The CFPB posted on Tuesday a final list of underserved and rural counties, defined for the purpose of implementing mortgage rules set to take effect next year.
Both the Truth in Lending Act’s escrow rule and ability to repay/qualified mortgage rule contain provisions that relate to mortgages originated by creditors that operate in predominantly rural or underserved counties.
The escrow rule, which took effect last month, requires certain creditors to establish and maintain escrow accounts for higher-priced mortgage for a minimum of five years. Loans made by creditors that operate in rural or underserved counties are exempt from the rule.
The ability to repay/QM rule set to take effect in January designates mortgage loans with balloon payments as ineligible for QM status, though small creditors that operate in rural or underserved counties are exempt from the rule.
Under the May ATR concurrent rule, the exemption was expanded to allow small creditors to make balloon-payment QMs between January 10, 2014, and January 10, 2016, even if they do not operate in a predominantly rural or underserved area.
The CFPB said it would annually update the list of counties, which some creditors may rely on as a safe harbor to determine whether a county is “rural” or “underserved” for any given calendar year.
“We have received extensive feedback on the definitions of ‘rural’ and ‘underserved’ and recently announced our intent to consider whether those definitions can be refined over the next two years,” the CFPB said. “We also are aware that some counties’ status as rural or non-rural has changed between the 2013 list and the 2014 list because of updated information from the 2010 Census, which will result in some small creditors losing eligibility for the exemptions discussed above. To alleviate these concerns and to facilitate lending by small creditors while we consider whether and how to refine the definitions, we are taking a number of steps to amend the affected rules.”
The CFPB recently proposed to extend the same treatment under the ATR concurrent rule to small creditors for the purposes of high-cost mortgage balloon exemption. The proposed change would exempt small creditors not operating in rural or underserved areas from high-cost mortgage balloon restrictions.
Additionally, the CFPB proposed to extend escrow exemption to creditors that have operated in predominantly rural or underserved areas in any of the previous three years.
The CFPB is seeking comment on the two proposals by July 22. The watchdog said it would work to issue a final rule as soon as possible to provide clarity to creditors on their status in advance of the January effective dates.