July 2015 Flood Final Rule – Regarding the “small lender” exemption for flood escrow provisions, what are the transition rules?

Compliance > Lending > Flood > 2015 Flood Final Rule - Escrows
Q:   Regarding the “small lender” exemption for flood escrow provisions, what are the transition rules?
 
A:  Institutions that initially qualify as a “small lender” should be aware of transition rules if they later grow to exceed the $1 billion asset-size threshold.
 
For example:
 
  • If a regulated lending institution qualified for the “small lender” exception in 2016, but had assets of $1 billion or more as of 12/31/16 and 12/31/17, such institution would be required to begin escrowing for any loans made, increased, extended, or renewed on or after July 1, 2018.
     
  • Similarly, an institution that no longer qualifies for the exception would provide the option-to-escrow for borrowers of loans outstanding on July 1 of the succeeding calendar year following the lender’s change in status.  The applicable option-to-escrow notices shall be mailed by September 30 of that year.
 
The CFPB has clarified that under the rules, if assets decrease; it is possible for an institution to technically reclaim “small lender” status.
 
 
 

See additional details in the July 2015 Final Rule on Loans in Areas Having Special Flood Hazards, here:  https://www.federalregister.gov/articles/2015/07/21/2015-15956/loans-in-areas-having-special-flood-hazards

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