Alert May 28, 2013

CFPB Finalizes Rule Clarifying Escrow Requirements

In the first of a series of planned issuances to clarify and provide additional guidance about the mortgage rules issued in January (see January 22, 2013 Alert), the CFPB announced that it finalized a proposal clarifying and making technical amendments to the escrows rule, which becomes effective June 1, 2013. In line with the proposal issued in April (see April 16, 2013 Alert), the final rule keeps in place protections for higher-priced mortgage loans until other similar provisions—which provide expanded protections for consumers—become effective in January 2013 to avoid a six-month period when those protections do not apply. The escrows rule and the other mortgage rules issued by the CFPB exempt small creditors that meet certain conditions operating in predominantly rural and underserved counties, from some of its requirements. The final rule clarifies how to determine whether a county is considered "rural" or "underserved" for purposes of applying this exemption. Although previously stating that it would, the CFPB noted it was never its intention to designate or determine which counties are "rural" and "underserved"; rather the CFPB intended to require creditors to make determinations of "rural" or "underserved" status and for the CFPB to publish an annual list of counties that creditors may rely upon as a safe harbor. The final rule clarifies that these determinations are to be made based on currently applicable urban influence codes, which are established by the USDA’s Economic Research Service (for "rural") or based on HMDA data (for "underserved").