By Thomas Ressler
The Consumer Financial Protection Bureau this week issued final changes to its mortgage rules, enabling responsible lending by small creditors, especially those operating in rural and underserved areas.
The new language – proposed in January – aims to increase the number of financial institutions, such as community banks and credit unions, able to offer certain types of mortgages in rural and underserved areas. It also gives small creditors time to adjust their business practices to comply with the rules.
Among the industry-supported provisions is a revised small-creditor definition. The final rule expands the designation to include banks that make fewer than 2,000 loans annually. Previously, the cutoff was 500. Loans held in portfolio – in which community banks retain 100 percent of the credit risk and a direct stake in the loan’s performance – will not count toward the loan total.
Also, industry supporters believe the changes will enable more community banks operating in rural areas to meet the unique mortgage needs of homeowners by deeming portfolio balloon mortgage loans they make to be qualified mortgages under the CFPB’s ability-to-repay rule.