EGRRCPA rule for small lender escrow exemption

The Bureau has issued the new rule providing the small creditor HPML escrow exemption required by the ECRRCPA.

https://www.bankersonline.com/topstory/166910

I was disappointed. I was hoping that they would get rid of the rural/underserved requirement. We originate maybe 3 or 4 closed-end loans per year that is a 1st lien on a primary dwelling. I am no escrow expert by any means and dabbling in something once or twice a year if the loan happens to be HPML opens us up for errors! APOR rates are so ridiculously low. I wish it had been better news.

If you are doing only 3-4 first lien mortgage loans a year, the chances are that your regulatory risk is much higher than just watching out to make sure you don't cross the HPML threshold. If you are aren't doing a higher volume than that, maintaining trained staff is a real problem.

Exactly Randy! That is why I am the 'trained staff" and was hoping I wouldn't have to deal with escrows any longer. Oh well........

We have always escrowed, but are interested in stopping. Can we still escrow on flood, second lien and second homes if we stop escrowing on consumer purpose 1-4 family first lien loans?

Even if a customer asked to escrow on a HPML we couldn't if we decided to take the exemption?

If you are currently escrowing for loans that are not HPMLs, I do not believe that you qualify under the new exception.

(5) the institution and its affiliates do not maintain an escrow for HPMLs, pursuant to § 1026.35(b)(2)(iii)(D)(1), unless:

(b) the escrow was established at a time when the institution may have been required by the regulation to do so, which would have occurred for an HPML escrow account on or after April 1, 2010, to 120 days from the effective date of the January 2021 Final Rule

Bummer. I see now.

Thank you for your help!

The limit for an insured bank/credit union is now $10 billion, but what if a loan is located in a flood zone and an HPML? Doesn't that in effect, drop the limit to $1 billion - the exemption limit for exemption from escrow for flood insurance, or am I missing something? If the institution has to insure for flood insurance because they aren't exempt, then because the have to escrow for flood don't they have to escrow for HMPL?

And that is the fly in this ointment, I think, Dave.

The rule is scheduled for publication, and becomes effective, on February 17.