A number of the Consumer Financial Protection Bureau’s (“CFPB’s”) new mortgage rules contain exemptions or safe harbors for mortgage loans made by creditors that, during the preceding year, operated predominantly in “rural” or “underserved” counties or for mortgage loans made in “rural” counties. The CFPB has now released its 2014 final list of “rural” and “underserved” counties that may be used by banks to determine whether a county is “rural” or “underserved” during 2013, and accordingly, whether it will qualify for an exemption under the CFPB’s new mortgage rules in 2014. The CFPB has confirmed that banks may rely on this list as a safe harbor in determining whether a county is “rural” or “underserved” in a given calendar year. The final list of “rural” and “underserved” counties for 2014 can be found on the CFPB’s website or by following this link.
The CFPB’s list will initially be relevant with respect to the following rules:
- Under the CFPB’s Escrow Requirements under the Truth in Lending Act rule (“Escrows Rule”), which took effect last month, certain creditors are required to create escrow accounts for a minimum of five years for higher-priced mortgage loans (“HPMLs”). There is an exemption to this requirement, however, for mortgage loans made by certain small creditors (generally, creditors with less than $2 billion in assets making 500 or fewer first lien mortgages annually) that operate predominantly in “rural” or “underserved” counties. The CFPB’s new 2013 list of rural and underserved counties should be used by banks when determining whether they are exempt from the Escrows Rule in 2014. Because this rule is already in effect, banks should also look to the previously-released 2012 list to determine whether an exemption is available for the remainder of 2013. The 2012 list can be found on the CFPB’s website or by following this link.
- Under the CFPB’s Ability to Repay and Qualified Mortgage Standards under the Truth in Lending Act rule (“ATR Rule”), which will become effective in January 2014, mortgage loans with balloon payments generally are not eligible to be “qualified mortgages.” Again, however, there is an exemption that permits loans with balloon payments to be “qualified mortgages” if they are made by certain small creditors that operate predominantly in “rural” or “underserved” counties. This exemption was expanded in May 2013 to allow small creditors to make “qualified mortgages” with balloon payments for two additional years following January 10, 2014, even if they do not operate in a predominantly “rural” or “underserved” county.
- Under the interagency Appraisals for HPMLs rule, which becomes effective in January 2014, certain HPMLs will be exempt from new second appraisal requirements if they are originated in “rural” counties. Importantly, this exemption does not reach mortgages made in “underserved” counties, and so the CFPB has posted a second final list for 2014 that includes only “rural” and not “underserved” counties. That list can be found on the CFPB’s website, or by following this link.
The CFPB has indicated that it will annually update its lists of “rural” and “underserved” counties.