Page 1 of 2 1 2
Thread Options
#2044413 - 10/15/15 04:03 PM New 'rural' definition
CindyS Offline
100 Club
Joined: Sep 2005
Posts: 132
Illinois
"final rule expands the definition of “rural” to include census blocks that are not in an urban area as defined by the Census Bureau"

The revised rule gives a safe harbor to a creditor relying on the automated address
tool found on the Census Bureau’s website.

How do we use the current Census Bureau website to determine if a census block is 'not in an urban area'?

Return to Top
Ability to Repay/Qualified Mortgage Rule
#2045729 - 10/22/15 07:44 PM Re: New 'rural' definition CindyS
rachelchri Offline
100 Club
Joined: Aug 2010
Posts: 165
I'm also looking for an answer to this question.

Return to Top
#2046035 - 10/26/15 12:50 PM Re: New 'rural' definition CindyS
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
Review comments .35(b)(2)(iv)-1.iii.B, C and D (revised text eff. 1/1/16) https://www.bankersonline.com/regulations/12-1026-035#b2

You will see that they refer to tools that may or will be provided by the CFPB (para. B) and Census Bureau (para. C). The tools are not yet available.

The revised commentary text is in red.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2049559 - 11/13/15 04:16 PM Re: New 'rural' definition CindyS
JWills, CRCM Offline
Diamond Poster
JWills, CRCM
Joined: May 2013
Posts: 1,755
The Mitten State
So in order to claim small creditor exemption for 2016, would we look back at 2015 or 2014 as we are unable to determine the rural status if the tool is not available yet.
_________________________
Nonsense wakes up the brain cells.

--Dr. Seuss

Return to Top
#2054464 - 12/16/15 05:48 PM Re: New 'rural' definition CindyS
NE Wx Forecast - Frosty Offline
Gold Star
NE Wx Forecast - Frosty
Joined: Mar 2011
Posts: 442
SE, Nebraska
OK the CFPB put out their Rural Tool today,...
http://www.consumerfinance.gov/rural-or-underserved-tool/

We have branches in an MSA that includes two counties. The western county is pretty much all Farms with a few small towns. The other one contains a mid-sized city (200,000). We've been waiting to see what these new rural designations would do. I researched the tool and plugged in legitimate addresses in and around one of those small towns. The addresses outside of town (remember this is still in an MSA) all show that they are Rural according to this new tool.

So what does this mean for a bank doing loans in this area? We are a small bank doing less than 2000 loans.

Return to Top
#2054538 - 12/16/15 08:48 PM Re: New 'rural' definition NE Wx Forecast - Frosty
Peach Offline
100 Club
Peach
Joined: Sep 2006
Posts: 179
Out West
I would like to know this as well. Our western side is 500,000 and the eastern side is very rural.

Return to Top
#2054754 - 12/17/15 06:29 PM Re: New 'rural' definition CindyS
189jet Offline
New Poster
Joined: Jun 2015
Posts: 11
The county my bank is in and the surrounding counties were not listed as rural or underserved. So we assumed we were no longer able to do qualified balloon mortgages after April 2016.

When the look up tool came out yesterday, I checked my personal address in the country and my bank's address in a town with a population of 4,000. My address came back as rural, the bank's was not.

After doing some reading I think I understand that going forward there is a one year look back to determine if more than 50% of mortgage loans are rural. Meaning that if I look up my first mortgage address for 2016 and more than 50% are rural on the look up tool I can do qualified balloon loans in 2017.

But what is the look back or determination of whether I can do qualified balloons for the remainder of the 2016 year after April. Is the look back 3 years?

We are small, and don't do a lot of mortgages in comparison to many, so looking up addresses isn't an issue. I just want to know I'm on the right track before I tell others there is the possibility of being able to continue doing qualified balloon mortgages.

Thanks so much for any input!

Return to Top
#2054807 - 12/17/15 08:26 PM Re: New 'rural' definition CindyS
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
No. Check out the revised language in 1026.35(b)(2)(iii)(A) in red here: https://www.bankersonline.com/regulations/12-1026-035#b2iii (scroll down a couple lines to see the "Editor's Note" and red text effective 1/1/16). The lookback is two year ends if you get the application before 4/1; only to the most recent year-end if on or after 4/1.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2055205 - 12/21/15 08:42 PM Re: New 'rural' definition John Burnett
Ski Offline
Platinum Poster
Joined: May 2003
Posts: 639
South Louisiana
On December 4, 2015, the “Fixing America’s Surface Transportation Act (the FAST Act) was signed into law. The Act, commonly referred to as “the Highway Bill,” contains a number of provisions that affect community banks.

Mortgage Lenders in Rural and Underserved Areas:

The Act removes the requirement that a “small creditor” lend predominantly in rural or underserved areas in order to qualify for certain exceptions to the CFPB’s mortgage rules (Balloon loans that meet the definition of “qualified mortgage” and High-cost mortgages with balloon payments).
The CFPB has interpreted “predominantly” to mean that the creditor has issued MORE THAN 50% of its first lien mortgage loan in rural or underserved areas in the preceding calendar year.

This provision cannot be implemented until the CFPB issues a rule. It is not clear how the agency will interpret the statutory language without the “predominantly” requirement. ICBA is urging the CFPB to promptly act on the new law and to remove any rural or underserved lending text.

Return to Top
#2056305 - 12/30/15 09:25 PM Re: New 'rural' definition John Burnett
WIBanker Offline
New Poster
Joined: Jun 2010
Posts: 11
My mortgages now mostly fall into the new "rural area" definition and when I use the CFPB tool for loans in 2015, they indicate rural status. Previously, these loans were not rural because of the county-wide status. What exactly is my bank's status as of April 2016? We make 100% in house balloon mortgages. If the look back in April 2016 is only to calendar year 2015, can I use the updated definition of rural to make this determination? If not, I will have a period from April to December with no balloons although we already know the change will be in place for the following year.

Return to Top
#2058344 - 01/13/16 04:14 PM Re: New 'rural' definition CindyS
JobSecurity Offline
Platinum Poster
Joined: Oct 2009
Posts: 579
Will banks be able to continue to do non QM balloons?

Return to Top
#2058354 - 01/13/16 04:44 PM Re: New 'rural' definition JobSecurity
Ski Offline
Platinum Poster
Joined: May 2003
Posts: 639
South Louisiana
I am told No to that question because you would have to include the Balloon payment in the ATR calculation.

If the CFPB does what they should do, which I think would be to state that if you make any loans that you warehouse in any rural or underserved area, then you may continue to make Balloon Payment QM's.

The question is whether they will say this AND whether they will say it BEFORE April 1, 2016.

Just sayin.

Return to Top
#2058673 - 01/14/16 05:41 PM Re: New 'rural' definition CindyS
189jet Offline
New Poster
Joined: Jun 2015
Posts: 11
I was thinking as long as the balloon payment is 5 years beyond the first payment, making the balloon term 62 months to be safe, you did not have to included that balloon payment in qualifying the borrower for ATR.

Return to Top
#2058731 - 01/14/16 07:33 PM Re: New 'rural' definition 189jet
Ski Offline
Platinum Poster
Joined: May 2003
Posts: 639
South Louisiana
I forgot to qualify:

For balloon loans, the calculation depends on whether the loan is a higher-priced loan.

For non-higher-priced balloon loans: Use the maximum payment scheduled during the first five years after the first regular periodic payment comes due.
For higher-priced balloon loans: Use the maximum payment in the payment schedule, including any balloon payment.

So HPML status makes the difference and in my bank's case, 99% are HPML.

Return to Top
#2058799 - 01/14/16 09:37 PM Re: New 'rural' definition CindyS
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
Ski -- I think you meant to refer to HPCTs rather than HPMLs. There is some overlap of the definitions, but there are different criteria for the two. The balloon ATR calculation difference depends on whether the loan is or is not an HPCT.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2058800 - 01/14/16 09:38 PM Re: New 'rural' definition CindyS
raitchjay Online
Power Poster
Joined: Oct 2009
Posts: 8,729
OK
And the HPCT definition has no bearing (at least as far as whether you have to count the balloon payment itself in the DTI calculation) if you meet the rural/underserved test...is that right John?
_________________________
I'm fixin' to fix that.

Return to Top
#2058803 - 01/14/16 09:42 PM Re: New 'rural' definition CindyS
raitchjay Online
Power Poster
Joined: Oct 2009
Posts: 8,729
OK
Let me clarify that question a bit: if the loan is a QM, and the bank qualifies as rural/underserved, then the HPCT status of the loan doesn't mean you have to include the balloon payment itself in the DTI calculation...is that correct? Recently, another poster and I revisited this subject that i once had put to bed, and it's been troublesome since.
_________________________
I'm fixin' to fix that.

Return to Top
#2058806 - 01/14/16 09:47 PM Re: New 'rural' definition CindyS
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
Yes, that's correct. If you can make balloon QMs under 1026.43(f) (as a small creditor that meets the criteria in 1026.35(b)(2)(iii) (A) (B) and (C). But if you can't do that, you can make balloon payment loans under the general ATR rules, but HPCT status limits greatly your ability to do it. Most borrowers won't meet the ATR requirement if you have to include the balloon payment in the calculation.
Last edited by John Burnett; 01/14/16 09:49 PM.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2058807 - 01/14/16 09:49 PM Re: New 'rural' definition CindyS
raitchjay Online
Power Poster
Joined: Oct 2009
Posts: 8,729
OK
Thank you John for the clarification. Really appreciate it.
_________________________
I'm fixin' to fix that.

Return to Top
#2058817 - 01/14/16 10:15 PM Re: New 'rural' definition raitchjay
Ski Offline
Platinum Poster
Joined: May 2003
Posts: 639
South Louisiana
From the CFPB "Ability-to-Repay and Qualified Mortgage Rule" Small Entity Compliance Guide dated 10/17/2013 - Page 21 bottom

X. How do I calculate, consider, and confirm debt information?

You must base your calculations on substantially equal monthly payments that would fully amortize the loan.

Special rules: However, there are also special rules and guidance provided for certain types of loans:

- For balloon loan, the calculation depends on whether the loan is a higher-priced loan.

- For non-higher-priced balloon loans: Use the maximum payment scheduled during the first five years after the first regular payment comes due.

- For higher-priced balloon loans: Use the maximum payment in the payment schedule, including any balloon payment.

Please tell me, am I missing something or misinterpreting this?

Thanks in advance.

Return to Top
#2059109 - 01/15/16 09:28 PM Re: New 'rural' definition CindyS
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
That info, Ski, refers to the ATR calculation in 1026.43(c)(5). But a small credit that meets the criteria for making qualified mortgages under 1026.43(f) doesn't have to follow 1026.43(c)(5).
Last edited by John Burnett; 01/15/16 09:32 PM.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
#2059257 - 01/19/16 04:12 PM Re: New 'rural' definition John Burnett
Ski Offline
Platinum Poster
Joined: May 2003
Posts: 639
South Louisiana
Thanks for the clarification John. I was not looking at it correctly.

Presently my bank meets the asset size and origination number criteria but we do not meet the current rural/underserved criteria.

My hope is that the CFPB will interpret the removal of the small creditor requirement to lend "predominately" in rural or underserved areas which would then allow us to continue (or resume) making balloon payment QM's (depending on when they decide).

Return to Top
#2060166 - 01/22/16 10:12 PM Re: New 'rural' definition CindyS
newyork Offline
Gold Star
Joined: Aug 2008
Posts: 413
If we do a non QM loan, and follow the ability to repay and the loan is a Higher Priced Mortgage Loan, must we take in consideration the balloon payment, even if we do the note for 62 months?

Return to Top
#2060172 - 01/22/16 10:21 PM Re: New 'rural' definition CindyS
VMack Offline
Platinum Poster
Joined: Jun 2001
Posts: 835
Texas
Yes, I believe you do. If the non QM loan is also an HPML or HPCT, the balloon payment must be calculated in the ATR regardless of when it is due.
_________________________
VMACK
CRCM

“The wise know their limitations; the foolish do not.”
Benjamin Hoff, The Tao of Pooh

Return to Top
#2060234 - 01/25/16 02:30 PM Re: New 'rural' definition CindyS
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,641
Cape Cod
The requirement relates to whether the loan is a HPCT. While there is some overlap in definitions between HPMLs and HPCTs, you shouldn't confuse them, or pull HPML status into the ATR requirements.

If you make a non-QM balloon payment closed-end loan secured by a dwelling, and its APR meets or exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by margins given in the HPCT definition at 1026.43(b)(4), you are required by 1026.43(c)(5)(ii)(A)(2) to include the "maximum payment in the payment schedule, including any balloon payment,..." in the calculation of the payment amount used in the D/I determination.
_________________________
John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

Return to Top
Page 1 of 2 1 2