TopMortgage Compliance Update (1)

           March 4, 2011   

                                      FRB: Proposes HPML Escrow Requirements

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On March 2, 2011, the FRB proposed revisions to the escrow account requirements for higher-priced mortgage loans (HPMLs).


The proposals would (1) implement statutory changes made by the Dodd-Frank Act that lengthen the time for which a mandatory HPML escrow account must be maintained, (2) would implement the Dodd-Frank disclosure requirements regarding escrow accounts, and (3) exempt certain loans from the statute's escrow requirement.


Comments must be received on or before May 2, 2011.


Our Library has a copy of the issuance. 

(1) The proposed rule would expand the minimum period for mandatory escrow accounts from one to five years, and under certain circumstances longer.

(2) The proposed rule would extend the partial exemption for certain loans secured by a condominium unit to planned unit developments and other, similar property types that have governing associations that maintain a master insurance policy.

(3) The proposed rule would create an exemption from the escrow requirement for any loan extended by a creditor that makes most of its first-lien higher-priced mortgage loans in counties designated by the FRB as "rural or underserved," has annual originations of 100 or fewer first-lien mortgage loans, and does not escrow for any mortgage transaction it services.
Two new disclosure requirements relating to HPML escrow accounts:

(1) A disclosure would be required three business days before consummation of a mortgage transaction for which an escrow account will be established. The Dodd-Frank Act requires such disclosures for higher-priced mortgage loans, for which such an escrow account is required. The FRB is proposing to require the same disclosure for all mortgage loans for which an escrow
account is established.

Contents of Proposed Disclosure

-The disclosure would explain what an escrow account is and how it works.

-It would state the risk of not having an escrow account.

-It would state the estimated amount of the first year's disbursements, the amount to be paid at consummation to fund the escrow account initially, and the amount of the consumer's regular mortgage payments to be paid into the escrow account.

-It would state that the amount of the regular escrow payment may change in the future.


(2) A disclosure would be given when a mortgage transaction is entered into without an escrow account or when an escrow account on an existing mortgage loan will be cancelled. The disclosure would be required to be delivered at least three business days before consummation or cancellation of the existing escrow account, as applicable.

Contents of Proposed Disclosure

-This disclosure would explain what an escrow account is, how it works, and the risk of not having an escrow account.

-It would state the potential consequences of failing to pay home-related costs such as taxes and insurance in the absence of an escrow account.

-It would state why there will be no escrow account or why it is being canceled, as applicable, the amount of any fee imposed for not having an escrow account, and how the consumer can request that an escrow account be established or left in place, along with any deadline for such requests.
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Truth in Lending, Higher-Priced Mortgage Loans - Escrows Accounts, Proposed Rule, Federal Register

March 2, 2011

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