The Consumer Financial Protection Bureau has finalized a rule which will expand the definitions of ‘rural’ and ‘small creditor’ affecting exemptions to its Ability-to-Repay rules.
The changes, which go into effect Jan. 1, 2016, would raise the loan origination limit for small-creditor status to 2,000 first-lien mortgage loans from 500 and will exclude loans held in portfolio by the creditor and its affiliates.
The rule also expands the definition of rural to include any county or census block not defined as “urban” by the Census Bureau.
It adds two new safe harbors for determining whether a property location meets the definition of rural. A creditor will be able to rely on an automated address look-up tool available on the Census Bureau’s website or on a new automated tool that will be provided on the CFPB’s website. The rule maintains the current safe harbor for creditors who choose to rely on the county lists available on the bureau’s website.
“These changes are sensible measures that will make it easier for community banks to serve their customers, and for many bankers to meet mortgage credit needs in rural and underserved communities,” said Bob Davis, executive vice president of mortgage markets for the American Bankers Association.
Under the new rule, however, the assets of a creditor’s mortgage-originating affiliates will now be included in calculating whether a creditor is under the small-creditor status limit. That limit, currently set at less than $2 billion in total assets as of the end of the preceding calendar year, will not be raised.
It does provide a grace period for creditors exceeding the origination or asset size limits and those no longer operating in predominantly rural areas. It also extends a transition period for small creditors making balloon-payment Qualified Mortgages and balloon-payment high-cost mortgages to April 1, 2016 from Jan. 10, 2016.
The time period used in determining whether a creditor is operating predominately in rural or underserved areas was decreased, from any of the three preceding calendar years to the preceding calendar year.
“The financial crisis was not caused by community banks and credit unions, and our mortgage rules reflect the fact that small institutions play a vital role in many communities,” said CFPB Director Richard Cordray. “These changes will help consumers in rural or underserved areas access the mortgage credit they need, while still maintaining these important new consumer protections.”