Financial services technology solutions developer Fiserv (FISV)
unveiled updates to its loan servicing platform, which now complies with new Truth in Lending Regulation Z rules.
The new rules, which require an escrow account for taxes and insurance on home equity loans, take effect April 1, 2010.
"This regulatory change will present challenges for many financial institutions, so it is crucial that lenders are aware that the functionality that used to be exclusive to the traditional mortgage market -- such as escrow -- is now required on the consumer loan side," said Cathy Martin, an executive at Fiserv, in a media statement
Regulation Z changes will require escrow accounts for high-cost first-lien mortgages, based on US Department of Housing and Urban Development
(HUD) guidelines, Fiserv said. These types of loans bear higher rates than the average prime rate for a similar transaction on the date the rate is set.
Martin added: "[L]enders will need to know some basic escrowing procedures such as how to conduct an escrow analysis, how to prepare the initial and the annual escrow account disclosure statements, and how to keep the appropriate records for auditing and risk-mitigation purposes. Otherwise, they will face penalties."
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