CFPB Proposal Extends Small Creditor Status and Exemptions to More Institutions

Additional community banks, credit unions, and other institutions would benefit from a proposal of the Consumer Financial Protection Bureau (“CFPB”) to facilitate the offering of certain types of mortgages in rural and underserved areas, and to help small creditors adjust their business practices to comply with the new rules. As banking professionals know, the CFPB issued several mortgage rules in January 2013 and May 2013 that became effective in January 2014 and, among other things, created the concept of “Qualified Mortgages” that prohibits certain loan features and that are presumed to comply with the CFPB’s ability-to-pay requirements.

Numerous provisions in the mortgage rules impact small creditors, and the CFPB carved out exceptions for small creditors in its original rules.  The recent proposal would expand the definition of “small creditor,” increasing the loan origination limit from 500 to 2,000 first-lien mortgages, and excluding loans held by the creditor and affiliates.  Additionally, the proposal contains the following:

  • Although the small creditor asset limit remains at less than $2 billion, the new proposal would include the assets of a creditor’s mortgage-originating affiliates.
  • The definition of “rural” areas would be expanded to include census blocks that are not in an urban area as defined by the Census Bureau.
  • Creditors that grow out of small creditor status would have a grace period to comply with regulations.
  • The exemption granted to small creditors on issuing balloon-payment Qualified Mortgages regardless of where they operated would be extended from January 10, 2016 to April 1, 2016.

If your organization has questions about this amendment and proposal, please contact Spilman.


By: R. Scott Adams

R. Scott Adams

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