WASHINGTON--The Consumer Financial Protection Bureau has proposed new rules aimed at helping small credit unions and banks to make mortgages, especially in rural and underserved areas.
In short, the new rules include provisions aimed at limiting regulations that would otherwise stymie smaller lenders, including a provision in its Ability-to-Repay rule that would extend Qualified Mortgage status to loans that small creditors hold in their own portfolios, even if consumers’ debt-to-income ratio exceeds 43%. In addition, small creditors in rural or underserved areas would be able originate Qualified Mortgages with balloon payments even though balloon payments are otherwise not allowed with Qualified Mortgages.
“Responsible lending by community banks and credit unions did not cause the financial crisis, and our mortgage rules reflect the fact that small institutions play a vital role in many communities,” said CFPB Director Richard Cordray. “Today’s proposal will help consumers in rural or underserved areas access the mortgage credit they need, while still maintaining these important new consumer protections.”
Under the CFPB proposal, a “small” creditor would now be defined as an institution of $2 billion of smaller that originate fewer than 2,000 first lien mortgages per calendar year. CFPB is also seeking to expand the definition of “rural” area to include census blocks not defined as being part of an urban area.
In response, NAFCU’s SVP/General Counsel Carrie Hunt issued a statement saying, “The National Association of Federal Credit Unions welcomes CFPB’s proposal to provide much-needed regulatory relief to credit unions wishing to continue providing mortgages to their members under the bureau’s QM regulation. We strongly urged the bureau to set a more realistic exemption level for small creditors and appreciate CFPB’s listening to our concerns and seeking to make its rule more workable.”