Under TILA, an escrow account for a higher-priced mortgage loan must be established for which type of transaction?

Prepare for the CFPB Mortgage Compliance Training Test. Study with flashcards and detailed questions and explanations. Master your knowledge and excel in your exam!

Under the Truth in Lending Act (TILA), an escrow account must be established for higher-priced mortgage loans (HPMLs) specifically for refinance transactions. This requirement is part of consumer protections aimed at ensuring that borrowers are not overwhelmed by the costs associated with their loans, particularly in cases where interest rates and payment obligations could lead to financial hardship.

In the context of a refinance transaction, the creation of an escrow account is essential for managing property-related expenses like property taxes and insurance premiums. This not only safeguards the lender's interest but also helps the borrower by creating a structured way to handle these payments, reducing the potential for missed payments or lapses in coverage that might occur if the borrower were left to manage these costs independently.

While there are various loan types and transactions listed, the requirement for an escrow account for an HPML specifically pertains to refinances, making this the correct choice. Other transactions such as those secured by shares in a cooperative, initial construction financing, or reverse mortgages do not trigger the same requirements under TILA regarding escrow accounts for HPMLs.

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy