Fed Issues Rules on Mortgage Escrows
The Federal Reserve this week issued two rules implementing provisions of the Dodd-Frank Act related to escrow requirements for certain types of mortgage loans.
The Fed announced a final rule that increases the annual percentage rate (APR) that triggers a requirement that a mortgage lender establish an escrow account for property taxes and insurance for first-lien, "jumbo" mortgage loans. The escrow requirement, effective April 1, 2011 for covered loans, applies only if the loan's APR is 2.5 percentage points or more above the average prime offer rate.
The Fed also announced a proposed rule that would expand the minimum period for mandatory escrow accounts for first-lien, higher-priced mortgage loans from one to five years. The minimum period would be longer under certain circumstances, such as when the loan is delinquent or in default.
Separately, in a first sign of the coming transition of authority to the Consumer Financial Protection Bureau, the Fed announced on February 1 that it would not finalize three pending rules, published as part of the Board's comprehensive review of its mortgage lending regulations under Regulation Z, prior to the July transfer of authority for rulemaking to the CFPB.
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