CFPB Expands Small Creditor And Rural Area Exceptions

On September 21, 2015, the CFPB issued a final rule amending the definitions of "small creditor" and "rural and underserved areas" which should be beneficial to many community banks and other small mortgage lenders. Small creditors operating predominately in rural and underserved areas are exempt from compliance with certain provisions of the 2013 mortgage rules. For example, the current rules extend Qualified Mortgage status to loans that small creditors hold in their portfolio even if the consumer's debt to income ratio exceeds 43%, and small creditors can originate Qualified Mortgages with a balloon payment under a temporary exception. Small creditors that serve predominantly rural and underserved areas can originate Qualified Mortgages with a balloon payment, can originate high-cost mortgages with a balloon payment, and are not required to establish escrow accounts for higher-priced mortgages. The CFPB's stated goal for changing the definitions is to "increase the