IBA Compliance Connection

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Assuming that we meet the small creditor and the rural/underserved loan prerequisites, do we qualify for the exemption from the escrow account requirements for higher-priced mortgage loans? We stopped using escrow accounts for first-lien higher-priced mortgage loans after January 1, 2014, and we have not established escrows for any consumer after that date.

Mar 27, 2015

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Yes, you will qualify for the small creditor exemption from the higher-priced mortgage loan escrow requirements, provided that you (and your affiliates) do not maintain an escrow account for any extension of credit secured by real property or a dwelling for which a loan application is received on or after January 1, 2014.

In addition: (1) continuing to maintain escrow accounts for first-lien higher-priced mortgage loans with applications received between April 1, 2010, and January 1, 2014, will not disqualify you from the small creditor exemption, and (2) you may offer escrow accounts as an accommodation to distressed consumers to assist in avoiding default or foreclosure.

For citations related to our guidance, please see below:

Regulation Z — 12 CFR 1026.35(b)(2)(iii) (small creditor exemption from HPML escrow account requirements)

Official Interpretations, 12 CFR 1026, Paragraph 35(b)(2)(iii)(D)(1), Comment 1 (escrow accounts for loan applications received between April 1, 2010, and January 1, 2014)

Official Interpretations, 12 CFR 1026, Paragraph 35(b)(2)(iii)(D)(2), Comment 1 (escrow accounts established after consummation as an accommodation to distressed consumers)