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Financial Services Law Insights and Observations

CFPB amends Regulation Z HPML escrow exemption commentary

Agency Rule-Making & Guidance CFPB Regulation Z TILA HPML Escrow Mortgages

Agency Rule-Making & Guidance

On June 3, the CFPB published correcting amendments to its Official Interpretations to Regulation Z (TILA) that were not part of the final rule published in February, which exempts certain insured depository institutions and credit unions from the requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs). As previously covered by InfoBytes, under the final rule, any loan made by an insured depository institution or credit union that is secured by a first lien on the principal dwelling of a consumer would be exempt from Regulation Z’s HPML escrow requirement if (i) the institution has assets of no more than $10 billion; (ii) “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 (iii) the institution meets certain existing HPML escrow exemption criteria. 

The amendments add one comment to the CFPB’s commentary that was not incorporated into the Code of Federal Regulations “due to an omission in an amendatory instruction,” and revise a second comment that inadvertently did not appear in the final rule. The amendments to the commentary relate to (i) Regulation Z section 1026.35(b)(2)(vi)(B), which covers requirements for escrow exemptions for HPMLs; and (ii) Regulation Z section 1026.43(f)(1)(vi), which addresses the exemption associated with balloon-payment qualified mortgages made by certain creditors under the minimum standards for transactions secured by a dwelling. The corrections took effect June 3.

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