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Proposed clarification of the 2013 Escrows Final Rule

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

The proposal has two primary purposes:

Maintaining Consumer Protections
The 2013 Escrows Final Rule amends an existing rule that also 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 mortgage regulations 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. The proposed 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
First, the Bureau is ensuring consumer protections are maintained. We are also proposing to clarify how to determine whether or not a county is considered “rural” or “underserved” for purposes of applying an exemption in the escrows rule and special provisions adopted in three other Dodd-Frank Act mortgage rules we issued in January. We also propose 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 proposed changes to compile the preliminary rural or underserved counties list posted on our website.

We welcome comment on this proposed rule. The comment period will close 15 days after publication in the Federal Register. We will update the Escrows rule page when it is published.

Later this month, we plan to issue additional proposed clarifications and guidance about the new mortgage rules. Periodic updates will continue to be made on as-needed basis. They will be available through our regulations page.

We are committed to helping stakeholders implement the Dodd-Frank 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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