Removing Barriers Blog

CFPB Applauded for Adopting CUNA-Advocated Threshold for Rural/Underserved Areas
Posted April 22, 2016 by CUNA Advocacy

This week, we sent a letter to the CFPB on its Interim Final Rule on Operations in Rural Areas Under the Truth in Lending Act's Regulation Z. This Interim Final Rule amends certain provisions of Regulation Z, and implements the Helping Expand Lending Practices in Rural Communities Act (HELP Act), which Congress passed at the end of last year. 

This new rule affects certain small creditors that operate in rural or underserved areas. It allows these lenders to originate Qualified Mortgages (QM) with balloon-payment features, and provides an exemption from the requirement to establish an escrow account for higher-priced mortgage loans.

Out letter applauds the CFPB for moving quickly to implement the HELP Act and commends the Bureau for lowering the qualification threshold to only one covered transaction originated in a rural or underserved area. We believe this threshold properly implements Congress’s intention to expand the pool of small creditors that will be eligible for the exemptions and, more significantly, will likely substantially improve the availability of credit in all rural and underserved areas. These areas are in need of credit, and any assistance to encourage the solid and responsible credit union lending is desirable. 

However, we also suggest that the CFPB go further to help small creditors, by allowing all loans held in portfolio by a credit union (or a small creditor) to qualify as a Qualified Mortgage. These loans, made by responsible lenders who are holding the risk on their portfolio, should not be subject to the new mortgage requirements, which are superfluous given the nature and risk of portfolio loans. We urge the CFPB to look closely at this issue during its upcoming monitoring phase. 

Ultimately, we believe this interim final rule is an excellent example of how regulatory exemptions can be provided for responsible lenders such as credit unions, and we look forward to future efforts by the CFPB to focus its rulemakings on bad actors in the industry.