We applaud the bureau for listening to community bankers who struggle to serve rural and underserved areas. These proposed changes are sensible measures that will make it easier for certain hometown bankers to meet the mortgage credit needs in their communities.
As ABA urged in a comment letter last summer, as well as in frequent, informal advocacy with CFPB officials, 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 may also originate QMs with balloon payments, which is not otherwise permitted. Yesterday’s 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.
The proposal 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 regardless of location.
The rules would take effect on Jan. 1, 2016. Comments are due by March 30.
Read the proposed rule.