On September 21, the CFPB issued its revised Truth in Lending Act regulations (Regulation Z) relating to creditors and rural or underserved areas. The CFPB's final rule revised the regulatory definitions of small creditor, and rural and underserved areas, for purposes of certain special provisions and exemptions from various requirements provided to certain small creditors under the CFPB's mortgage rules.

For example, the Ability-to-Repay rule extends Qualified Mortgage status to loans that small creditors hold in their own portfolios. Small creditors that operate predominantly in rural or underserved areas can originate Qualified Mortgages with balloon payments, even though balloon payments are otherwise not allowed with Qualified Mortgages.

The Final Rule will:

  • Create a one-year qualifying period for rural or underserved creditor status.
  • Provide additional implementation time for small creditors.
  • Expand the definition of "small creditor": The final rule expands the loan origination limit for small-creditor status to 2,000 first-lien mortgage loans and excludes loans held in portfolio by the creditor and its affiliates.
  • Include mortgage affiliates in calculation of small-creditor status: The final rule does not change the $2 billion asset limit for small-creditor status, and assets of a creditor's mortgage-originating affiliates are included in calculating whether a creditor is under the limit.
  • Expand the definition of "rural" areas: The revised definition of "rural" includes census blocks that are not in an urban area as defined by the Census Bureau. Two additional safe harbors are also available: use of the automated address look-up tool available on the Census Bureau's website or on the CFPB's new automated address look-up tool.
  • Reduce the time period used to determine whether a creditor is operating predominantly in rural or underserved areas: The look-back period is reduced to the preceding calendar year; previously, it was from any of the three preceding calendar years to the immediately preceding calendar year. However, the final rule also provides grace periods for small creditor and rural or underserved creditor status: Creditors that have lost small creditor or rural or underserved creditor status will receive a grace period for applications received prior to April 1 of the current calendar year.