CFPB Issues Final Rules to Clarify Regulation Z Escrow Requirements, As Required by Dodd-Frank

BY: EDMUND D. HARLLEE

On January 22, 2013, the Consumer Financial Protection Bureau (the “Bureau”) published final rules (with official interpretations) (the “Final Rules”) in the Federal Register to amend its Regulation Z (Truth in Lending) to lengthen the time that escrows have to be maintained on “higher-priced mortgage loans” secured by a first lien on a principal dwelling, and exempt certain transactions from coverage.  These changes were made in order to implement changes required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  On Thursday, April 18, 2013, the Bureau published proposed rules (with request for public comment) in the Federal Register to clarify the Final Rules. The proposed rules were discussed in this publication of May 2, 2013.

In addition to making some technical corrections to the Final Rules, the Bureau proposed to clarify the exemption to the escrow requirements in the Final Rules for “rural” or “underserved” counties.  The Bureau proposed to determine a county’s “rural” or “underserved” status by reference to currently applicable Urban Influence Codes established by the U.S. Department of Agriculture, Economic Research Service (for “rural”) or based on Home Mortgage Disclosure Act data (for “underserved”).

The Bureau has adopted the above change to the Final Rules as set forth in the proposed rules of April 18.  The Bureau is posting on its public Web site a list of “rural” and ”underserved” counties, to be referenced for mortgages consummated between June 1, 2013, and December 31, 2013.  The Bureau will post the list for 2014 when the data become available.

This final rule becomes effective June 1, 2013.