NWCUA to Fed: Changes Make Escrow Accounts Impossible

Responding to the Federal Reserve Board’s proposed changes to Regulation Z, the Truth in Lending Act, the Association submitted a comment letter urging the agency to think about the rule’s effect on credit unions and specialized lenders. The letter was sent on May 2, after input from member credit unions.

The Fed’s proposal would increase the amount of time a mandatory escrow account must be maintained, broaden the circumstances under which an escrow account must be established, implement new disclosure requirements, and exempt certain lenders from those requirements.

In the letter, Director of Regulatory Affairs Jaycee Winn asked that the compliance period be extended and loans with a loan-to-value ratio of less than 20 percent be excluded from the escrow requirement.

“We believe [the proposed rulemaking] reaches beyond the intended goals and sweeps small and specialized lenders into requirements proposed for larger more broadly focused institutions,” the letter said. “The changes we have suggested are a step in helping to ensure that credit unions are able to remain competitive in the lending market and maintain a diverse and inclusive balance sheet.”

Other suggested changes include: reconsider extending the required escrow period from one to five years; flexibility in niche lending such as with mobile homes and live-aboard boats where developing escrow accounts may not be practical; and to expand the narrow circumstances under which lenders would be exempted from offering escrow accounts.

The Association is concerned with the mounting regulatory burden that credit unions must contend with, and will continue to press agencies to recognize and address this problem.


Questions or comments? Contact Director of Regulatory Affairs Jaycee Winn: 503.350.2209, jwinn@nwcua.org.

Posted in Federal, Industry Insight.