On June 1, the CFPB’s new escrow requirements under the Truth in Lending Act will go into effect, which require certain creditors to create escrow accounts for a minimum of five years for higher-priced mortgage loans.
There is an exemption to this requirement for certain small creditors that operate in predominately rural or underserved counties. The preliminary list of exempt credit unions, released March 12, based on the proposed revisions was published and can be found here.
Forty-seven of Michigan’s 83 counties are listed. The list is expected to be finalized when the final rule is published. It is expected that some counties’ status as rural or non-rural may change from the 2013 list to the 2014 list because of updated information from the 2010 Census.
This list can also be utilized for other proposed rules that will take effect in January 2014 that offer an exemption for creditors that operate predominately in rural or underserved counties. For example, under the ability to repay and qualified mortgage standards under the Truth in Lending Act, mortgage loans with balloon payments do not meet the “qualified mortgage” standard in most cases. However, small creditors that operate in predominately rural or underserved counties will be eligible to originate balloon-payment qualified mortgages under the act. These same creditors will be exempt from restrictions on balloon payments for certain high-cost mortgages under the CFPB’s high-cost mortgage and homeownership counseling amendments to the Truth in Lending Act rule (HOEPA rule). Also, certain higher-priced mortgage loans will be exempt from new second appraisal requirements if they are originated in rural counties under the interagency appraisals for higher-priced mortgage loans rule.