The Bad News The rule establishes a new category of "higher-priced mortgages" that includes virtually all closed-end subprime loans secured by a consumer's principal dwelling.  Which loans qualify as "higher-priced" will be determined by a new index that will be published by the Federal Reserve Board.

The rule requires that lenders establish escrow accounts for the payment of property taxes and homeowners' insurance. The lender may offer the borrower the opportunity to cancel the escrow account after one year.

The rule's definition of "higher-priced mortgage loans" will capture virtually all loans in the subprime market, but generally exclude loans in the prime market.  To provide an index, the Federal Reserve Board will publish the "average prime offer rate," based on a survey currently published by Freddie Mac.  A loan is higher-priced if it is a first-lien mortgage and has an annual percentage rate that is 1.5 percentage points or more above this index, or 3.5 percentage points if it is a subordinate-lien mortgage.

Compliance with the new escrow requirement has an effective date of April 1, 2010.

The Good News The Mortgage Office™ is ready! Our Escrow Administration module working in concert with the Trust Accounting and Loan Servicing modules meets or exceeds the accounting and reporting requirements set forth by TILA Final Rule.

So, call your ABS sales representative today at 800-833-3343 and ask how the Escrow Administration module can help you eliminate all of the complicated tasks involved with complying with the new federal mandated regulations, and automate the whole process of producing the Annual Escrow Analysis Disclosure Statements.

To learn more about the final rule download the PDF from the Federal Reserve System.