According to the Consumer Financial Protection Bureau (CFPB), the definition of “small creditor” and “rural areas” will be amended effective January 1, 2016. The loan origination limit for small creditor status will increase from 500 originations to 2,000 originations, excluding originated loans held in portfolio by the creditor and its affiliates. The creditor’s affiliates will also be included in the $2 billion asset limit. Both provide a grace period that will apply in certain circumstance that will apply to those exceeding these limits, allowing them to continue to operate as small creditors. With small creditor status, more lenders will qualify for the following:
- Extending qualified mortgages that are not subject to the 43 percent DTI ratio or underwriting requirements of Appendix Q of the ATR rule, if the loan is retained in portfolio;
- Extending balloon qualified mortgages, if operating in predominately rural or underserved areas;
- Extending balloon qualified mortgages under a temporary provisions whether or not they are operating in predominately rural or underserved areas;
- Avoiding establishing escrow accounts for certain higher-priced mortgage loans.
The definition of “rural areas” will also be amended to include a county that meets the current definition, or a census block that is not in an urban area according to the U.S Census Bureau. In addition, it allows use of a new tool provided by the CFPB website or the Census Bureau’s website in determining whether or not a property is located in rural or underserved areas.