The Consumer Financial Protection Bureau is pushing for greater access to mortgage credit in rural and underserved areas by attempting to increase the number of financial institutions in the space.
Currently, there are few players in the rural lending space, which is something the CFPB would like to see changed with the proposed rulemaking.
If successful, the CFPB hopes this new expansion will help small creditors adjust their business practices to comply with the new rules.
The bureau made sure to emphasize the need to maintain responsible lending while still ensuring that consumers are protected.
“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.”
The rules include a variety of provisions that impact small creditors that the bureau is trying to help alleviate in order to open up the credit box wider.
For instance, the bureau noted that a provision in the Ability-to-Repay rule extends Qualified Mortgage status to loans that small creditors hold in their own portfolios, even if consumers’ debt-to-income ratio exceeds 43%.
Small creditors in rural or underserved areas can originate Qualified Mortgages with balloon payments even though balloon payments are otherwise not allowed with Qualified Mortgages.
“National Association of Federal Credit Unions welcomes CFPB’s proposal to provide much-needed regulatory relief to credit unions wishing to continue providing mortgages to their members under the bureau’s QM regulation,” said Carrie Hunt, NAFCU’s senior vice president of government affairs and general counsel. “We strongly urged the bureau to set a more realistic exemption level for small creditors and appreciate CFPB’s listening to our concerns and seeking to make its rule more workable.