United States: CFPB's Amendments To The "Escrows Final Rule" Seek To Maintain Consumer Protections Applicable To Higher-Priced Mortgage Loans And To Clarify The "Rural" And "Underserved" Definitions

The Consumer Financial Protection Bureau ("CFPB") recently issued a final rule clarifying the 2013 Escrows Final Rule issued by CFPB on January 10, 2013. The CFPB indicates that the clarifying and technical amendments to the 2013 Escrows Final Rule seek to (1) maintain consumer protections and (2) to clarify the "Rural" and "Underserved" definitions.

Maintaining Consumer Protections

The 2013 Escrows Final Rule amends an existing rule that provides protections regarding assessments of consumers' ability to repay and prepayment penalties on certain "higher-priced" mortgage loans. These protections include, for example, lengthening the time for which a mandatory escrow account established for a higher-priced mortgage loan must be maintained. The 2013 Escrows Final Rule, however, can be interpreted to cut off the old protections pertaining to "higher-priced" mortgage loans before the new expanded protections take effect. This would create a six-month period when those consumer protections would not apply. The clarifying and technical amendments to the 2013 Escrows Final Rule establish a temporary provision to ensure existing protections remain in place for higher-priced mortgage loans until the expanded provisions take effect in January 2014.

"Rural" and "Underserved" Definitions

The 2013 Escrows Final Rule also established an exemption from the escrow requirement for certain creditors that operate predominantly in "rural" or "underserved" areas. The CFPB's amendments to the 2013 Escrows Final Rule clarify 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 special provisions adopted in three other Dodd-Frank Act mortgage rules issued in January 2013. The CFBP used the amendments to the 2013 Escrows Final Rule to compile its final 2013 rural or underserved counties list.

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