Federal Register Publishes Correction to CFPB's KBYO Rule

CFPB TRID

On February 10, the CFPB published a correction to amend the preamble of the Know Before You Owe (KBYO) rule. Under the former RESPA rules, prepaid property taxes, HOA dues, condo fees, and co-op fees were not subject to tolerances, and the CFPB did not intend to modify that standard under KBYO. However, KBYO’s preamble was missing a “not” where it explained applicable tolerance limitations, which reinforced existing dialogue that the aforementioned fees were within the zero tolerance category. The CFPB’s recently issued correction amends KBYO’s preamble to include the formerly missing “not”: “The final rule also mirrors current Regulation X in that property insurance premiums, property taxes, homeowner’s association dues, condominium fees, and cooperative fees are not subject to tolerances whether or not they are placed into an escrow, impound, reserve, or similar account.” The publication further explains why the CFPB believes those fees are not subject to tolerances, noting “[p]roperty taxes, homeowner’s association dues, condominium fees, and cooperative fees are all ‘[c]harges paid for third-party servicers not required by the creditor.’” The correction is effective February 10, 2016.