NEW: CFPB eases rural and underserved credit access

September 21, 2015

WASHINGTON (9/21/15 UPDATED 2:45 p.m. ET)--The Consumer Financial Protection Bureau (CFPB) finalized a rule this afternoon increasing the number of financial institutions able to offer certain mortgages in rural and underserved areas. CUNA supported most aspects of this rule when it was proposed, and the final rule is largely unchanged.

“The financial crisis was not caused by community banks and credit unions, and our mortgage rules reflect the fact that small institutions play a vital role in many communities,” said CFPB Director Richard Cordray. “These changes will help consumers in rural or underserved areas access the mortgage credit they need, while still maintaining these important new consumer protections.”

In its comment letter on the proposal filed in March, CUNA generally supported the proposal due to its minimizing the impact of regulatory burden on small creditors.

Specifically, the rule:

  • Expands the definition of “small creditor” to entities that issue less than 2,000 first-lien mortgages per year, up from 500. CUNA asked the bureau to consider raising the threshold higher than 2,000;
  • Includes mortgage affiliates in the calculation of small-creditor status, and leaves the asset size of “small creditors” at $2 billion. CUNA urged the agency to consider raising the limit to $10 billion;
  • Expands the definition of “rural” areas to include census blocks that are not in an urban area as defined by the Census Bureau. The rule adds two new safe harbors: 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 CFPB’s website;
  • Allows creditors that exceed the origination limit or asset-size limit in the preceding calendar year will 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; The final rule creates a similar grace period for creditors that no longer operated predominantly in rural or underserved areas during the preceding calendar year;
  • Adjusts the time period used in determining whether a creditor is operating predominately in rural or underserved areas, from any of the three preceding calendar years to the preceding calendar year;
  • Provide additional implementation time for small creditors. 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. Today’s final rule extends that period to include balloon-payment mortgage transactions with applications received before April 1, 2016; and
  • Makes technical changes to the language requiring inclusion of affiliate assets (including credit union service organizations) for purposes of counting covered transactions for the originations limit. While the change appears to bring additional clarity, CUNA is still analyzing the change.