Download - CFPB introduces Escrow Requirements amending Reg. Z January 10, 2013 Effective Date: June 1, 2013
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Compliance Outlook
Escrow Requirements of
Regulation Z
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CFPB Escrow Requirements
CFPB introduces Escrow Requirements amending Reg. Z
January 10, 2013
Effective Date: June 1, 2013
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CFPB Escrow Requirements
Definitions:
Higher Priced Mortgage Loan –A closed-end loan secured by a principal dwelling with an APR that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set.
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CFPB Escrow RequirementsDefinitions:APR Difference from Average Prime Offer–
An APR 1.5% or more higher than the average prime rate offer for principal amounts that do not exceed Freddie Mac limits;
By 2.5% or more for principal amounts that exceed Freddie Mac limits; or
By 3.5% or more for loans secured by subordinate liens.
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CFPB Escrow RequirementsDefinitions:Dwelling –
Structures that are classified as personal property under State law:
• Manufactured homes, boats, and trailers.
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CFPB Escrow RequirementsDefinitions:
Average Prime Rate Offer –Annual percentage rate derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage transactions that have low-risk pricing characteristics.
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CFPB Escrow Requirements
Escrow Account Requirements
Escrow account must be established
and maintained for a minimum of 5 years.
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CFPB Escrow RequirementsMandatory Escrow Requirements
Property taxes,
Hazard insurance,
Liability insurance, and
Private mortgage insurance.Insurance
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CFPB Escrow RequirementsExempt Mortgage Products
Reverse mortgages,
Loan transactions secured by shares in a cooperative,
Construction loans, and
Bridge loans.
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CFPB Escrow RequirementsCommunity Association Exemption
Escrow only required for property tax, not hazard insurance premiums.
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CFPB Escrow RequirementsSmall Credit Union Exemption
1. Asset size less than $2 billion;
2. Make more than half first-lien mortgages in rural or underserved areas during the previous calendar year;
3. Together with its affiliates, originated 500 or fewer first-lien mortgages during the preceding calendar year; and
4. Together with its affiliates, not escrow for any mortgage it or its affiliates currently services, except in limited instances.
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CFPB Escrow RequirementsRural Area:County is not in a metropolitan statistical area or in a micropolitan statistical area that is adjacent to a metropolitan statistical area.
Underserved Area:County HMDA data reports that no more than two creditors extend covered transactions secured by a first lien, five or more times in the past year.
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CFPB Escrow RequirementsMember Escrow Cancelation
• Loan is paid off; or
• Member requests termination:
5 years after loan origination;
80% or less loan to value; and
Member is not delinquent.
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Thank you for joining me for this overview of the Compliance Outlook.
Stay Tuned……..