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CFPB Proposes to Expand 'Small Creditor' and 'Rural Definitions' in Mortgage Rules
Tuesday, February 3, 2015 6:25 AM

The Consumer Financial Protection Bureau has proposed several changes to its Ability-to-Repay, Home Ownership and Equity Protection Act, and Escrow mortgage rules. If finalized, the CFPB says these changes will increase the number of financial institutions able to offer certain types of mortgages in rural and underserved areas and help small creditors adjust their business practices to comply with the new rules.

Specifically, the proposed amendments would: 

  • Expand the definition of "small creditor": The loan origination limit for small creditor status would be raised from 500 first-lien mortgage loans to 2,000 and would exclude loans held in portfolio by lenders and their affiliates.
  • Include mortgage affiliates in calculating the small creditor status: The $2 billion asset threshold would not change. However, assets of a creditor's mortgage originating affiliates would be included in calculating whether a creditor is under the limit.
  • Expand the definition of "rural" areas: In addition to counties considered to be rural under the current mortgage rules, the proposal would expand this definition 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 would 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. A similar grace period would be created for creditors that no longer operate predominantly in rural or underserved areas during the preceding calendar year.
  • Create a one-year qualifying period for rural or underserved creditor status: The proposal would adjust the time period used to determine whether a creditor is operating predominantly in rural or underserved areas, from any of the three preceding calendar years to only the preceding calendar year.
  • Provide additional implementation time for small creditors: Under current rules, small creditors are able to make balloon-payment qualified mortgages and balloon-payment high-cost mortgages regardless of where they operate until Jan. 10, 2016. The proposal would extend that period to include balloon-payment mortgage transactions with applications received before April 1, 2016.