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CFPB’s mortgage escrow rule to take effect June 1

cfpbThe CFPB’s mortgage escrow rule will take effect June 1, leaving credit unions just one month to come into compliance with the rule’s deadline.

Escrow accounts are designed to hold funds some mortgage lenders collect each month in addition to the monthly mortgage payment, allowing consumers to save for big bills such as property taxes and insurance, which can help homeowners better understand the costs of owning a home.

The rule affects only closed-end, first-lien mortgages secured by the borrower’s primary residence and does not apply to initial construction loans or home equity lines of credit.

Credit unions that meet a four-part test in the rule are exempt if the institution operates in a predominantly rural or underserved area, originated 500 or fewer first-lien mortgages in the previous calendar year, had less than $2 billion in assets at the end of the prior calendar year or if the institution does not regularly set up escrow accounts for its serviced mortgages.

The rule is just one of several pending CFPB mortgage rules, and the CFPB has issued clarifications for the rule that will be open for public comment on Friday.

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