WASHINGTON (3/23/16)--The Consumer Financial Protection Bureau (CFPB) Tuesday issued an interim final rule that broadens the availability of certain special provisions for credit unions and other small creditors in the Regulation Z qualified mortgage and escrow rules. It is a victory for the Credit Union National Association (CUNA), which strongly advocated for it in both the regulatory and legislative fronts.
The rule applies to small creditors that have less than $2 billion in assets and make and sell fewer than 2,000 loans a year.
"This is an important win for credit unions and consumers alike," CUNA President/CEO Jim Nussle declared Tuesday. "The rule reduces the burden of recent CFPB mortgage lending rules on more credit unions, and these member-owned, community-based financial institutions will be able to provide more credit to consumers in rural and underserved areas. Our thanks to Director Cordray for getting this needed change into the rulebook quickly."
The new rule takes effect March 31. It implements the Helping Expand Lending Practices in Rural Communities (HELP) Act, legislation backed by CUNA, and is relief for some small creditors from the CFPB’s prior regulations in the mortgage market, such as the Qualified Mortgage requirements and escrow requirements for higher-priced mortgage loans.
Before the HELP Act was signed into law, 50% of a lender's total first-lien covered transactions would have to be on properties located in a rural or underserved area to qualify for exemptions from the QM balloon loan provisions and escrow requirements for higher-priced mortgage loans.
As requested by CUNA, under the CFPB's new rule, a small creditor will be eligible for the special provisions if it originates at least one covered mortgage loan on a property located in a rural or underserved area in the prior calendar year.
The CFPB will accept comments on the interim final rule for 30 days after its publication in the Federal Register.
This is the second rule the CFPB has issued to implement the HELP Act. On March 3, the bureau approved a procedural rule that establishes an application process that allows individuals and entities to apply for additional areas to be designated as rural areas under federal consumer financial laws.