The Consumer Financial Protection Bureau announced on Wednesday a new application process to designate additional areas as “rural” that are not currently under federal consumer financial law.
Starting March 31, the CFPB will accept applications for those areas now outside rural counties or census blocks to be designated as rural. The areas may also be eligible for specific exemptions and provisions for certain mortgage lenders.
“This step will allow the bureau to consider whether there are smaller institutions that merit a designation as ‘rural’ lenders but do not qualify under current guidelines,” said CFPB Director Richard Cordray. “The bureau is taking quick action to fulfill our responsibility to Congress and implement the law.”
In September 2015, the CFPB finalized several changes to its mortgage rules to expand access to credit to small creditors, particularly in rural and underserved areas.
At the time, the CFPB expanded the definition of “rural” areas to:
In addition to counties that are considered to be “rural” under the CFPB’s current mortgage rules, today’s final rule expands the definition of “rural” to include census blocks that are not in an urban area as defined by the Census Bureau. The rule adds two new safe harbors for determining whether a property location meets the definition of rural. A creditor will be able to rely on an automated address look-up tool available on the Census Bureau’s website or on a new automated tool that will be provided on the Bureau’s website. The rule maintains the current safe harbor for creditors who choose to rely on the county lists available on the Bureau’s website.
The rule was originally proposed in January 2015 and geared to increase the number of financial institutions able to offer certain types of mortgages in rural and underserved areas.
To request a rural designation, the CFPB said:
Applicants need to identify the area and the state in which it is located. As set out in the application process, they must then provide information that will allow the CFPB to evaluate the application under the parameters of the Helping Expand Lending Practices in Rural Communities (HELP) Act, passed by Congress in December 2015. The application process will be open through Dec. 4, 2017. However, any application submitted after April 8, 2017, will be considered only if the bureau determines the designation decision process for that application can be completed by the sunset date of Dec. 4, 2017, based on the time remaining, the complexity of the application, and any other relevant factors.
The CFPB announced at the beginning of last year a push for greater access to mortgage credit in rural and underserved areas by attempting to increase the number of financial institutions in the space.
“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,” CFPB Director Richard Cordray said at the time. “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.”