On September 21, the Consumer Financial Protection Bureau ("CFPB") released final and revised versions of mortgage rules regarding small creditors. These changes should ease lenders' ability to originate qualified mortgages in rural areas. These revisions comport with Director Richard Cordray's stated position that community banks and credit unions did not cause the financial crisis—and thus, implicitly, should not be overburdened in their ability to generate loans.
The new rules revise the definition of "small creditor" and "rural area." While the definition of "small creditor" was previously limited to lenders originating 500 loans or fewer per year, a lender may now originate up to 2,000 loans per year and still qualify as a small creditor. Additionally, loans held "in portfolio" by the lenders are excluded from the 2,000-loan limit. Notably, loans with balloon payments, while normally discouraged by the CFPB, may be originated by small creditors and still be defined as qualified mortgages. But the CFPB's revisions do not change the $2 billion asset limit for small creditor status.
The new rule also expands the definition of rural areas. A "rural area" is now defined as any part of the country not otherwise designated by the Census Bureau as "urban."
Finally, the rule incorporates safe harbors and grace periods for lenders' determination of whether they serve rural areas or qualify as small creditors.
Overall, the rule change should enable more lenders in rural and underserved communities to originate "qualified mortgages." In turn, this should expand access to credit for borrowers in rural and underserved communities.
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