Escrow Requirements under the Truth in Lending Act (Regulation Z)
The CFPB is issuing a final rule that amends Regulation Z (Truth in Lending) to implement certain amendments to the Truth in Lending Act made by the Dodd-Frank Act. Regulation Z currently requires creditors to establish escrow accounts for higher-priced mortgage loans secured by a first lien on a principal dwelling. The rule implements statutory changes made by the Dodd-Frank Act that lengthen the time for which a mandatory escrow account established for a higher-priced mortgage loan must be maintained. The rule also exempts certain transactions from the statute’s escrow requirement. The primary exemption applies to mortgage transactions extended by creditors that operate predominantly in rural or underserved areas, originate a limited number of first-lien covered transactions, have assets below a certain threshold, and do not maintain escrow accounts on mortgage obligations they currently service.
- The Bureau of Consumer Financial Protection (Bureau) is issuing clarifying and technical amendments to a final rule issued by the Bureau on January 10, 2013, which, among other things, lengthens the time for which a mandatory escrow account established for a higher-priced mortgage loan (HPML) must be maintained. The rule also established an exemption from the escrow requirement for certain creditors that operate predominantly in “rural” or “underserved” areas. The amendments clarify the determination method for the “rural” and “underserved” designations and keep in place certain existing protections for HPMLs until other similar provisions take effect in January 2014.