Higher-priced mortgage loan escrow rule change detailed in NCUA reg alert

Provisions of a final rule exempting more institutions from a requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs) are reviewed for credit unions in a regulatory alert issued Wednesday by the National Credit Union Administration (NCUA).

The alert, No. 21-RA-05, focuses on a final rule issued in January by the Consumer Financial Protection Bureau (CFPB) and that took effect Feb. 17. The rule implements an exemption provided under the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).

The HPML provisions of Regulation Z (Truth in Lending Act, or TILA) require that a creditor establish an escrow account for certain first-lien HPMLs. The NCUA notes these provisions already included an exemption for small creditors operating in rural or underserved areas that meet certain requirements; the exemption under the EGRRCPA is additional.

According to a summary in the final rule, any loan made by a bank or credit union and secured by a first lien on the principal dwelling of a consumer is exempted from the HPML escrow requirement 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 NCUA notes that qualifying institutions that have established HPML escrow accounts on or after April 1, 2010, have 120 days after the effective date of the final rule to cease providing escrows for HPMLs to take advantage of the new exemption.

NCUA 21-RA-05