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.