On September 21, 2015, the Consumer Financial Protection Bureau (CFPB) finalized a number of changes to its mortgage rules which will allow more financial institutions to offer certain types of mortgages in rural and underserved areas and will give small creditors time to adjust their business practices to comply with the rules. Effective January 1, 2016, the Final Rule will:
• Expand the definition of “small creditor” from 500 first-lien mortgage loans to 2,000 and will exclude loans held in portfolio by the creditor and its affiliates.
• Include mortgage-originating affiliates in the asset limit calculation of the small-creditor status (less than $2 billion – adjusted annually, as of the end of the preceding calendar year).
• Expand the definition of “rural” areas to include census blocks that are not in an urban area as defined by the Census Bureau (in addition to counties that are considered to be “rural” under the CFPB’s current mortgage rules).
• Provide grace periods for small creditor and for the rural or underserved creditor status, if the creditor exceeds the origination limit or asset-size limit, or no longer operates predominantly in rural or underserved areas during the preceding calendar year. The grace period will allow the creditor to operate as a small creditor with respect to mortgage transaction applications received prior to April 1 of the current calendar year.
• Change the qualifying 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 just the preceding calendar year.
• Extend the temporary exemption set to expire on January 10, 2016 to April 1, 2016, under which small creditors are allowed to make balloon-payment Qualified Mortgages and balloon-payment high-cost mortgages, regardless of where they operate. This will provide creditors more time to understand how any changes will affect their status, and to adjust their business practices.