CFPB Issues Proposed Clarification on the 2013 Escrows Final Rule

Written by JiJi Bahhur, Regulatory Compliance Counsel

This past Friday, the CFPB issued its first clarifications/guidance to the mortgage rules it finalized this past January.  Specifically, the CFPB issued a proposed rule which will clarify and make technical amendments to the 2013 Escrows Final Rule. 

In addition to some technical corrections to enhance clarity, the proposal includes clarification on how to determine whether a county is considered “rural” or “underserved” for the application of the escrows requirement and three other Dodd-Frank Act regulations that have related provisions.  Specifically, the CFPB is proposing that the determination of “rural” and “underserved” status be based on currently applicable Urban Influence Codes (UICs) established by the United States Department of Agriculture, Economic Research Service (USDA-ERS) (for “rural”) or based on Home Mortgage Disclosure Act (HMDA) data (for “underserved”).  The proposal also provides illustrations to facilitate compliance with the rule. 

Further, the CFPB incorporates a temporary provision to ensure existing protections under Regulation Z –regarding assessments of a consumer’s ability to repay and prepayment penalties – remain in place for HPMLs until the expanded provisions from the Dodd-Frank Act and certain other mortgage regulations issued earlier this year take effect in January, 2014.  As the 2013 Escrows Final Rule currently reads, the existing protections would be cut off 6 months before the new expanded protections take effect.  However, the proposal would restore these protections and expand the scope of the protections to apply to most mortgage transactions, rather than just HPMLs.

The CFPB is welcoming comments on this proposed rule.  The comment period will close 15 days after publication in the Federal Register.  The CFPB contemplates making the temporary provision effective from June 1, 2013, through January 9, 2013, and making all other proposed amendments effective at the same time the 2013
Escrows Final Rule becomes effective – June 1, 2013.