​ABA Welcomes Proposed Rules for Small Creditors, Suggests Tweaks

ABA on Monday welcomed the Consumer Financial Protection Bureau’s proposed changes — many previously advocated by ABA — that will increase the number of banks able to benefit from the bureau’s small creditor and rural or underserved area exemptions in its mortgage rules.

The proposal would lift the origination limit to qualify for “small creditor” status from 500 loans annually to 2,000 loans annually — a limit that would also exclude loans retained in portfolio, further increasing the relief provided. Under the mortgage rules, small creditors’ portfolio loans would have lower burdens in obtaining Qualified Mortgage status.

Small creditors operating in rural and underserved areas would also be able to originate QMs with balloon payments, which is not otherwise permitted. The proposal would clarify and expand the definition of rural areas to include any county or census block not designated as “urban” by the U.S. Census Bureau and provide a safe harbor for lenders who use the Census Bureau or CFPB websites to validate a locale’s rural or underserved status.

ABA asked for a few additional changes to better tailor the rules. Specifically, ABA sought a $10 billion asset limit, rather than $2 billion, for small creditor status; a longer transition period for balloon payment QM; a six-month grace period for creditors that exceed the small creditor limits in the preceding year; and explicit clarification of fair lending and ability-to-repay requirements. For more information, contact ABA’s Rod Alba.