CFPB Finalizes Relief for Small, Rural Mortgage Lenders

The Consumer Financial Protection Bureau today finalized several changes — many 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. “This welcome rule is a result of hometown bankers engaging with the CFPB and the CFPB listening,” said ABA EVP Bob Davis. “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.”

As ABA has urged in formal comments, as well as in frequent, informal advocacy with CFPB officials, the rule lifts the origination limit to qualify for “small creditor” status from 500 loans annually to 2,000 loans annually — a limit that also excludes loans retained in portfolio, further increasing the relief provided. Under the mortgage rules, small creditors’ portfolio loans have lower burdens in obtaining Qualified Mortgage status. Small creditors operating in rural and underserved areas may also originate QMs with balloon payments, which is not otherwise permitted.

The final rule, which takes effect Jan. 1, 2016, also clarifies and expands the definition of rural areas to include any county or census block not designated as “urban” by the U.S. Census Bureau and provides a safe harbor for lenders who use the Census Bureau or CFPB websites to validate a locale’s rural or underserved status. As ABA had requested, the CFPB said it would have an automated tool to determine rural or underserved status by the time the rule takes effect.

The rule includes additional provisions making it easier for lenders whose small creditor or rural or underserved status changes to obtain the benefits of the exemption. It also provides a brief extension for the transition period in which small creditors can make QMs with balloon payments. For more information, contact ABA’s Rod Alba.