15 U.S.C. § 1639d — Escrow or impound accounts relating to

Page 1515 TITLE 15—COMMERCE AND TRADE § 1639d nator provides an application to a consumer, or receives an application from a consumer, for any type of refinancing for such loan that would cause the loan to lose the protection of such anti-deficiency law, the creditor or mort- gage originator shall provide a written notice to the consumer describing the protection pro- vided by the anti-deficiency law and the sig- nificance for the consumer of the loss of such protection before any agreement for any such refinancing is consummated. (h) Policy regarding acceptance of partial pay- ment In the case of any residential mortgage loan, a creditor shall disclose prior to settlement or, in the case of a person becoming a creditor with respect to an existing residential mortgage loan, at the time such person becomes a creditor— (1) the creditor’s policy regarding the ac- ceptance of partial payments; and (2) if partial payments are accepted, how such payments will be applied to such mort- gage and if such payments will be placed in es- crow. (i) Timeshare plans This section and any regulations promulgated under this section do not apply to an extension of credit relating to a plan described in section 101(53D) of title 11. (Pub. L. 90–321, title I, § 129C, as added and amended Pub. L. 111–203, title X, § 1100A(2), title XIV, §§ 1411(a)(2), 1412, 1414(a), (c), (d), July 21, 2010, 124 Stat. 2107, 2142, 2145, 2149, 2152; Pub. L. 114–94, div. G, title LXXXIX, § 89003(1), Dec. 4, 2015, 129 Stat. 1800; Pub. L. 115–174, title I, § 101, title III, § 307, May 24, 2018, 132 Stat. 1297, 1347.) Editorial Notes REFERENCES IN TEXT Section 1602(aa)(4) of this title, referred to in subsecs. (a)(5)(C) and (b)(2)(C)(i), was redesignated section 1602(bb)(4) of this title by Pub. L. 111–203, title X, § 1100A(1)(A), July 21, 2010, 124 Stat. 2107. This part, referred to in subsec. (b)(2)(E)(iv)(IV), was in the original ‘‘this subtitle’’, and was translated as reading ‘‘this chapter’’, meaning chapter 2 of title I of Pub. L. 90–321, to reflect the probable intent of Con- gress. Title I of Pub. L. 90–321 does not contain sub- titles. The National Housing Act, referred to in subsec. (b)(3)(B)(ii)(I), is act June 27, 1934, ch. 847, 48 Stat. 1246, which is classified principally to chapter 13 (§ 1701 et seq.) of Title 12, Banks and Banking. For complete clas- sification of this Act to the Code, see section 1701 of Title 12 and Tables. The Mortgage Reform and Anti-Predatory Lending Act, referred to in subsec. (c)(2)(C), is title XIV of Pub. L. 111–203, July 21, 2010, 124 Stat. 2136. For complete classification of this Act to the Code, see Short Title of 2010 Amendment note set out under section 1601 of this title and Tables. AMENDMENTS 2018—Subsec. (b)(2)(F). Pub. L. 115–174, § 101, added subpar. (F). Subsec. (b)(3)(C). Pub. L. 115–174, § 307, added subpar. (C). 2015—Subsec. (b)(2)(E)(iv)(I). Pub. L. 114–94 struck out ‘‘predominantly’’ after ‘‘operates’’. 2010—Pub. L. 111–203, § 1100A(2), substituted ‘‘Bureau’’ for ‘‘Board’’ wherever appearing. Subsec. (b). Pub. L. 111–203, § 1412, added subsec. (b). Subsecs. (c) to (f). Pub. L. 111–203, § 1414(a), added sub- secs. (c) to (f). Subsec. (g). Pub. L. 111–203, § 1414(c), added subsec. (g). Subsecs. (h), (i). Pub. L. 111–203, § 1414(d), added sub- secs. (h) and (i). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by section 1100A(2) of Pub. L. 111–203 ef- fective on the designated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employ- ees. Amendment by sections 1412 and 1414(a), (c), (d) of Pub. L. 111–203 effective on the date on which final reg- ulations implementing that amendment take effect, or on the date that is 18 months after the designated transfer date, if such regulations have not been issued by that date, see section 1400(c) of Pub. L. 111–203, set out as a note under section 1601 of this title. EFFECTIVE DATE Section effective on the date on which final regula- tions implementing such section take effect, or on the date that is 18 months after the designated transfer date if such regulations have not been issued by that date, see section 1400(c) of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 1601 of this title. RULE OF CONSTRUCTION Pub. L. 111–203, title XIV, § 1411(a)(1), July 21, 2010, 124 Stat. 2142, provided that: ‘‘No regulation, order, or guidance issued by the Bureau under this title [see Ta- bles for classification] shall be construed as requiring a depository institution to apply mortgage underwriting standards that do not meet the minimum underwriting standards required by the appropriate prudential regu- lator of the depository institution.’’ [For definitions of ‘‘Bureau’’ and ‘‘depository institu- tion’’ as used in section 1411(a)(1) of Pub. L. 111–203, set out above, see section 5301 of Title 12, Banks and Bank- ing.] § 1639d. Escrow or impound accounts relating to certain consumer credit transactions (a) In general Except as provided in subsection (b), (c), (d), or (e), a creditor, in connection with the con- summation of a consumer credit transaction se- cured by a first lien on the principal dwelling of the consumer, other than a consumer credit transaction under an open end credit plan or a reverse mortgage, shall establish, before the consummation of such transaction, an escrow or impound account for the payment of taxes and hazard insurance, and, if applicable, flood insur- ance, mortgage insurance, ground rents, and any other required periodic payments or premiums with respect to the property or the loan terms, as provided in, and in accordance with, this sec- tion. (b) When required No impound, trust, or other type of account for the payment of property taxes, insurance premiums, or other purposes relating to the property may be required as a condition of a real property sale contract or a loan secured by a first deed of trust or mortgage on the principal dwelling of the consumer, other than a con- sumer credit transaction under an open end credit plan or a reverse mortgage, except when— (1) any such impound, trust, or other type of escrow or impound account for such purposes is required by Federal or State law; Page 1516 TITLE 15—COMMERCE AND TRADE § 1639d (2) a loan is made, guaranteed, or insured by a State or Federal governmental lending or in- suring agency; (3) the transaction is secured by a first mort- gage or lien on the consumer’s principal dwell- ing having an original principal obligation amount that— (A) does not exceed the amount of the maximum limitation on the original prin- cipal obligation of mortgage in effect for a residence of the applicable size, as of the date such interest rate set, pursuant to the sixth sentence of section 1454(a)(2) of title 12, and the annual percentage rate will exceed the average prime offer rate as defined in section 1639c of this title by 1.5 or more per- centage points; or (B) exceeds the amount of the maximum limitation on the original principal obliga- tion of mortgage in effect for a residence of the applicable size, as of the date such inter- est rate set, pursuant to the sixth sentence of section 1454(a)(2) of title 12, and the an- nual percentage rate will exceed the average prime offer rate as defined in section 1639c of this title by 2.5 or more percentage points; or (4) so required pursuant to regulation. (c) Exemptions (1) In general The Bureau may, by regulation, exempt from the requirements of subsection (a) a cred- itor that— (A) operates in rural or underserved areas; (B) together with all affiliates, has total annual mortgage loan originations that do not exceed a limit set by the Bureau; (C) retains its mortgage loan originations in portfolio; and (D) meets any asset size threshold and any other criteria the Bureau may establish, consistent with the purposes of this part. (2) Treatment of loans held by smaller institu- tions The Bureau shall, by regulation, exempt from the requirements of subsection (a) any loan made by an insured depository institu- tion or an insured credit union secured by a first lien on the principal dwelling of a con- sumer if— (A) the insured depository institution or insured credit union has assets of $10,000,000,000 or less; (B) during the preceding calendar year, the insured depository institution or insured credit union and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling; and (C) the transaction satisfies the criteria in sections 1026.35(b)(2)(iii)(A), 1026.35(b)(2)(iii)(D), and 1026.35(b)(2)(v) of title 12, Code of Federal Regulations, or any successor regulation. (d) Duration of mandatory escrow or impound account An escrow or impound account established pursuant to subsection (b) shall remain in exist- ence for a minimum period of 5 years, beginning with the date of the consummation of the loan, unless and until— (1) such borrower has sufficient equity in the dwelling securing the consumer credit trans- action so as to no longer be required to main- tain private mortgage insurance; (2) such borrower is delinquent; (3) such borrower otherwise has not complied with the legal obligation, as established by rule; or (4) the underlying mortgage establishing the account is terminated. (e) Limited exemptions for loans secured by shares in a cooperative or in which an asso- ciation must maintain a master insurance policy Escrow accounts need not be established for loans secured by shares in a cooperative. Insur- ance premiums need not be included in escrow accounts for loans secured by dwellings or units, where the borrower must join an association as a condition of ownership, and that association has an obligation to the dwelling or unit owners to maintain a master policy insuring the dwell- ings or units. (f) Clarification on escrow accounts for loans not meeting statutory test For mortgages not covered by the require- ments of subsection (b), no provision of this sec- tion shall be construed as precluding the estab- lishment of an impound, trust, or other type of account for the payment of property taxes, in- surance premiums, or other purposes relating to the property— (1) on terms mutually agreeable to the par- ties to the loan; (2) at the discretion of the lender or servicer, as provided by the contract between the lender or servicer and the borrower; or (3) pursuant to the requirements for the escrowing of flood insurance payments for reg- ulated lending institutions in section 102(d) of the Flood Disaster Protection Act of 1973 [42 U.S.C. 4012a(d)]. (g) Administration of mandatory escrow or im- pound accounts (1) In general Except as may otherwise be provided for in this subchapter or in regulations prescribed by the Bureau, escrow or impound accounts es- tablished pursuant to subsection (b) shall be established in a federally insured depository institution or credit union. (2) Administration Except as provided in this section or regula- tions prescribed under this section, an escrow or impound account subject to this section shall be administered in accordance with— (A) the Real Estate Settlement Procedures Act of 1974 [12 U.S.C. 2601 et seq.] and regula- tions prescribed under such Act; (B) the Flood Disaster Protection Act of 1973 and regulations prescribed under such Act; and (C) the law of the State, if applicable, where the real property securing the con- sumer credit transaction is located. (3) Applicability of payment of interest If prescribed by applicable State or Federal law, each creditor shall pay interest to the Page 1517 TITLE 15—COMMERCE AND TRADE § 1639d consumer on the amount held in any impound, trust, or escrow account that is subject to this section in the manner as prescribed by that applicable State or Federal law. (4) Penalty coordination with RESPA Any action or omission on the part of any person which constitutes a violation of the Real Estate Settlement Procedures Act of 1974 or any regulation prescribed under such Act for which the person has paid any fine, civil money penalty, or other damages shall not give rise to any additional fine, civil money penalty, or other damages under this section, unless the action or omission also constitutes a direct violation of this section. (h) Disclosures relating to mandatory escrow or impound account In the case of any impound, trust, or escrow account that is required under subsection (b), the creditor shall disclose by written notice to the consumer at least 3 business days before the consummation of the consumer credit trans- action giving rise to such account or in accord- ance with timeframes established in prescribed regulations the following information: (1) The fact that an escrow or impound ac- count will be established at consummation of the transaction. (2) The amount required at closing to ini- tially fund the escrow or impound account. (3) The amount, in the initial year after the consummation of the transaction, of the esti- mated taxes and hazard insurance, including flood insurance, if applicable, and any other required periodic payments or premiums that reflects, as appropriate, either the taxable as- sessed value of the real property securing the transaction, including the value of any im- provements on the property or to be con- structed on the property (whether or not such construction will be financed from the pro- ceeds of the transaction) or the replacement costs of the property. (4) The estimated monthly amount payable to be escrowed for taxes, hazard insurance (in- cluding flood insurance, if applicable) and any other required periodic payments or pre- miums. (5) The fact that, if the consumer chooses to terminate the account in the future, the con- sumer will become responsible for the pay- ment of all taxes, hazard insurance, and flood insurance, if applicable, as well as any other required periodic payments or premiums on the property unless a new escrow or impound account is established. (6) Such other information as the Bureau de- termines necessary for the protection of the consumer. (i) Definitions For purposes of this section, the following definitions shall apply: (1) Flood insurance The term ‘‘flood insurance’’ means flood in- surance coverage provided under the national flood insurance program pursuant to the Na- tional Flood Insurance Act of 1968 [42 U.S.C. 4001 et seq.]. (2) Hazard insurance The term ‘‘hazard insurance’’ shall have the same meaning as provided for ‘‘hazard insur- ance’’, ‘‘casualty insurance’’, ‘‘homeowner’s insurance’’, or other similar term under the law of the State where the real property secur- ing the consumer credit transaction is located. (3) Insured credit union The term ‘‘insured credit union’’ has the meaning given the term in section 1752 of title 12. (4) Insured depository institution The term ‘‘insured depository institution’’ has the meaning given the term in section 1813 of title 12. (j) Disclosure notice required for consumers who waive escrow services (1) In general If— (A) an impound, trust, or other type of ac- count for the payment of property taxes, in- surance premiums, or other purposes relat- ing to real property securing a consumer credit transaction is not established in con- nection with the transaction; or (B) a consumer chooses, and provides writ- ten notice to the creditor or servicer of such choice, at any time after such an account is established in connection with any such transaction and in accordance with any stat- ute, regulation, or contractual agreement, to close such account, the creditor or servicer shall provide a timely and clearly written disclosure to the consumer that advises the consumer of the responsibil- ities of the consumer and implications for the consumer in the absence of any such account. (2) Disclosure requirements Any disclosure provided to a consumer under paragraph (1) shall include the following: (A) Information concerning any applicable fees or costs associated with either the non- establishment of any such account at the time of the transaction, or any subsequent closure of any such account. (B) A clear and prominent statement that the consumer is responsible for personally and directly paying the non-escrowed items, in addition to paying the mortgage loan pay- ment, in the absence of any such account, and the fact that the costs for taxes, insur- ance, and related fees can be substantial. (C) A clear explanation of the con- sequences of any failure to pay non-escrowed items, including the possible requirement for the forced placement of insurance by the creditor or servicer and the potentially high- er cost (including any potential commission payments to the servicer) or reduced cov- erage for the consumer in the event of any such creditor-placed insurance. (D) Such other information as the Bureau determines necessary for the protection of the consumer. (Pub. L. 90–321, title I, § 129D, as added and amended Pub. L. 111–203, title X, § 1100A(2), title XIV, §§ 1461(a), 1462, July 21, 2010, 124 Stat. 2107, Page 1518 TITLE 15—COMMERCE AND TRADE § 1639e 2178, 2181; Pub. L. 114–94, div. G, title LXXXIX, § 89003(2), Dec. 4, 2015, 129 Stat. 1801; Pub. L. 115–174, title I, § 108, May 24, 2018, 132 Stat. 1304.) Editorial Notes REFERENCES IN TEXT This part, referred to in subsec. (c)(1)(D), was in the original ‘‘this subtitle’’, and was translated as reading ‘‘this chapter’’, meaning chapter 2 of title I of Pub. L. 90–321, to reflect the probable intent of Congress. Title I of Pub. L. 90–321 does not contain subtitles. The Real Estate Settlement Procedures Act of 1974, referred to in subsec. (g)(2)(A), (4), is Pub. L. 93–533, Dec. 22, 1974, 88 Stat. 1724, which is classified prin- cipally to chapter 27 (§ 2601 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title note set out under section 2601 of Title 12 and Tables. The Flood Disaster Protection Act of 1973, referred to in subsec. (g)(2)(B), is Pub. L. 93–234, Dec. 31, 1973, 87 Stat. 975. For complete classification of this Act to the Code, see Short Title of 1973 Amendment note set out under section 4001 of Title 42, The Public Health and Welfare, and Tables. The National Flood Insurance Act of 1968, referred to in subsec. (i)(1), is title XIII of Pub. L. 90–448, Aug. 1, 1968, 82 Stat. 572, which is classified principally to chap- ter 50 (§ 4001 et seq.) of Title 42, The Public Health and Welfare. For complete classification of this Act to the Code, see Short Title note set out under section 4001 of Title 42 and Tables. AMENDMENTS 2018—Subsec. (c). Pub. L. 115–174, § 108(1)(A), (B), (D), designated existing provisions as par. (1) and inserted heading, redesignated former pars. (1) to (4) as subpars. (A) to (D), respectively, of par. (1) and realigned mar- gins, and added par. (2). Subsec. (c)(1). Pub. L. 115–174, § 108(1)(B), (C), which directed substitution of ‘‘The Bureau’’ for ‘‘The Board’’ in introductory provisions, and ‘‘the Bureau’’ for ‘‘the Board’’ wherever appearing, duplicated the amendment made by Pub. L. 111–203, § 1100A(2), which had already been executed. See 2010 Amendment note below. Subsec. (i)(3), (4). Pub. L. 115–174, § 108(2), added pars. (3) and (4). 2015—Subsec. (c)(1). Pub. L. 114–94 struck out ‘‘pre- dominantly’’ after ‘‘operates’’. 2010—Pub. L. 111–203, § 1100A(2), which directed substi- tution of ‘‘Bureau’’ for ‘‘Board’’ wherever appearing in Pub. L. 90–321, was executed to this section, which was added to Pub. L. 90–321 by section 1461(a) of Pub. L. 111–203. Subsec. (j). Pub. L. 111–203, § 1462, added subsec. (j). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2010 AMENDMENT Amendment by section 1100A(2) of Pub. L. 111–203 ef- fective on the designated transfer date, see section 1100H of Pub. L. 111–203, set out as a note under section 552a of Title 5, Government Organization and Employ- ees. Amendment by section 1462 of Pub. L. 111–203 effec- tive on the date on which final regulations imple- menting that amendment take effect, or on the date that is 18 months after the designated transfer date if such regulations have not been issued by that date, see section 1400(c) of Pub. L. 111–203, set out as a note under section 1601 of this title. EFFECTIVE DATE Section effective on the date on which final regula- tions implementing such section take effect, or on the date that is 18 months after the designated transfer date if such regulations have not been issued by that date, see section 1400(c) of Pub. L. 111–203, set out as an Effective Date of 2010 Amendment note under section 1601 of this title. EXEMPTIONS AND MODIFICATIONS Pub. L. 111–203, title XIV, § 1461(b), July 21, 2010, 124 Stat. 2181, provided that: ‘‘The Board may prescribe rules that revise, add to, or subtract from the criteria of section 129D(b) of the Truth in Lending Act [15 U.S.C. 1639d(b)] if the Board determines that such rules are in the interest of consumers and in the public inter- est.’’ § 1639e. Appraisal independence requirements (a) In general It shall be unlawful, in extending credit or in providing any services for a consumer credit transaction secured by the principal dwelling of the consumer, to engage in any act or practice that violates appraisal independence as de- scribed in or pursuant to regulations prescribed under this section. (b) Appraisal independence For purposes of subsection (a), acts or prac- tices that violate appraisal independence shall include— (1) any appraisal of a property offered as se- curity for repayment of the consumer credit transaction that is conducted in connection with such transaction in which a person with an interest in the underlying transaction com- pensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates a person, ap- praisal management company, firm, or other entity conducting or involved in an appraisal, or attempts, to compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate such a person, for the purpose of causing the appraised value assigned, under the appraisal, to the property to be based on any factor other than the independent judgment of the ap- praiser; (2) mischaracterizing, or suborning any mischaracterization of, the appraised value of the property securing the extension of the credit; (3) seeking to influence an appraiser or oth- erwise to encourage a targeted value in order to facilitate the making or pricing of the transaction; and (4) withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered when the appraisal report or services are provided for in accord- ance with the contract between the parties. (c) Exceptions The requirements of subsection (b) shall not be construed as prohibiting a mortgage lender, mortgage broker, mortgage banker, real estate broker, appraisal management company, em- ployee of an appraisal management company, consumer, or any other person with an interest in a real estate transaction from asking an ap- praiser to undertake 1 or more of the following: (1) Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support an appraisal. (2) Provide further detail, substantiation, or explanation for the appraiser’s value conclu- sion.