Bureau final rule to facilitate access to credit in rural and underserved areas

The Consumer Finance Protection Bureau announced on Monday that it has finalized several changes to its mortgage rules to facilitate responsible lending by small creditors, particularly in rural and underserved areas. The new rule, which was proposed in January, will increase the number of financial institutions able to offer certain types of mortgages in rural and underserved areas, and gives small creditors time to adjust their business practices to comply with the rules. The final rule will:

• Expand the definition of “small creditor”: The loan origination limit for small-creditor status will be raised from 500 first-lien mortgage loans to 2,000 and will exclude loans held in portfolio by the creditor and its affiliates.
• Include mortgage affiliates in calculation of small-creditor status: The final rule does not change the current asset limit for small-creditor status, which is set at less than $2 billion (adjusted annually) in total assets as of the end of the preceding calendar year. However, under the new rule the assets of the creditor’s mortgage-originating affiliates are included in calculating whether a creditor is under the limit.
• Expand the definition of “rural” areas: In addition to counties that are considered to be “rural” under the CFPB’s current mortgage rules, today’s final rule expands the definition of “rural” to include census blocks that are not in an urban area as defined by the Census Bureau.
• Provide grace periods for small creditor and rural or underserved creditor status: Creditors that exceed the origination limit or asset-size limit in the preceding calendar year will be allowed to operate, in certain circumstances, as a small creditor with respect to mortgage transactions with applications received prior to April 1 of the current calendar year. The final rule creates a similar grace period for creditors that no longer operated predominantly in rural or underserved areas during the preceding calendar year.
• Create a one-year qualifying period for rural or underserved creditor status: The final rule adjusts the time period used in determining whether a creditor is operating predominately in rural or underserved areas, from any of the three preceding calendar years to the preceding calendar year.
• Provide additional implementation time for small creditors: Eligible small creditors are currently able to make balloon-payment Qualified Mortgages and balloon-payment high-cost mortgages regardless of where they operate, under a temporary exemption scheduled to expire on January 10, 2016. The final rule extends the sunset of that provision to cover balloon-payment mortgage transactions with applications received before April 1, 2016, giving creditors more time to understand how any changes will affect their status, and to adjust their business practices.

The Final Rule, which will be effective January 1, 2016, is available at http://files.consumerfinance.gov/f/201509_cfpb_amendments-relating-to-sm...