CFPB Expands Small Lender Exemptions, Rural Definition for QM

September 22, 2015

The Consumer Financial Protection Bureau (CFPB) on Monday finalized several changes to mortgage rules it proposed in January.

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.

Among the changes, the CFPB increased the small creditor exemption from qualified mortgage (QM) rules from 500 total loans per year to 2,000. The final rule excludes loans held in portfolio by the creditor and its affiliates.

In addition, the final rule expands the definition of “rural” to include census blocks that are not in an urban area as defined by the Census Bureau. The rule adds two new safe harbors for determining whether a property location meets the definition of rural. A creditor will be able to rely on an automated address look-up tool available on the Census Bureau’s website or on a new automated tool that will be provided on the Bureau’s website. The rule maintains the current safe harbor for creditors who choose to rely on the county lists available on the Bureau’s website.

The CFPB also is providing creditors additional implementation time. 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 Jan. 10, 2016. The final rule extends that period to include balloon-payment mortgage transactions with applications received before April 1, 2016.

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