On March 2, 2011, the FRB published its HOEPA Final Rule for "jumbo" loans, to comply with the Dodd-Frank Act. In July of 2008, the FRB adopted final rules (2008 HOEPA Final Rule).
The 2008 HOEPA Final Rule defined a class of "higher-priced mortgage loans'' (HPMLs) and prohibited certain lending and servicing practices in connection with such transactions. Dodd-Frank substantially codifies the requirement in Regulation Z that escrow accounts for taxes and insurance be established for first-lien HPMLs, adopted by the FRB as part of the 2008 HOEPA Final Rule.
Among other things, the FRB prohibited extending an HPML secured by a first lien unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor.
Under the 2008 HOEPA Final Rule, an HPML is a consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) for a comparable transaction, as of the date the transaction's interest rate is set, by 1.5 or more percentage points for loans secured by a first lien, or by 3.5 or more percentage points for loans secured by a subordinate lien.
On September 24, 2010, the FRB published a proposed rule in the Federal Register to implement TILA Section 129D(b)(3)(B), as enacted by Section 1461 of the Dodd-Frank Act. See 75 FR 58505 (September 2010 Escrow Proposal). The FRB proposed to raise the rate threshold for coverage by the escrow account requirement for first-lien HPML "jumbo'' mortgage loans.
Specifically, the FRB proposed to require escrows for "jumbo'' loans whose APR exceeds the APOR for a comparable transaction, as of the date the transaction's interest rate is set, by 2.5 or more percentage points.
Loans that are not eligible for purchase by Freddie Mac because their original principal obligation is too large are "jumbo" mortgages. The term "jumbo'' is used in this Final Rule to refer to such loans.
Our Library has a copy of the issuance.