Come April 1, the Federal Reserve Board is raising the threshold that triggers mandatory escrow accounts for jumbo loans.
The FRB's Home Ownership and Equity Protection Act rule currently requires escrows for property taxes and homeowners’ insurance if the annual percentage rate is 1.5 percentage points above the prime mortgage rate on all first lien loans.
Mortgage bankers complained to the Fed that the low threshold treats most jumbo loans as high-cost or subprime loans. They urged the Fed to raise it, but without success.
Congress then stepped in, and a provision in the Dodd-Frank Act raises the threshold to 2.5 percentage points for jumbo loans with a principal balance above the $417,000 conforming loan limit.
Starting April 1, lenders can use the higher threshold in determining which jumbo loan applicants must establish escrow accounts.
"Lenders may, at their option, elect to continue to use the 1.5 percentage point threshold," the final HOEPA rule says.
The Fed also points out that the "final rule does not require termination of any existing escrow accounts."
