On January 29, the CFPB proposed its ability to repay and qualified mortgage rules to facilitate additional mortgage lending by credit unions and community banks. South Carolina closing attorneys who handle transactions for small lenders could benefit from these proposed rule changes because the business coming from these lenders would increase in volume.
Comments are due on the proposals by March 30. South Carolina closing attorneys should consider commenting positively on this proposal.
“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.
Credit unions and other small lenders have been lobbying for flexibility under the new rules, and this development is considered to be a victory for them.
The proposed rules would expand the definition of “small creditor” by raising the limit on first lien-mortgages from 500 to 2,000, excluding the mortgages held in the portfolios of the creditor and their affiliates. The CFPB said that this change would increase the approximate number of small lenders from 9,700 to 10,400.
Small lender status allows these lenders to make loans where the homeowner’s total debt payments exceed 43 percent of pretax income.
The proposal would also extend the ability of small creditors in rural or underserved areas to issue loans with balloon payments and still have them qualify as qualified mortgage loans. The definition of “rural” was extended to any census block that is not in an urban area as defined by the Census Bureau.