Subtitle E: Mortgage Servicing
Escrows for Certain Mortgages
Amends TILA to require creditors to establish escrow accounts for certain first lien mortgages for minimum of five years, unless and until sufficient equity is reached comparable to that required under PMI cancellation laws, borrower is delinquent, and other conditions.
Requires mandatory escrows when:
required by state law;
- loan is made, guaranteed or insured by state or federal government;
- transaction is secured by first mortgage on consumer’s principal dwelling where loan does not exceed conforming loan limit and APR will exceed APOR by 1.5 percent or a loan whose principal balance exceeds conforming loan limit and which has APR that exceeds APOR by 2.5 percent; or required by regulation. Requirement excludes junior liens, open-end credit plans and loans secured by coops and insurance premiums on condos covered by master policy. CFPB can exempt creditors from requirement that operate in rural areas, retain mortgages in portfolio or meet asset and origination size thresholds to be determined. CFPB can revise, add to or subtract from types of loans that require mandatory escrows if in interest of consumer or public.
Creditors shall pay interest on amounts held in escrow if prescribed by state or federal law.
Penalty Coordination with RESPA
A violation of RESPA does not result in TILA penalties unless TILA as amended is also violated.
Disclosures Prior to Closing
Requires creditors to disclose to consumer at least 3 days prior to consummation that escrows will be established, amount required at closing to fund escrow account, amount to be collected in first year (based on improved value); estimated monthly amount payable to escrow, and consumer’s obligation to pay such items if consumer chooses to terminate account in future.
Disclosure Notice Required for Non-Escrowed Loans
Amends TILA to require disclosures to consumers who do not establish escrow accounts advising them of their responsibilities of paying escrow items and implications of non-payment.
Miscellaneous RESPA Amendments
Force-placed insurance – Prohibits servicers from: obtaining force-placed insurance unless there is reasonable basis to believe borrower has failed to comply; charging fees for valid qualified written requests (to be defined by regulation); failing to take timely action to respond to borrower’s requests to correct errors; failing to respond within 10 days to requests from borrower for information about owner/assignee of loan; failing to comply with any other obligation required by CFPB. For force-placed insurance, servicer must provide two notices to borrower prior to placing coverage and must terminate and refund force-placed premiums within 15 days of confirmation of borrower obtained coverage. Acceptable demonstration of insurance is a written confirmation of existing coverage, which includes policy number and contact information for insurance company or agent, or requirement to be determined by CFPB. Requires charges, other than those subject to state regulation as business of insurance, imposed on borrower by or through servicer to be bona fide and reasonable.
Increases penalties for certain violations of RESPA from $1,000 to $2,000 per violation and $500,000 to $1 million for class actions.
Qualified Written Requests
Shortens required time frames for acknowledging qualified written requests (QWRs) under RESPA from 20 to 5 business days and reduces timeframe for a final response from 60 to 30 business days. Permits additional 15-day extension if borrower is notified.
Requires escrow refunds (or credits) within 20 business days of payoff.
Truth in Lending Act Amendments
Prompt Crediting of Payments
Creates new TILA § 129F. Requires servicers to credit payments as of date of receipt except when a delay does not result in a charge or negative credit reporting. If servicer accepts non-conforming payment, it shall be credited within five days of receipt.
Creates new TILA §129G. Pay-off statements must be sent within reasonable time, but no more than seven business days after receipt of written request.
Escrows Included in Repayment Analysis
For first lien mortgages on principal dwellings, requires TILA repayment analysis to include taxes and insurance payments and “other periodic payments.” Requires use of taxable assessed value of real property including improvements (versus raw land). Excluded from requirement are open-end-lines of credit and reverse mortgages.