October 2, 2015 5:14 pm

By, Mikel Dunnagan

The CFPB issued a Final Rule implementing changes to the definitions of “small creditor” and “rural underserved areas” relating to the special provisions and creditor exemptions contained in its 2013 Escrow, ATR and HOEPA Rules.

Specifically, this Final Rule:

– Increases the loan origination limit for determining small creditor eligibility from 500 to 2,000 covered transactions secured by a first lien and excludes originated loans held in portfolio by the creditor and its affiliates

– Establishes a grace period allowing for continued operation as a small creditor for applications received before April 1 of the current year for creditors who, in the prior year:

– Exceeded the originations or asset limit in the prior year
Met the operating threshold

– Clarifies that assets of a creditor’s affiliates who regularly extend covered transactions are included in the calculation for the asset limitation

– Decreases the time period for determining whether a creditor is operating predominantly in rural or underserved areas from “any of the three preceding calendar years” to “the preceding calendar year”

– Amends the exemption from the requirement to establish escrow accounts to ensure that creditors establishing escrow accounts solely to comply with the current rule are eligible for the exemption from establishing escrow accounts if they meet the expanded definition of small creditors operating predominantly in rural and underserved areas under the final rule

– Expands the definition of “rural” to include census blocks deemed rural by the Census Bureau (in addition to the current county-based definition)
Adds two additional safe harbors for the rural and underserved definition for creditors relying on automated tools provided by the CFPB or the Census Bureau

– Extends the deadline of the current two-year transition period for small creditors to make balloon-payment QM and balloon-payment high-cost mortgages from transactions consummated on or before January 10, 2016 to transactions for which application is received before April 1, 2016 (includes other non-substantive technical corrections).