The American Bankers Association urged the House Financial Services Committee on Wednesday to support legislation that would ensure flexibility in the application of the CFPB’s definition of “rural” under its new mortgage rules.
H.R. 2672, introduced by Rep. Garland “Andy” Barr (R-Ky.), is designed to ensure the establishment of an application process to appeal to the CFPB to have an area designated as “rural” if it has not already been designated by the agency—part of a larger effort to protect community lending institutions.
Under the 2010 Dodd-Frank Act, the CFPB may exempt certain loans from the qualified mortgage rule if the creditor in question extended more than 50 percent of balloon-payment mortgages in one or more counties designated by the agency as “rural” or “underserved.”
The ABA said the CFPB’s original definition was much too narrow and “was inconsistently applied and would have had a dramatic, negative impact on small lenders and communities.”
“An appropriate exemption is critical to a bank’s ability to meet their community’s needs,” the ABA said in a letter to the committee. “The CFPB has wide discretion in defining ‘rural and underserved,’ and it should ensure that any future definition not exclude banks from offering deserving customers access to credit. [Barr’s bill] would help to assure that whatever definition of rural is ultimately used by the CFPB, there would be an avenue to apply to the Bureau to extend the definition of rural in those inevitable cases where a county may have been inappropriately excluded.”
The National Association of Federal Credit Unions has also urged lawmakers to support the legislation, saying the bill would help lenders meet all of the CFPB’s ability-to-repay/QM requirements.