The Consumer Financial Protection Bureau (CFPB) unveiled on Thursday changes to its mortgage rules to expand credit access to rural and underserved areas.
In a release, the bureau detailed a number of proposed revisions it hopes will increase options for community banks and other smaller mortgage lenders who may have been adversely impacted by last year's newly implemented rules.
"Responsible lending by community banks and credit unions did not cause the financial crisis, and our mortgage rules reflect the fact that small institutions play a vital role in many communities," said CFPB Director Richard Cordray. "Today's proposal will help consumers in rural or underserved areas access the mortgage credit they need, while still maintaining these important new consumer protections."
Included in the new rules is a proposal to expand the scope of what CFPB defines as a "small creditor." Under the proposal, the loan origination limit for an institution to have small-creditor status would jump from 500 first-lien mortgages to 2,000, excluding loans held in portfolio by the creditor and its affiliates.
Small creditors are granted several protections in last year's rules, including receiving "qualified mortgage" status for loans held in their own portfolios and the ability to origination qualified mortgages with balloon payments.
The changes would also expand the definition of "rural" areas to include census blocks not in areas designated "urban" by the Census Bureau.
The proposal does not include a change in asset limit for small-creditor status, which is currently at $2 billion. It would include assets of creditors' mortgage lending affiliates in making calculations.
The proposed changes would also provide grace periods for creditors exceeding the origination or asset size limits and a qualifying period for rural or underserved status.
While the proposed rule is open for public comment until March 30, industry groups didn't wait to respond.
"We applaud the bureau of listening to community bankers who struggle to serve rural and underserved areas. These proposed changes are sensible measures that will make it easier for certain hometown bankers to meet the mortgage credit needs in their communities," commented Bob Davis, EVP of mortgage markets for the American Bankers Association.
Independent Community Bankers of America (ICBA) was also supportive.
"The CFPB's proposed changes to its Qualified Mortgage rules will help ensure community banks can continue to actively and responsively make mortgage loans to their customers," said ICBA Chairman John Buhrmaster.
The National Association of Federal Credit Unions (NAFCU) welcomed the news but did find issue with its scope.
"CFPB's mortgage rules implement requirements of the Dodd-Frank Act, which provides a specific exemption for small creditors," said Carrie Hunt, NAFCU's SVP of government affairs and general counsel. "NAFCU continues to believe all credit unions should be exempt from rules implemented to address abuses in which credit unions did not participate."