Small Creditor Change Effective March 31, 2016

In our February Newsletter we alerted you to the fact that many banks could lose their Small Creditor status as of April 1, 2016. Due to a recent interim Final Rule (effective March 31, 2016); however, we BSA Training and Banking Regulations Compliance Consulting amy11 - Small Creditor Change Effective March 31, 2016have good news for once.

The CFPB has amended one of the Small Creditor criteria, specifically the Service Area Test. The Service Area Test is just one of the tests a creditor must meet to be able to originate Small Creditor Balloon Payment Qualified Mortgages and to be exempt from the HPML Escrow Requirements

Under the current rule, more than 50% of a bank’s consumer purpose, closed-end, first-lien dwelling secured loans originated in the prior year must be secured by properties located in rural or underserved areas. The interim Final Rule; however, states that for applications received on or after March 31, 2016, a creditor must have originated at least ONE consumer purpose, closed-end, first-lien loan secured by a dwelling, located in a rural or underserved area, in the preceding calendar year.

As we mentioned above, this is just one of the tests a creditor must meet to be considered a Small Creditor. For example, to be able to originate a Small Creditor Balloon Payment QM the bank must meet a Loan Volume Test, an Asset Size Test AND the Service Area Test. To be exempt from the HPML escrow requirement a bank must meet a Loan Volume Test, an Asset Size Test, the Service Area Test AND an escrow account test.

Be sure to check our April Newsletter for more on this interim Final Rule.

Published
2016/03/25
Amy Kudlacek

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