Recently, the Consumer Financial Protection Bureau (“CFPB”) issued an interim final rule (“Rule”) that expanded “qualified mortgage” coverage in rural or underserved areas. Specifically, the Rule amends certain provisions of Regulation Z, the implementing regulations of the Truth-in-Lending Act. The updates concern two issues. First, the Rule expands the eligibility of certain small creditors operating in rural or underserved areas for special provisions that permit the creditor to originate of balloon-payment qualified mortgages and balloon-payment high cost mortgages. The Rule exempts such creditors for an exemption from the requirement to establish an escrow account for higher-priced mortgage loans. Small creditors are those with no more than 2,000 first-lien covered transactions and less than $2 billion in assets.
Second, the Rule broadens the provisions of Regulation Z for determining whether an area is rural. The Rule also “establishes that, consistent with the current definition of rural area in Regulation Z, only counties or census blocks are eligible areas for the purpose of the application process established by the Bureau pursuant to the Act.” The Rule expands this designation, and another recently issued rule provides a process for appealing the CFPB’s designation of a rural area.
In response to these updates, the CFPB also updated certain implementation materials to align them with the changes to Regulation Z. These include “the compliance guides for ATR/QM, HOEPA and the TILA Higher-Priced Mortgage Loans (“HPML”) Escrow Rule, the transaction coverage and exemption chart, the small creditor qualified mortgage flowchart and the ATR/QM comparison chart.”
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