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In reading, we have determined we are not exempt from escrowing for HPMLs because of the 4th condition: maintaining escrow accounts for mortgages being serviced by our bank.
We regularly escrow for mortgage loans other than 1st lien HPMLs. Our bank has the capability to escrow and we escrow for a large portion of our mortgage loans. Customers are not required to escrow but they are strongly encouraged. We have consulted our outside auditors and were told we are still exempt, see his explanation below.This is the explanation from our auditor:
I think you’re still exempt. You can still escrow on first lien HPMLs, you’re just not required to. I believe you’re escrowing in accordance to 1026.35(b)(2)(iii)(D)(1)and (2) which describe first lien HPML escrows, that does not disqualify you from being able to exempt future HPML from the escrow requirement.Can you clarify that we are or are not exempt from escrowing for HPMLs based on the information I have shared?
Unless an exemption applies, a creditor is not allowed to make a HPML secured by a first lien on a consumer’s principal dwelling unless an escrow account is established before consummation. Exemptions include:
(A) A transaction secured by shares in a cooperative;
(B) A transaction to finance the initial construction of a dwelling;
(C) A temporary or “bridge” loan with a loan term of twelve months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within twelve months; or
(D) A reverse mortgage transaction subject to § 1026.33.There is also a small creditor exemption that applies if the institution:
(A) The institution makes a loan in a rural or underserved area;
(B) The institution and its affiliates originates no more than 2,000 covered transactions secured by first liens, that were sold, assigned, or otherwise transferred to another person, or that were subject at the time of
consummation to a commitment to be acquired by another person;
(C) The institution and its affiliates had total assets of less than $2,230,000,000; 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 for which applications were received on or after April 1, 2010, and before June 17, 2021; or
(2) Escrow accounts established after consummation as an accommodation to distressed consumers to assist such consumers in avoiding default or foreclosure.The regulations were recently revised. There is a temporary opportunity to get out of escrowing. To be exempt from escrowing you must meet all of the conditions listed above. You must stop opening new escrows and you can only service existing escrows that were HPMLs originated prior to June 17, of this year. If you want to stop escrowing, action is needed by June 17, 2021.
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