What is the primary purpose of the small lender exception regarding escrow requirements?

The primary purpose of the small lender exception regarding escrow requirements is to reduce the regulatory burden on small credit unions. This exception recognizes that smaller lenders, particularly credit unions, may not have the same resources as larger financial institutions to manage escrow accounts for every mortgage loan. By allowing these smaller lenders to be exempt from certain escrow requirements, it helps them remain competitive and focus on serving their communities without being overwhelmed by compliance burdens. This aligns with the goal of fostering a diverse range of lending institutions and ensuring that small lenders can continue to operate effectively within the mortgage market.