These two disclosures for Illinois are provided pursuant to 765 Ill. Comp. Stat. Ann. 910/11 and Ill. Admin. Code tit. 38, §§ 1050.1110(f) & 1050.1360(a)(1). Both documents disclose (verbatim) the Illinois Mortgage Escrow Account Act, Section 5 of which permits the borrower to terminate their escrow account once their mortgage has been “reduced to 65% of its original amount” (Supra 910/5).
However, under Federal Regulation Z, an escrow account cannot be terminated in connection with a higher-priced mortgage loan (“HPML”) until the earlier of the loan being terminated or five years after consummation (see 12 C.F.R. § 1026.35[b][3][i]). Thus, there are times where the provisions of the Illinois Mortgage Escrow Account Act are pre-empted by Federal law. In 2013, we included in Cx1207 and Cx16095 a disclosure concerning such a fact (see https://compliance.docutech.com/2013/06/06/document-updates-il-mortgage-escrow-account-act-cx1207-and-16095/ for details).
While the aforementioned Regulation Z requirements generally apply to all HPMLs, there are exceptions to certain types of HPMLs (e.g., one secured by shares in a cooperative) and for HPMLs extended by certain creditors (e.g., creditors with assets under a certain amount; see Ibid. § 1026.35[b][2] for all exceptions). If these exceptions apply, then no preemption occurs.
We are, therefore, slightly changing the text of our disclosures concerning the relationship between Federal and State laws, by changing the phrase “and is subject to further” in the first sentence of said disclosures to “and may be subject to further”, in order to prevent a strict reading that all HPMLs are subject to Regulation Z’s HPML escrow account requirements.
This change will take effect on January 11, 2020. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
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