This evening, CUNA submitted comments to the CFPB regarding their proposed rule titled, “Higher-Priced Mortgage Loan Escrow Exemption (Regulation Z).” This rule amends Regulation Z to exempt certain insured depository institutions and insured credit unions from the requirement to establish escrow accounts for higher-priced mortgage loans (HPMLs).  The proposed new regulatory exemption applies to insured depository institutions or insured credit unions when the loan is secured on a borrower’s principal dwelling and the covered entity: (a) has assets of $10 billion or less; (b) originated, together with its affiliates, 1,000 or fewer first lien mortgage loans for principal dwellings during the preceding calendar year; and (c) meets certain other escrow exemption criteria including requirements to: (i) extend credit in a rural or underserved area, (ii) exclude any loans from the exemption that have forward commitments to transfer or sell the loan to a purchaser that is ineligible for the exemption, and (iii) not require or maintain escrow accounts for other mortgage products.

“We believe that this exemption represents a positive step forward to ensure that small, leanly staffed credit unions are not burdened with costly regulatory obligations that could prevent them from offering mortgage products that are right for a members’ financial situation,” the letter states. “We commend the Bureau for this codification of the statutory exemption.”

Despite that general support, the letter does offer a few specific recommendations, including exploring administrative flexibilities to define an insured credit union-originated loan with a 2% annual percentage rate over the relevant average prime offer rate as an HPML, instead of 1.5%.  Similarly, based on credit unions strong track record, the letter points out why a slightly higher spread for insured credit union-originated subordinate lien loans is warranted as well.  Finally, the letter requests 120 days for credit unions to transition from their current escrow policies and determine if they will update their systems and processes to lend under this exemption.

CUNA will continue to work with the CFPB to ensure credit union members continue to have access to a range of sustainable and affordable mortgage products.