As you may recall, there are several criteria a bank must meet to determine whether it can originate Small Creditor Balloon Payment QMs and/or whether it is exempt from the HPML escrow requirement. One of these criteria, is the Service Area Test. This test requires that:
In the prior calendar year, more than 50% of your consumer purpose, closed-end, first-lien, dwelling-secured loans were secured by properties located in areas that are either “rural” or “underserved”.
The CFPB recently released a Rural and Underserved Areas Tool to help banks determine if properties are located in rural or underserved areas. The tool is pretty straight forward and user friendly. You just enter the year and the property address. You can also upload and search multiple addresses at one time. The questions and answers included with the tool also state, the tool provides a safe harbor determination that a specific property securing a mortgage loan is located in a rural or underserved area. For more information on the safe harbor, see 1026.35(b)(2)(iv)(C) and comment 35(b)(2)(iv)-1.iii.D.