lien higher-priced mortgage loans (HPMLs). That rule expands existing escrow requirements for such loans and creates a new exemption for small creditors that operate predominantly in rural or underserved areas. The proposal explains that the CFPB did not intend for the escrow rule to state that the CFPB will designate or determine which counties are rural or underserved. Instead, the CFPB intended to require determinations of rural or underserved status to be made by creditors, but also intended for the CFPB to apply both tests to each U.S. county and publish an annual list of counties that satisfy either test for a given calendar year, which creditors may rely upon as a safe harbor. Further, the CFPB proposes clarifications to how rural or underserved status may be determined. The proposal notes that the amended factors also will apply to three other CFPB mortgage rules that provide rural and underserved exemptions. Finally, the proposal (i) notes that the final escrow rule inadvertently removed existing language that provided certain protections related to a consumer’s ability to repay and prepayment penalties for HPMLs, and (ii) seeks to establish a temporary provision to ensure the removed protections remain in effect until the expanded HPML protections take effect on January 10, 2014. The CFPB is accepting comments on the proposed amendments for 15 days following publication in the Federal Register. On April 18, the CFPB published a guide to help small entities comply with the escrow rule. More broadly, the CFPB believes the guide provides an “easy-to-use” summary of the rule for all creditors, as well as servicing market participants, software providers, and other creditor business partners. As with another compliance guide released last week, the CFPB notes that the guide is not a substitute for the rule and the Official Interpretations and does not consider other laws that may apply to the maintenance and administration of escrow accounts.