On February 23, 2011, the Federal Reserve Board (FRB) issued a final rule and requested public comment on a second rule under Regulation Z to revise the escrow account requirements for certain home mortgage loans.
The revisions to the regulation, which implements the Truth in Lending Act (TILA), are being made pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The final rule implements a provision of the Dodd-Frank Act that increases the annual percentage rate (APR) threshold used to determine whether a mortgage lender is required to establish an escrow account for property taxes and insurance for first-lien, "jumbo" mortgage loans. (Jumbo loans are loans exceeding the conforming loan-size limit for purchase by Freddie Mac, as specified by the legislation.)
In July 2008, the Board issued final rules requiring creditors to establish escrow accounts for first-lien higher-priced mortgage loans (HPML). A first-lien mortgage is considered an HPML if its APR is 1.5 percentage points or more above the current average prime offer rate.
Under the final rule, the escrow requirement will apply to first-lien jumbo loans only if the loan's APR is 2.5 percentage points or more above the average prime offer rate.
The APR threshold for non-jumbo loans remains unchanged.
The final rule is effective for covered loans for which the creditor receives an application on or after April 1, 2011.
Our Library has a copy of the issuance.