Under the CFPB’s escrow requirements, which are set to take effect June 1, higher-priced mortgage loans made by small creditors that serve rural or under-served communities will be exempt from the rules.
The requirements mandate that certain creditors establish and maintain escrow accounts, which are accounts set up by lenders to pay certain recurring property-related expenses for a consumer, for HPMLs for at least five years.
Escrow accounts ensure that consumers have adequate funds to pay the bills, since the expenses are broken down by the lender into monthly installments, which are then added to the monthly mortgage payment.
“Through an escrow account, consumers can better see the true cost of owning a home with insurance and tax costs laid out with each mortgage payment and are better assured that those costs are paid in a timely manner,” the CFPB said.
The CFPB expects to publish the rule with some minor technical alterations before June 1 and will also publish an official list of rural and under-served counties when the rule is finalized.
“Addressing problems in the mortgage market is critical to helping our economy recover,” CFPB Director Richard Cordray said. “[The] changes will better help consumers to understand the real costs of owning a home while protecting them from harmful practices that can trap them into high-cost mortgages.”