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Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Rules and Regulations would have caused most insured depositories and insured credit unions who would otherwise qualify under the EGRRCPAs new exemption criteria to be ineligible for the exemption. The reason they would have been ineligible is that those depositories and credit unions presumably had established escrows for HPMLs after May 1, 2016, in compliance with the then-current escrow rules requirements.
In the proposed rule, to assist otherwise exempt institutions to avoid inadvertently making themselves ineligible by establishing escrow accounts before they had heard about the rule and adjusted their compliance, the Bureau proposed to replace the May 1, 2016, end date for the exception to the prerequisite against maintaining escrows with a new end date that was approximately 90 days after the effective date proposed as the date of publication in the Federal Register of the eventual section 108 escrow exemption final rule. In addition, the Bureau proposed to amend comment 35b2iii1.iv to conform to this change.
The Bureau also proposed to amend comment 35b2iiiD11 to address the date change. Comments 35b2iiiD11 and 21 were inadvertently deleted from the Code of Federal Regulations in 2019 during an annual inflation adjustment rulemaking, and no change in interpretation of the associated regulatory provisions was intended.33 The Bureau proposed to correct this deletion by reinserting the two comments back into Supplement I, with comment 35b2iiiD11
amended from its former language to reflect the date change described above and with no changes being made to comment 35b2iiiD21. In addition, a sentence describing the definition of affiliate in comment 35b2iii1.ii.C was also inadvertently deleted from the Code of Federal Regulations in 2019, and no change in interpretation was intended.34
The Bureau also proposed to add the deleted sentence back into this comment.
Two commenters supported the proposed extension of the nonescrowing date to 90 days beyond the effective i.e., publication date of the rule and said they agreed with the Bureaus concern that small institutions might unintentionally become ineligible. Four other commenters requested that the Bureau allow 120
days instead of 90, stating that small institutions often lack the resources to 33 84

FR 1356 Feb. 26, 2019.

34 Id.

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adjust to new compliance requirements quickly and thus the extra time would be very important. Two other commenters asked for a longer transition period than 90 days but did not specify how many days the Bureau should provide. None of the commenters asking for more than 90
days provided factual evidence of the need for more time beyond their stated knowledge of creditor processes.
The Bureau is amending 1026.35b2iiiD1 and comments 35b2iii1.iv and iiiD11
generally as proposed, but finalizing the end date for the exception to the nonescrowing requirement as 120 days from the effective date date of publication instead of the proposed end date of 90
days from the effective date. The smallto mid-size institutions affected by the rule may not be immediately aware of the change and might make themselves ineligible for the exemption by establishing escrow accounts before they become aware of the change. With the final rule end date change, such institutions will have 120 days to learn of the amendment. The Bureau has no information that extending the nonescrowing date of the final rule from 90
to 120 days after the effective date would harm consumers or have an adverse impact on industry.
The Bureau initially adopted the criterion in 1026.35b2iiiD under its broad discretionary authority, set forth in 15 U.S.C. 1639dc4, to establish any other criteria for the escrow exemption consistent with the purposes of the escrow provisions. In establishing the new exemption in EGRRCPA section 108, Congress incorporated as a prerequisite to the new exemption the criterion in 1026.35b2iiiD or any successor regulation. The Bureau interprets the reference to any successor regulation to authorize it to make amendments to existing 1026.35b2iiiD consistent with the purposes of the escrow provisions, the same standard under which the provision was initially authorized. The Bureau believes the amendment to the end date in 1026.35b2iiiD1 is consistent with the purposes of the escrow provisions to avoid disqualifying the majority of institutions that otherwise would qualify for the new exemption.
Without this amendment, the Bureau believes that very few insured depository institutions and insured credit unions would have been able to benefit from the new escrow exemption.
Such institutions would only have been institutions that 1 together with their affiliates, had more than approximately $2 billion in assets and, without
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affiliates, less than $10 billion in assets;
2 had not extended any HPMLs since May 1, 2016; and 3 did not offer mortgage escrows in the normal course of business. Because this approach would have restricted access to the new HPML escrow exemption to this limited group of institutions, the usefulness of the exemption would have been extremely limited. The Bureau acknowledges the possibility that creditors outside of the scope of the new escrow exemption might become eligible for the existing escrow exemption as a result of the end-date change. However, any such creditors were able to so during previous date extensions and chose not to. Therefore, the Bureau believes that few, if any, of such creditors would actually take advantage of the existing escrow exemption during this date extension.
In addition, the Bureaus exemption is authorized under the Bureaus TILA
section 105a authority to make adjustments to facilitate compliance with TILA and effectuate its purposes.35
Modifying the date will facilitate compliance with TILA for the institutions that would qualify for the exemption but for the previous end date.
Finally, in a recent annual inflation adjustment rulemaking, the Bureau erroneously amended comment 35b2iii1.iii.E to include a reference to the year 2019 rather than the correct 2020, and also erroneously amended comment 35b2iii1.iii.E.8
to include a reference to the year 2010
rather than the correct 2021. 36 The Bureau considers these to be scriveners errors that should be interpreted as references to the year 2020 and 2021 respectively, and the Bureau is now correcting the errors for clarity.
35b2iv 35b2ivA
The proposed rule explained that existing 1026.35b2ivA3
provided that a county or census block could be designated as rural using an application process pursuant to section 89002 of the Helping Expand Lending Practices in Rural Communities Act.37
Because the provision ceased to have any force or effect on December 4, 2017, the Bureau proposed to remove this provision and make conforming changes to 1026.35b2ivA. The Bureau also proposed to remove references to the obsolete provision in comments 35 15

U.S.C. 1604a.
in Lending Act Regulation Z
Adjustment to Asset-Size Exemption Threshold, 85
FR 83411, 83415 Dec. 22, 2020.
37 129 Stat. 1799.
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