CFPB Issues Final Rule on Escrow Accounts for Higher-Priced Mortgage Loans

General information

Beginning June 1, 2013, new rules come into effect on the establishment of escrow accounts for the payment of taxes and required mortgage insurance for certain lenders who make “higher priced mortgage loans.”

These are closed-end consumer credit transactions secured by the consumer’s principal dwelling where the APR exceeds the average prime offer rate for a comparable transaction by 1.5 percent or more for conforming loans, 2.5 percent or more for jumbo loans (the principal balance does not exceed the maximum amount eligible for purchase by Freddie Mac), or 3.5 percent or more for a loan secured by a subordinate lien. The rule extends from one to five years the period of time that the escrow account must be maintained. 

Certain exceptions apply. See CBA’s Regulatory Compliance Bulletin for a summary of the rule.