Reg. Alert: 2022 Truth in Lending Act Adjustment to Asset-Size Exemption Threshold

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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 Jan. 1, 2022. 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 Dec. 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. 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 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.

Creditors with assets of $10.473 billion or less (excluding assets of certain affiliates) as of Dec. 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.

 

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