ESCROW EXEMPTION WINDOW REMAINS OPEN

Some creditors never wanted to play the escrow game. Section 1026.35(b)(2(iii) of Regulation Z creates an exemption from escrowing on first-lien higher-priced mortgage loans for certain creditors. The exemption originally required action by June 30, 2013. Some creditors that were eligible for the exemption missed the June 30th deadline and the opportunity for the exemption. A subsequent revision to Regulation Z has reopened the window of opportunity for taking advantage of the exemption until January 1, 2014.

The exemption is available if:

(A)  During any of the three preceding calendar years, the creditor extended more than 50 percent of its total covered transactions secured by a first lien, on properties that are located in counties that are either “rural” or “underserved;”

(B)  During the preceding calendar year, the creditor and its affiliates together originated 500 or fewer covered transactions  secured by a first lien; and

(C)  As of the end of the preceding calendar year, the creditor had total assets of less than $2,000,000,000; and

(D)  Neither the creditor nor its affiliate maintains an escrow account for any extension of consumer credit secured by real property or a dwelling that the creditor or its affiliate currently services, other than:

(1)  Escrow accounts established for first-lien higher-priced mortgage loans on or after April 1, 2010, and before January 1, 2014; or

(2)  Escrow accounts established after consummation as an accommodation to distressed consumers to assist such consumers in avoiding default or foreclosure.

Important considerations include:

  • As long as a creditor (or its affiliate) services and maintains escrow accounts for any mortgage loans, other than as provided in § 1026.35(b)(2)(iii)(D)(1) and (2), the creditor will not be eligible for the exemption for any higher-priced mortgage loan it may make.
  • On and after January 1, 2014, creditors, together with their affiliates, that establish new escrow accounts, other than those described in § 1026.35(b)(2)(iii)(D)(2), do not qualify for the exemption.
  • Creditors, together with their affiliates, that continue to maintain escrow accounts established between April 1, 2010, and January 1, 2014, still qualify for the exemption provided under § 1026.35(b)(2)(iii) so long as they do not establish new escrow accounts for transactions consummated on or after January 1, 2014, other than those described in § 1026.35(b)(2)(iii)(D)(2), and they otherwise qualify under § 1026.35(b)(2)(iii).

The window is open. If you meet all the conditions listed above you have the opportunity to get out of the escrow game.

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