Federal Reserve Proposes Rule to Revise Escrow Account Requirements for Jumbo Mortgages
August 16, 2010
Circular No. 12239

The Federal Reserve Board has proposed a rule to revise the escrow account requirements for higher-priced, first-lien "jumbo" mortgage loans. The proposed rule, which implements a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act, would increase 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 Dodd-Frank Act incorporates into the Truth in Lending Act (TILA) the Board's regulatory requirement for escrow accounts and revises the APR threshold, but the act also includes other provisions, including new disclosure requirements. This proposal would implement only the act's change to the APR threshold. Other provisions of the act concerning escrow accounts will be implemented in a separate rulemaking.

The proposed change would not affect the APR threshold used to determine whether a jumbo loan is subject to the other consumer protections that the Board adopted for higher-priced loans in 2008. Those protections include requirements for determining consumers' repayment abilities and restrictions on prepayment penalties.

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