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The CFPB last week issued a notice of proposed rulemaking (NPRM) to amend Regulation Z to provide a new exemption for certain financial institutions from the requirement to establish escrow accounts for certain higher-priced mortgage loans. These changes were included in the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) enacted in 2018.

S. 2155 amended a section of the Truth in Lending Act (TILA) to exempt qualifying credit unions and other insured depository institutions from the escrow requirements for higher-priced mortgage loans. It provided that loans made by an insured financial institution, which are secured by a first lien on a principal dwelling, are exempt from the requirement, subject to certain conditions.

The CFPB's proposed rule intends to implement this provision. Institutions will be exempt from escrow requirements 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 higher-priced mortgage loan escrow exemption criteria are met.

The Regulation Z provisions included in the amended statute for the new exemption include:

• the requirement that the creditor extend credit in a rural or underserved area;
• the exclusion from exemption eligibility of transactions involving forward purchase commitments; and
• the prerequisite that the institution and its affiliates not maintain an escrow account other than those established for HPMLs at a time when the creditor may have been required by the regulation to do so or those established after consummation as an accommodation to distressed consumers to assist such consumers in avoiding default or foreclosure.

NAFCU will keep credit unions informed of the bureau's efforts to implement this provision, as well as other agencies' efforts to implement outstanding provisions of S. 2155. Review the association's S. 2155 regulator table.