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Clarification of the 2013 Escrows Final Rule

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.

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