In a Tuesday announcement, the CFPB said it issued an interim final rule that broadens special provisions for small creditors in rural or underserved areas. The interim final rule took congressional legislation passed in December 2015 into consideration.
The interim final rule implemented the Helping Expand Lending Practices in Rural Communities (HELP Act), which broadened the category of rural small creditors that may be eligible for certain provisions under the Truth in Lending Act. Changes to the CFPB rule reflect Congress' recent changes, which expanded eligibility for the special provisions, allowing qualified balloon mortgages and high-cost balloon mortgages for the escrow exemption.
"The Consumer Bureau today has acted to implement the recent law that extends to more small creditors the specific provisions for operating in rural or underserved areas," CFPB Director Richard Cordray said in a statement. "This rule provides broader eligibility for lenders serving those areas to originate balloon payment qualified and high-cost mortgages."
Prior to the implementation of the HELP Act, a small creditor was only eligible for these provisions if it operated predominantly in rural or underserved areas. The bureau's prior rules had interpreted "predominantly" to mean the small creditor made more than half of its covered mortgage loans on properties located in rural or underserved areas during the prior calendar year. Under the HELP Act, however, Congress amended the statute to give a small creditor eligibility for these provisions if it operates in a rural or underserved area, even if that is not its predominant operational area.
The interim final rule stated as of March 31, 2016, a small creditor will be eligible for the special provisions if it originates at least one covered mortgage loan on a property located in a rural or underserved area in the prior calendar year.
The CFPB will accept comments on the interim final rule for 30 days after its publication in the Federal Register.
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