June 22, 2021

CFPB Publishes Escrow Account FAQs, CFPB Facilitating Transition Away from LIBOR Index, Federal Juneteenth Holiday Enacted and more!

Read more below!

June 22, 2021

CFPB Publishes Escrow Account FAQs

On June 2, 2021, the CFPB published a set of 23 FAQs relating to the escrow account provisions under Regulation X, which is RESPA’s implementing regulation. This set of escrow FAQs was added to the CFPB’s existing Mortgage Servicing FAQs.

CFPB Facilitating Transition Away from LIBOR Index

The CFPB recently published its Spring 2021 Agenda, which included the following statement regarding the expiration of the Libor index:

We [the CFPB] are continuing a rulemaking to address the anticipated expiration of the LIBOR index, which the UK Financial Conduct Authority has stated that it cannot guarantee the publication of beyond June 2023. This rulemaking is important for the millions of consumers who have adjustable-rate mortgages, credit cards, student loans, reverse mortgages, home equity lines of credit, or other loans that are tied to the LIBOR index. Our work is designed to lessen the financial impact to consumers and facilitate creditor compliance by providing examples of replacement indices that meet Regulation Z requirements. We issued a proposed rule in June 2020 and expect to issue a final rule in January 2022.

Federal Juneteenth Holiday Enacted

With the signing of the Juneteenth National Independence Day Act earlier last Thursday, a new and well-deserved legal public holiday was established for June 19. PPDocs, Inc. fully supports this historic legislation.

Our system and interactive TRID calendar have been updated, and our static rescission calendars will reflect this change for the years 2022 and beyond.

June Frequently Asked Question

Question: Please explain the one-year seasoning requirement to refinance a Texas home equity loan. Also, as part of the seasoning requirement in Texas law, does the owner have to own the house for a year prior to the closing of a home equity loan?

Answer: A Texas home equity loan (commonly referred to as a 50(a)(6) or as an A6) may not be refinanced into another home equity loan until on or after the first anniversary date of the closing of the prior home equity loan. (See Texas Constitution, Article XVI, Section 50(a)(6)(M)(iii) and 7 Texas Administrative Code §153.14(1)(A)). The same rule applies for a rate/term refinance of a home equity loan (commonly referred to as a 50(f)(2) or as an f2). (See Texas Constitution, Article XVI, Section 50(f)(2) and 7 Texas Administrative Code §153.45(1)).

To determine the earliest allowable closing date for a refinance of a 50(a)(6), Texas law allows the refinance—either as another 50(a)(6) or f2—to close on or after the one-year anniversary of the closing of the 50(a)(6) that is being refinanced. Be aware, some title companies and some investors may have additional overlays. These title companies and investors may allow the refinancing to close on the one-year anniversary of the date of closing, some may look to the one-year anniversary of the date of funding, and a few others may not start the clock on the one-year wait until the date of recording. Accordingly, we would recommend checking with both your title company and investor for guidance if there is a potential issue.

Texas law does not specify a period that an owner must own a homestead before they may obtain a home equity loan. For secondary market loans, the FNMA Selling Guide requires generally (with a few exceptions) that at least one borrower be vested in title for at least 6 months when the loan is underwritten as a cash-out refinance. (“Cash out refinance” refers to a FNMA underwriting standard and not to a Texas home equity loan, as explained in our August 2020 FAQ.)