WASHINGTON, D.C. (Legal News Line) – The Consumer Financial Protection Bureau announced Tuesday changes to mortgage regulations to ensure responsible lending by small creditors.
The new rules will increase the number of financial institutions offering loans in rural and underserved areas.
“The financial crisis was not caused by community banks and credit unions, and our mortgage rules reflect the fact that small institutions play a vital role in many communities,” said CFPB Director Richard Cordray. “These changes will help consumers in rural or underserved areas access the mortgage credit they need while still maintaining these important new consumer protections.”
The new rule expands the definition of a small creditor by raising the origination limit. The definition of rural areas will now include rural areas not included in an urban area according to the U.S. Census Bureau. Grace periods for small creditors are also being added and a one-year qualifying period for rural and underserved creditors will be implemented. Additional implementation time will be provided for small creditors.
In addition, an escrow rule was established so that small creditors in underserved areas will not be required to establish escrow accounts for higher-priced mortgages. The final rules take effect on Jan. 1, 2016.