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Clarification of the 2013 Escrows Final Rule

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Today, we issued a final rule clarifying and making technical amendments to the 2013 Escrows Final Rule issued by the Bureau this past January. This is the first final rule in connection with our planned issuances to clarify and provide additional guidance about the mortgage rules we issued in January. It is based on a proposed rule issued in April.

This final rule has two primary purposes:

Maintaining Consumer Protections
The 2013 Escrows Final Rule amends an existing rule that provides protections regarding assessments of consumers’ ability to repay and prepayment penalties on certain “higher-priced” mortgage loans. The Dodd-Frank Act and certain of the other new mortgage rules we issued in January expand and strengthen the requirements concerning ability to repay and prepayment penalties. However, the 2013 Escrows Final Rule as adopted in January can be read to cut off the old protections before the new expanded protections take effect. This would create a six-month period when those consumer protections would not apply. This final rule establishes a temporary provision to ensure existing protections remain in place for higher-priced mortgage loans until the expanded provisions take effect in January 2014.

“Rural” and “Underserved” Definitions
We are also clarifying how to determine whether or not a county is considered “rural” or “underserved” for purposes of applying an exemption in the 2013 Escrows Final Rule and special provisions adopted in three other Dodd-Frank Act mortgage rules we issued in January. We also provide illustrations of how to do the determinations to facilitate compliance. The determinations are made based on currently applicable Urban Influence Codes or UICs, which are established by the USDA’s Economic Research Service (for “rural”), or based on HMDA data (for “underserved”). We used the changes to compile the final 2013 rural or underserved counties list (which applies with respect to the exemption in the 2013 Escrows Final Rule posted on our website to mortgages closed from June 1, 2013 through December 31, 2013.)

During the rulemaking process for these clarifications, the Bureau received many comments suggesting major changes to the rural and underserved definitions and related provisions. These comments were outside the scope of the narrow technical changes the rule was proposing. However, the Bureau plans to finalize very soon the proposed rule the Bureau issued concurrently with the Ability to Repay/QM Rule in January, and it will address questions of further flexibility for small institutions.

We have also recently issued a proposed rule with clarifications and updates to the ATR/QM and Servicing rules from January. We plan to issue a final rule based on that proposal in June. Also in June, we plan to issue additional proposed clarifications and guidance about the new mortgage rules. Periodic updates will continue to be made on an as-needed basis. They will be available through our regulations page.

We are committed to helping stakeholders implement the Dodd-Frank Act Title XIV mortgage rules that we issued in January. We want these updates to provide further clarity and guidance on how to comply with the rules. They are an opportunity to address important questions raised by industry, consumer groups, and other agencies. We are prioritizing updates that are important to a large number of providers or consumers and that critically affect mortgage originators’ and servicers’ implementation decisions. We hope you’ll familiarize yourself with the rules we’ve issued and the resources available.

When we post new information like this, we email people who have expressed interest in receiving updates about our regulations. If you want to get messages like that in your inbox, sign up using the form above.

Final list of rural and underserved counties for use in 2013

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On June 1, 2013, our Escrow Requirements under the Truth in Lending Act rule (Escrows Rule) will go into effect, which requires certain creditors to create escrow accounts for a minimum of 5 years for higher-priced mortgage loans (HPMLs). The rule exempts HPMLs made by certain small creditors that operate predominantly in rural or underserved counties from this requirement. On March 12, 2013, we posted a preliminary list of counties that are rural or underserved (or both), for use in the second part of 2013. That preliminary list applied the rules for determining both rural and underserved status as those rules would be amended by a proposed rule the Bureau intended at that time to publish.

The CFPB is now issuing the final rule based on the proposed rule that we had used to compile the preliminary list. Because the methods for determining rural and underserved status have not changed from the proposed rule, this final list is identical to the preliminary list we posted on March 12. For purposes of applying the exemption in the Escrows Rule, creditors may rely on this list as a safe harbor to determine whether a county is “rural” or “underserved” for loans made from June 1, 2013, through December 31, 2013.

In our Escrows Rule, rural counties are defined by using the USDA Economic Research Service’s urban influence codes, and underserved counties are defined by reference to data collected under the Home Mortgage Disclosure Act (HMDA). As explained in the rule, the Bureau will post a list of such counties on its website, which we are doing today.

We also have several rules that will that take effect in January 2014 that have provisions related to mortgage loans made in rural or underserved counties.

Some counties’ status as rural or non-rural may change from the 2013 list to the 2014 list because of updated information from the 2010 Census. This updated information is still being analyzed by the Economic Research Service, but we’ll post the 2014 list of rural and underserved counties as soon as possible.

See a full table of the regulatory sections involved.

More tools for Spanish speakers

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Leer en Español

Many people struggle to understand consumer financial products and services. These struggles can be compounded by language barriers, and can make some populations prime targets for exploitation. Recognizing these challenges, we wanted to provide our Spanish-speaking audience with access to clear, unbiased information about financial products and services.

Therefore, today we are unveiling consumerfinance.gov/es.

On consumerfinance.gov/es, you can find answers, in plain-language Spanish, to consumers’ most common questions. It’s also our first responsive site – it works beautifully on mobile devices as well as on desktops – in response to research that shows two-thirds of Latinos who are online tend to access the Internet from a mobile device. And this is just the beginning – we want to continue to expand to include more resources and tools in languages other than English so that we can reach as many people as effectively as possible.

In all of our efforts, hearing from the public is critical in assessing how best to use our tools to improve the workings of consumer financial markets.

We take complaints in Spanish, as well as more than 180 other languages, over the telephone, at 855-411-CFPB (2372). We want everyone, regardless of which language they speak, to know that they have a place to turn when they have a problem with a consumer financial product or service.

The customer may not always be right, but the customer always deserves to have someone who will take the time to listen and, where justified and appropriate, do something about it.

 

Más recursos para los consumidores que hablan español

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Read in English

Muchas personas tienen dificultades entendiendo los productos y servicios financieros. Y es más difícil cuando existe  la barrera del idioma, resultando en que algunas comunidades sean objetivo de explotación. Por esta razón,  hemos querido ofrecer a nuestra audiencia que habla español acceso a información clara y objetiva sobre los productos y servicios financieros.

Por lo tanto, estamos presentando consumerfinance.gov/es.

En consumerfinance.gov/es, usted podrá encontrar respuestas a las preguntas más comunes de los consumidores en un lenguaje claro y sencillo. También es nuestro primer sitio web ajustable – ya que funciona muy bien en los teléfonos móviles, así como en los computadores – una investigación indicó que dos tercios de los latinos que están en línea tienden a acceder el internet desde un teléfono móvil. Esto es sólo el comienzo – queremos seguir ampliando para incluir más recursos y herramientas en otros idiomas para que podamos llegar a muchas personas lo más efectivamente que sea posible.

En todos nuestros esfuerzos, escuchamos a la opinión pública ya que es fundamental para evaluar la mejor manera de utilizar nuestras herramientas para mejorar el funcionamiento de los mercados financieros de los consumidores.

Aceptamos quejas en español por teléfono al 855-411-CFPB (2372), así como en más de 180  idiomas. Queremos que todos los consumidores, sin importar  la lengua que hablen, sepan que tienen un lugar donde acudir cuando tienen un problema con un producto o servicio financiero. Tal vez el cliente no siempre tenga la razón, pero el cliente siempre merece que alguién se tome el tiempo para escucharlo(a) y, cuando sea justificado y apropiado, hacer algo al respecto.

Should I refinance my student loan?

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Last week, we published a report on student loan affordability, which discussed the low levels of activity in the student loan refinance market. Since that time, we’ve received a lot of questions from consumers about what to consider if they find a refinance option. We’ve uploaded these questions to Ask CFPB. Take a look.

Should I refinance my private student loan into one with a lower rate?
Private student loans generally feature variable interest rates based on a borrower’s credit history. When borrowers first take out private student loans, many have a limited credit profile and are treated as higher credit risks by lenders. This means that, for many borrowers, private student loan interest rates can be quite high.

Some borrowers who have graduated, obtained a job, and have excellent credit may be able to qualify to refinance their existing private student loans with a new private loan at a lower rate.

Unfortunately for many borrowers in this situation, there aren’t very many financial institutions that offer this financial product, but if you are able to find one, here are some things to consider:

  • Look closely at the APR. The monthly payment on your new loan might be lower, but the interest rate could be higher. This can occur because the loan term might be spread out over more years. Active-duty servicemembers should remember that they might also lose rate benefits on pre-service obligations if they refinance.
  • Consider the tax consequences. Your new refinanced loan may not be considered a student loan for the purposes of the student loan interest tax deduction. If you regularly claim this deduction, be sure to consider whether the new loan will allow you to continue to do so.

Should I refinance my federal student loan into a private student loan with a lower rate?
It depends. While today’s interest rate environment is at historical lows, federal student loan interest rates set by Congress have not gone down on the most common type of loan, the Unsubsidized Stafford Loan. Some borrowers in repayment with excellent credit may be able to qualify to refinance their existing federal student loans with a new loan at a lower rate. Borrowers considering this option should also be aware of the risks:

  • Look closely if you’re switching from a fixed to a variable rate loan. Interest rates for most outstanding federal loans have fixed rates, which means that you never have to worry about your monthly payment going up when interest rates rise in the future. If you switch to a variable rate loan, know that your interest rate could rise higher than the original fixed rate loan over time.
  • You’ll probably sign away certain benefits if you refinance. Federal student loans feature a number of options for borrowers that run into trouble, including Income-Based Repayment (IBR). Borrowers working in certain professions—like those employed in public service or as teachers may be eligible for loan forgiveness for certain federal loans. If you refinance a federal loan with a new private student loan, you will no longer be eligible to participate in these federal loan forgiveness programs. There are also loan discharge benefits in the case of death or permanent disability on certain federal student loans. Active-duty servicemembers might also lose benefits on pre-service obligations if they refinance.

If you are considering refinancing your federal student loans with a new private student loan, be sure you understand what you’re giving up before making this choice. In general, honest lenders will warn you about the benefits you are giving up when refinancing out of a federal student loan. If you have a secure job, emergency savings, strong credit, and are unlikely to benefit from forgiveness options, it may be a choice worth considering if you’re looking to lower your payments.

Refinancing your student loan could help you take advantage of your improved credit profile, as well as today’s historically low interest rates. It can be a useful way to lower your monthly payments and build your savings, but be sure to consider the risks and benefits before signing on the dotted line.

Live from Los Angeles, CA!

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Earlier today, we were in Los Angeles for a discussion on challenges and opportunities faced by new Americans in the consumer marketplace. There were remarks from Director Richard Cordray, followed by discussion by the Consumer Advisory Board, and testimony from consumer groups, industry representatives, and members of the public.

If you missed the livestream, you can watch the recording below.

  

The CFPB blog aims to facilitate conversations about our work. We want your comments to drive this conversation. Please be courteous, constructive, and on-topic. To help make the conversation productive, we encourage you to read our comment policy before posting. Comments on any post remain open for seven days from the date it was posted.