Smaller institutions exempted from HPML escrow accounts

(Jan. 22, 2021) An exemption from the requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs) for smaller banks and credit unions was issued as a final rule this week by the CFPB. The rule, proposed in July, takes effect upon publication in the Federal Register. It exempts from the HPML escrow requirement any loan made by a credit union or bank and secured by a first lien on the principal dwelling of a consumer if:

  • the institution has assets of $10 billion or less;
  • the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year; and
  • certain of the existing HPML escrow exemption criteria are met.

When the proposal was issued, the bureau noted that HPMLs are generally closed-end consumer credit transactions secured by the consumer’s principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction by specific amounts as of the date the interest rate is set.

The bureau also asserted that the rule, as proposed, would reduce costs associated with escrow requirements.

Consumer Financial Protection Bureau issues rule on higher-priced mortgage loan escrow exemption