In January 2021, the Consumer Financial Protection Bureau (CFPB) issued a final rule to implement a requirement of 2018’s Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). The final rule exempts certain insured depository institutions and insured credit unions from the requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs).
Prior to the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Board of Governors of the Federal Reserve System issued a rule requiring, among other things, the establishment of escrow accounts for payment of property taxes and insurance for certain “higher-priced mortgage loans,” a category which the board defined to capture what it deemed to be subprime loans. This rule was intended to reduce consumer and systemic risks by requiring the subprime market to structure loans and disclose their pricing similarly to the prime market.
The CFPB proposes that the amendments included in this proposal take effect for mortgage applications received by an exempt institution on the date of the final rule's publication in the Federal Register. Under section 553(d) of the Administrative Procedure Act (APA), the required publication or service of a substantive rule must be made not less than 30 days before its effective date except for certain instances, including when a substantive rule grants or recognizes an exemption or relieves a restriction. The proposed rule therefore would lead to a final rule that would be a substantive rule that would grant an exemption and relieve requirements and restrictions. Thus, the CFPB proposes to make the final rule effective on the same day as publication.