By Andrew A. Turner, J.D.
The Consumer Financial Protection Bureau has adopted amendments to its mortgage lending rules that are intended to ease burdens on small lenders, especially those operating in rural or underserved areas. The final rule makes changes to the CFPB’s Ability-to-Repay rule, Home Ownership and Equity Protection Act rule, and Escrows rule.
An expanded definition of “small creditor” increases the loan origination limit for small-creditor status from 500 first-lien mortgage loans to 2,000 first-lien mortgage loans. The change also excludes loans held in portfolio by the creditor and its affiliates.
The amendments allow small creditors to include mortgage affiliates when the asset limit is calculated, create a grace period for creditors that no longer operated predominantly in rural or underserved areas during the preceding calendar year, and adjust the time period used in determining whether a creditor is operating predominately in rural or underserved areas to a one-year qualifying period.
Included in the amendments are changes that will:
- expand the definition of “rural area” to include a county that meets the current definition of rural county or a census block that is not in an urban area as defined by the Census Bureau; and
- extend, until April 1, 2016, the temporary two-year transition period that allows certain small creditors to make balloon-payment qualified mortgages and balloon-payment high cost mortgages regardless of whether they operate predominantly in rural or underserved areas.
Effective date. The CFPB settled on a Jan. 1, 2016, effective date as it is consistent with the end of the calendar year determinations required to be made in order to determine a creditor’s eligibility for small creditor and small creditor rural or underserved status and for the April 1 grace period.
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