CFPB Rule Eases Standards for Balloon Payment Mortgages and Escrow Requirements
April 25, 2016
The Consumer Financial Protection Bureau, under authority of a provision in the transportation bill that Congress adopted last December, issued an interim final rule that expands the number of banks eligible for exemptions from qualified mortgage standards. Small creditors, defined as those (together with affiliates) extended no more than 2,000 applicable mortgage loans and have less than $2 billion in assets, that operate in rural or underserved areas, may extend balloon payment mortgage loans if they originated a covered transaction located in a rural or underserved area in the preceding calendar year or, if the application for the transaction was received before April 1 of the current calendar year, during either of the two preceding calendar years. This replaces the former standard that tests whether a creditor “predominately” made loans in such areas. The rule also exempts such creditors from the requirement to establish an escrow account for high priced mortgages. See CBA’s Regulatory Compliance Bulletin for more information.