Dear Boards of Directors and Chief Executive Officers:
The Consumer Financial Protection Bureau (CFPB) published annual adjustments for asset-size exemption thresholds under the Truth in Lending Act (TILA), as implemented by Regulation Z, which became effective on January 1, 2022.1 The asset-size thresholds exempt certain credit unions from escrow account requirements for higher-priced mortgage loans and specific qualified mortgages under Regulation Z.
Regulation Z: Escrows and Small Creditor Qualified Mortgages—Asset-Size Exemption Threshold Increased to $2.336 Billion
Creditors with assets of less than $2.336 billion (including assets of certain affiliates) on December 31, 2021, are exempt from the requirement to establish escrow accounts for higher-priced mortgage loans in 2022 if other provisions of Regulation Z are also met.2 This asset-size threshold also applies during a grace period, in certain circumstances, with respect to transactions with applications received before April 1, 2023.
Section 129D of TILA contains a general requirement that an escrow account be established by a creditor to pay for property taxes and insurance premiums for certain first-lien higher-priced mortgage loan transactions. Section 129D of TILA also generally permits an exemption from the higher-priced mortgage loan escrow requirement for a creditor that meets certain requirements, including any asset-size threshold the CFPB may establish.
The adjustment to the asset-size exemption threshold (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) for escrow accounts also increases the threshold for small creditor portfolio and balloon-payment qualified mortgages. A balloon-payment qualified mortgage that satisfies all applicable criteria, including having been made by a creditor that, together with certain affiliates, has total assets below the threshold, is also exempted from the prohibition on balloon-payments for high-cost mortgages.
Regulation Z: First-Lien Principal Dwelling Secured Loans—Asset-Size Exemption Threshold Increased to $10.473 Billion
In 2021, the CFPB issued a final rule that exempted from the Regulation Z higher-priced mortgage loan escrow requirement any loan made by an insured depository institution or insured credit union and secured by a first-lien on the principal dwelling of a consumer if certain criteria are met, including an asset-size exemption threshold.3
Creditors with assets of $10.473 billion or less (excluding assets of certain affiliates) as of December 31, 2021, meet this asset-size exemption threshold criterion for purposes of any loan consummated in 2022. This asset-size threshold also applies with respect to any loan secured by a first-lien on a principal dwelling of a consumer consummated in 2023 where the application is received before April 1, 2023.
If you have questions about the information in this Regulatory Alert, please contact the NCUA’s Office of Consumer Financial Protection at 703.518.1140 or ComplianceMail@ncua.gov. You can also contact your NCUA regional office or your state supervisory authority.
Todd M. Harper
2 TILA authorizes the CFPB to exempt, by regulation, a creditor from the requirement to establish escrow accounts for higher-priced mortgage loans if the creditor operates in rural or underserved areas, retains its mortgage loans in portfolio, does not exceed (together with all affiliates) a total annual mortgage loan origination limit set by the CFPB, and meets any asset-size threshold, and any other criteria the CFPB may establish. 15 U.S.C. 1639d(c) (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) .