Compliance Blog

Written By JiJi Bahhur, Regulatory Compliance Counsel

Last week, the Consumer Financial Protection Bureau (CFPB) issued a final rule clarifying and making technical amendments to the 2013 Escrows final rule.  Besides providing additional guidance, the final rule has two primary purposes (we also blogged about this not too long ago when the rule was in proposal stage): 

1. Maintaining Consumer Protections.  The 2013 Escrows Final Rule can be read to cut off the old protections regarding assessments of consumers’ ability to repay and prepayment penalties on certain higher-priced mortgage loans (HPMLs) before the new expanded protections take effect. This would create a six-month period when those consumer protections would not apply. The final rule establishes a temporary provision to ensure existing protections remain in place for HPMLs until the expanded provisions take effect in January 2014. 

2. â€œRural” and “Underserved” Definitions.  The 2013 Escrows Final Rule exempts HPMLs made by certain small creditors that operate predominantly in rural or underserved counties from the requirement to create escrow accounts for a minimum of 5 years for HPMLs.  The final rule discussed in this blog clarifies how to determine whether or not a county is considered “rural” or “underserved” for purposes of applying an exemption in the 2013 Escrows Final Rule (and three other provisions of mortgage regulations issued this past January).  The determination is made based on currently applicable Urban Influence Codes or UICs, which are established by the USDA’s Economic Research Service (for“rural”), or based on HMDA data (for “underserved”).

The CFPB has also published a final list (see box to the right of screen for download options) of rural and underserved counties for 2013.  For purposes of applying the exemption in the 2013 Escrows Final Rule, 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.