Well THIS is lovely. I thought they just got through pulling out of some previous rules to leave up to "The Bureau." But then they write more? I'm confused.

Reg Z Final and Proposed Escrow RulesThe FRB has issued a Press Release announcing a final rule amending Reg Z by implementing a provision of the Dodd-Frank Act that increases the annual percentage rate (APR) threshold used to determine whether a mortgage lender is required to establish an escrow account for property taxes and insurance for first-lien “jumbo” mortgage loans. The Fed also requested public comment on a proposed rule that would amend Reg Z to expand the minimum period for mandatory escrow accounts for first-lien, higher-priced mortgage loans from one to five years, and longer under certain circumstances, such as when the loan is delinquent or in default. The proposal would also implement new disclosure requirements concerning escrows as requjired by the Dodd-Frank Act. The Notices for the final rule, the proposed rule, and a Summary of Findings on Design and Testing of Escrow Disclosures were also published.

When would this go into efect?

The raise in JUMBO rate spread is effective 4-1.

I'm still looking for the definition of a jumbo loan.....not worried about our secondary market transactions as escrows are established for these anyway. But we have an in-house "jumbo" program. I need to see if our loan criteria matches the reg so I'll know if we can raise the loan rate guidelines for this product without worrying about escrow. Any pointers about finding the definition? Admittedly, I haven't tried very hard yet. Trying to get the danged HMDA Lar and CRA LR filed!!

Swiggles. it will be whatever amount 'exceeds the maximum principal obligation eligble for purchase by Freddie'...so if someone who has Freddie's restrictions would kindly fill us in on that amount...I'd be very appreciative!

Oh wait...page 4 - not located in a 'high-cost' area = $417,000 for a SF property. Higher limits apply for 2-4.

From pg 4 of the Final Rule:
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110223b2.pdf

"Loans that are not eligible for purchase by Freddie Mac because their original principal obligation is too large (>$417,000) are widely referred to in the mortgage market as “jumbo” mortgages. The term “jumbo” also is used in this final rule to refer to such loans."

I meant to include this in my post, as this is what a lot of us are probably waiting for:

From page 6 of the FInal Rule:

"Other commenters recommended exemptions from the escrow requirement for higher-priced mortgage loans. Recommended exemptions included for: (1) loans a creditor holds in portfolio; (2) loans made by community banks; (3) loans made in rural areas; and (4) small retail loans that are first-lien loans because a consumer has paid off his larger mortgage. Such exceptions are outside the scope of this rulemaking. The Board is publishing elsewhere in today’s Federal Register a proposed rule that addresses several of those proposed exceptions."

So, perhaps we will get the clarification we need later today.

From Attachment 1:
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110223b1.pdf

"In addition, the proposal would implement the Act’s disclosure requirements regarding escrow accounts. The proposal also would exempt certain loans from the statute’s escrow requirement. The primary exemption would apply to mortgage loans extended by creditors that operate predominantly in rural or underserved areas, originate
a limited number of mortgage loans, and do not maintain escrow accounts for any mortgage loans they service."

On page 6... "Third, the proposed rule would create an exemption from the escrow requirement for any loan extended by a creditor that makes most of its first-lien higher-priced mortgage loans in counties designated by the Board as “rural or underserved,” has annual originations of 100 or fewer first-lien mortgage loans, and does not escrow for any mortgage transaction it services."


I wonder if you complied with last year's rules and ONLY escrow for HPMLs, if you can be exempt now? I know we make less than 100 1st lien mortgage loans a year.

To me, it looks like it's more trouble than it's worth. I'm afraid some LO's will take it to mean they won't be an HPML...you will now have 2 methods, instead of one...and all that second one will do will allow you to not require escrow...I would think that if you are already set up for escrow...why would you want to not escrow these huge loans? Are they any less risky in reality? Heck no.

The bureau estimates it needs $143 million this year, and current law allows it to draw as much as $500 million when it's up and running.

Just what we needed a super-sized bureacracy working with the super buracracy. Makes sense!

Hot off the press:

NEW HOME SALES PLUNGE 11.2%

FORECLOSURES MAKEUP 26% OF SALES

New Rules: 124pgs. Yea, that should fix things!!

Feel free to draw your own conclusions.

You can access the conforming loan limits from the following page. The current limits are good through 9/30/11.
http://www.fhfa.gov/Default.aspx?Page=185

You have to see if any areas where you lend are high cost areas and use the appropriate amount.