We recently wrote a letter to the CFPB, asking the bureau to make regulatory
changes based on several provisions signed into law last December. The
provisions were part of the long-term highway funding package, and allows the
CFPB to provide more flexibility for small creditors to qualify for exemptions
to Regulation Z’s Qualified Mortgage (QM) balloon loan provisions and escrow
requirements for higher-priced mortgage loans (HPMLs).
Our letter urged the CFPB to promptly amend TILA’s Regulation Z
to allow for credit unions that make at least one (1) loan in a rural or
underserved area to qualify for the exemptions from the QM balloon loan
provisions and escrow requirements for HPMLs. Credit unions
will benefit by being able to provide balloon loans that meet the definition of
QM and being exempt from escrow requirements under certain circumstances.
Currently, in order to qualify for exemptions from the QM
balloon loan provisions and escrow requirements for HPMLs, the CFPB requires a
financial institution to extend over 50% of its total first-lien covered
transactions on properties located in a rural or underserved area, as well as
stay under the 2,000 first-lien limit and $2.052 billion asset size threshold.
While we appreciate that the CFPB imposed the over 50
percent requirement to stay within existing statutory limits, with the passage
of the FAST Act, it is certainly appropriate for the CFPB to revise the rule to
adjust to the new Congressional directive.
The CFPB can go farther and allow any
mortgage loan held in a credit union’s balance sheet, regardless of any other
threshold, to qualify as a QM loan.
Treating loans that a financial institutions holds on its
balance sheets as QM loans is appropriate because the lender retains all of the
risk involved with these mortgages and is subject to significant safety and
soundness supervision from its prudential regulator.
Finally, we requested that the CFPB move promptly to implement
the section of the act that provides for an application process under which a
person who lives or does business in a state may petition the CFPB for an area
within the state to be designated as a rural or underserved area if it is not
already.