Wednesday, August 18, 2010

FYI: FRB Issues Proposed Rule to Implement Dodd-Frank Act Escrow Account Requirements for Certain Jumbo Loans

The Federal Reserve issued a proposal to revise the escrow account requirements for higher-priced, first-lien jumbo mortgages.  A copy of the FRB's proposal is available at:
 
The FRB's proposal would implement provisions of the Dodd-Frank Act that require an increase in the annual percentage rate threshold used to determine whether a mortgage lender is required to establish an escrow account for property taxes and insurance for first-lien jumbo mortgages.
 
As you may recall, current FRB "higher-cost loan" rules require creditors to establish escrow accounts for first-lien loans if a loan's APR is 1.5 percentage points or more above the applicable prime offer rate.  Under the Dodd-Frank Act, the escrow requirement will apply for first-lien jumbo loans only if the loan's APR is 2.5 percentage points or more above the applicable prime offer rate.  The APR threshold for non-first-lien and non-jumbo loans remains unchanged.
 
This proposal has a 30-day comment period, which is expected to begin shortly and after publication of the proposal in the Federal Register.
 
Let me know if you have any questions.  Thanks.
 

 

Ralph T. Wutscher

Kahrl Wutscher LLP

The Loop Center Building

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Chicago, Illinois  60602
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RWutscher@kw-llp.com

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