While the Loan Estimate and Closing Disclosure have deservedly received the most attention, the Consumer Financial Protection Bureau's Integrated Mortgage Disclosure rule also requires an Escrow Closing Notice disclosure. This requirement becomes effective on August 1, 2015.
Scope & Applicability
The Escrow Closing Notice applies to closed-end consumer credit transactions secured by a first lien on real property or a dwelling. The term "dwelling" uses the existing definition in Regulation Z which includes vacation, second homes and manufactured homes.
Importantly, the final rule does not impact when an escrow account is required on a particular loan. Rather, the new disclosure is required when an escrow account will be cancelled.
Timing for Escrow Closing Notice
The timing for the Escrow Closing Notice depends on whether or not the member has requested the escrow cancellation.
If the member has requested the cancellation, the credit union must provide the Escrow Closing Notice within three business days of the request.
However, if the escrow cancellation is not at the member's request - the credit union must ensure the consumer receives the Escrow Closing Notice at least 30 business days before the closure of the member's escrow account.
Format and Content Requirements
The new Escrow Closing Notice must follow specific format and content requirements. The underlying regulatory requirements can be found in 12 CFR 1026.20(e). Credit unions must design their Escrow Closing Notices to be substantially similar to Model Form H-29.
While the ability of members to cancel their escrow accounts for higher-priced mortgage loans (HPMLs) was limited by Dodd-Frank, members retain the ability to cancel their escrow accounts for other mortgage loans. Additionally, members can cancel their escrow accounts after one year for HPMLs granted prior to June 1, 2013 (versus five years for HPMLs granted on or after June 1, 2013).
Credit unions should review their escrow account policies and communicate with any servicers to ensure compliance with the Escrow Closing Notice by August 1, 2015.