The CFPB has announced annual adjustments to two asset-size exemption thresholds.  First, the CFPB is making no change to the asset-size exemption threshold under HMDA/Regulation C which is currently set at $44 million.  Banks, savings associations, and credit unions with assets at or below $44 million as of December 31, 2015 will continue to be exempt from collecting HMDA data in 2016.

Second, the CFPB has decreased the asset-size threshold under TILA/Regulation Z for certain small creditors operating primarily in rural or underserved areas to qualify for an exemption to the requirement to establish an escrow account for higher-priced mortgage loans (HPML).  The threshold is currently set at $2.060 billion.  Loans made by creditors operating primarily in rural or underserved areas with assets of less than $2.052 billion as of December 31, 2015 (including assets of certain affiliates) that meet the other Regulation Z exemption requirements will be exempt in 2016 from the escrow account requirement for HPMLs.  (The adjustment will also decrease the asset threshold for small creditor portfolio and balloon-payment qualified mortgages which references the HPML escrow account asset-size threshold.)

The CFPB has posted on its website a list of rural and underserved counties for calendar year 2011.  The CFPB had already posted lists of such counties for calendar years 2012 and 2013. 

As initially adopted, the CFPB’s final rule requiring creditors to establish escrow accounts for certain first-lien higher-priced mortgage loans contained an exemption for certain small creditors that operated predominantly in “rural” or “underserved” counties in the preceding calendar year. The CFPB subsequently broadened the exemption to include such creditors that operated predominantly in rural or underserved counties in any of the previous three calendar years. 

The broader exemption means that creditors will be able to qualify for the exemption in 2014 if they operated predominantly in rural or underserved counties in calendar years 2011, 2012, or 2013 (and meet the other criteria for eligibility).

 

 

In notices published in yesterday’s Federal Register, the CFPB adjusted the thresholds of the asset-size exemptions for collecting HMDA data and establishing an escrow account for certain mortgage loans under TILA.

Pursuant to Regulation C, which implements HMDA, depository institutions with assets below an annually adjusted threshold are exempt from HMDA data collection requirements. In its notice, the CFPB increased the 2013 threshold of $42 million to $43 million for 2014.  Thus, depository institutions with assets of $43 million or less as of
December 31, 2013 will be exempt from collecting HMDA data in 2014.  (An institution’s exemption from collecting data in 2014 does not affect its duty to report data it was required to collect in 2013.)

Regulation Z, which implements TILA, requires creditors to establish an escrow account to pay property taxes and insurance premiums for certain first-lien higher-priced mortgages.  The rule contains an exemption for creditors that operate predominantly in rural or underserved areas that meet certain other criteria, including an annually adjusted asset-size threshold.   In its notice, the CFPB increased the 2013 threshold from $2 billion to $2.028 billion for 2014.  Thus, loans made by creditors with assets of less than $2.028 billion on
December 31, 2013 that operate predominantly in rural or underserved areas and meet the other exemption criteria will be exempt in 2014 from the TILA escrow account requirement for higher-priced mortgage loans.

 

The CFPB has issued final “clarifying and technical” amendments to its final mortgage escrow account rule dealing with the establishment of mandatory escrow accounts on higher-priced mortgage loans (HPML).  

The final escrow rule contains exemptions for certain creditors operating primarily in “rural” or “underserved” areas. Such creditors are also the subject of (1) a provision allowing balloon payment mortgages in the final ability-to-repay rule, (2) an exemption from the balloon payment prohibition on high-cost mortgages in the 2013 final HOEPA rule, and (3) an exemption from a requirement to obtain a second appraisal for certain HPMLs in the 2013 interagency final appraisals rule.  These rules rely on the criteria for “rural” and “underserved” areas in the final escrow rule. 

The final amendments clarify how to determine whether a county is considered “rural” or “underserved” for purposes of the escrow rule and three other rules.  Concurrently with the amendments, the CFPB released a final list of “rural” or “underserved” counties which, according to the CFPB, is identical to the preliminary list it issued in March 2013.  For purposes of the escrow rule and other relevant rules, the CFPB has indicated that creditors may rely on this list as a safe harbor to determine whether a county is “rural” or “underserved” for loans made from
June 1, 2013, through December 31, 2013. The CFPB plans to issue an official list for 2014 when the necessary data becomes available. 

The final amendments also include a temporary provision to keep in place existing requirements concerning the assessment of a consumer’s ability to repay an HPML and limitations on prepayment penalties for HPMLs.  The final escrow rule had removed the regulatory text containing these provisions for HPMLs. The Title XIV rules which become effective on
January 10, 2014 expanded these requirements and limitations to cover most mortgage loans.  The final amendments keep the existing requirements and limitations in place for HPMLs until  January 10, 2014. 

The CFPB describes the escrow rule amendments as “the first final rule in connection with our planned issuances to clarify and provide additional guidance about the mortgage rules we issued in January.”  The CFPB has also issued proposed clarifications to its ability to repay/qualified mortgage and servicing rules.  Because the final escrow rule is effective June 1, 2013, the CFPB gave priority to finalizing the escrow rule amendments.

In another mortgage-related development, on May 15, 2013, the CFPB posted videos on the mortgage rules it finalized in January 2013.  In March 2013, the CFPB said that it planned to publish plain-language guides to the regulations in both written and video form to assist smaller businesses with limited compliance staff.

The CFPB has proposed amendments to its final mortgage escrow account rule dealing with the establishment of mandatory escrow accounts on higher-priced mortgage loans (HPML).  According to the proposal’s supplementary information, the proposal is the “first publication of additional guidance and updates regarding the Title XIV Final Rules.”  It further states that because the final rule is effective June 1, 2013, the CFPB gave priority to issuing the proposal.  It also indicates that another update affecting Title XIV final rules that are effective in January 2014 “will be proposed shortly.”

The final escrow rule contains exemptions for certain creditors operating primarily in “rural” or “underserved” areas. Such creditors are also the subject of (1) a provision allowing balloon payment mortgages in the final ability-to-repay rule, (2) an exemption from the balloon payment prohibition on high-cost mortgages in the 2013 final HOEPA rule, and (3) an exemption from a requirement to obtain a second appraisal for certain HPMLs in the 2013 interagency final appraisals rule.  These three rules rely on the criteria for “rural” and “underserved” areas in the final escrow rule.

The proposal is intended to clarify how to determine whether a county is considered “rural” or “underserved” for purposes of the four rules.  Previously the CFPB issued a preliminary list of “rural” or “underserved” counties and indicated that it would propose amendments to the escrow rule to conform with the methodology used by the CFPB in developing the list.

The proposal also includes provisions to keep in place existing requirements concerning the assessment of a consumer’s ability to repay an HPML and limitations on prepayment penalties for HPMLs.  The final escrow rule had removed the regulatory text containing these provisions for HPMLs. The Title XIV rules which are effective in January 2014 expanded these requirements and limitations to cover most mortgage loans.  The proposal would establish a temporary provision to keep the requirements and limitations in place for HPMLs until the expanded provisions take effect in January 2014.

Comments on the proposal will be due 15 days after its publication in the Federal Register.

 

 

Last week was a busy one for the CFPB.  In addition to the final ability to repay/qualified mortgage rule, the CFPB also issued final rules on mortgage escrow accounts and high-cost home loans. 

The final mortgage escrow account rule implements a section of the Dodd-Frank Act relating to the establishment of mandatory escrow accounts on higher-priced mortgage loans. The final rule is effective June 1, 2013.  

The final rule on high-cost home loans implements various changes to the Home Ownership and Equity Protection Act provisions of the Truth in Lending Act regarding such loans, including modifications to the scope and triggers.  It also implements homeownership counseling-related requirements under Dodd-Frank. The final rule is effective January 10, 2014. 

For more information, see our legal alert on the final escrow account rule and our legal alert on the final high-cost home loan rule.