Final rule exempting smaller credit unions, banks from escrow accounts for HPMLs issued

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 Tuesday by the federal consumer financial protection agency.

The final rule from the Consumer Financial Protection Bureau (CFPB) takes effect upon its publication in the Federal Register. The rule exempts from the HPML escrow requirement any loan made by a bank or credit union 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.

The rule was proposed in July. At that time, the CFPB said it represents the last mandatory rulemaking to implement the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S.2155).

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