CFPB Issues Mortgage Rules on Escrow Requirements Under TILA (Regulation Z)

 

The Consumer Financial Protection Bureau (“CFPB”) has issued the much-anticipated final rules that implement residential mortgage reforms of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).  In a series of reports, PYA is analyzing the effect of each of these new rules, this week looking at the impact of the final rule that amends escrow requirements under the Truth in Lending Act (“TILA”) (Regulation Z).

The final rule, which takes effect June 1, 2013, requires creditors to establish escrow accounts for certain mortgage transactions to help ensure that consumers set aside funds to pay property taxes, premiums for homeowners insurance, and other mortgage-related insurance required by the creditor.

The final rule consists of three elements:

  • Amends the existing regulations for “higher-priced mortgage loans,” now requiring a creditor to establish and maintain escrow accounts for at least one year after origination of the loan.  The amended rule will establish a requirement that accounts be maintained for at least five years.
  • Creates an exemption from the escrow requirements for small creditors that operate predominantly in rural or underserved areas.
  • Expands an existing exemption from escrowing insurance premiums (not for property taxes) for condominium units to extend the partial exemption to other situations in which an individual consumer’s property is covered by a master insurance policy.

View the final rule amending escrow requirements under TILA here.  To discuss the impact of the new mortgage rules on your institution, please contact the expert listed below at PYA, (800) 270-9629.

WE ARE REQUIRED BY IRS CIRCULAR 230 TO INFORM YOU THAT THE FOLLOWING DISCUSSION WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, NOR RELIED UPON, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW. THE ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THE DISCUSSION. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.


Mike Shamblin

Mike Shamblin

Managing Principal of Audit & Assurance Services

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