New Rule Broadens Qualified Mortgage Coverage for Small Creditors
On March 22, 2016, the Consumer Financial Protection Bureau (CFPB) issued an interim final rule that allows more small creditors to take advantage of provisions for operating in rural or underserved communities.
The interim final rule, effective March 31, 2016, expands the eligibility of certain small creditors that operate in rural or underserved areas for special provisions that permit the origination of balloon-payment qualified mortgages and balloon-payment high cost mortgages.
Small creditors will no longer have to operate predominantly in rural or underserved areas to take advantage of these provisions. Under the interim final rule, a creditor satisfies the rural-or-underserved component of the eligibility criteria if the creditor originated a covered transaction secured by a property located in a rural or underserved area in the preceding calendar year, or if the application for the transaction was received before April 1 of the current calendar year, during either of the two preceding calendar years.
The interim rule also provides an exemption from the requirement to establish an escrow account for higher-priced mortgage loans and changes the rules in determining whether an area is rural for the purposes of Regulation Z.
CLA’s financial institution regulatory compliance team assists banks and credit unions nationwide in establishing regulatory compliance programs, conducting compliance testing, and training staff on regulations. Justin Robinson is a member of CLA’s regulatory compliance team and can be reached at justin.robinson@CLAconnect.com.
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