See link CFPB Interim Final Rule

Now small creditors only have to originate 1 loan in a "rural or underserved" area in the preceding calendar year to originate Small Creditor Balloon QMs. Great news for my community banks!

Clarification: Small Creditors must originate 1 "covered transaction" in a rural or underserved area.

If a FI meets all the requirements of "rural and underserved" to qualify for the small creditor QM, but hasn't originated a mortgage loan since 2014, does the FI lose it's exemption status to make the small creditor QMs?

If the FI has not originated a mortgage loan since 2014 the requirements of operating in a "rural and underserved" area have not been met. The FI must originate at least 1 covered transaction in a designated rural and/or underserved area in order to qualify.

A "covered" loan is a first-lien secured by a property in a rural or underserved area. Correct?

Does the property have to be in a county designated as a rural or underserved area or can the property address be designated as rural on the CFPB tool?

Thank you

I believe to get the safe harbor it has to be a CFPB designated rural or underserved area (which you can verify through the tool). The rule did mention an application process for designating an area as rural or underserved so maybe they might expand that a bit.

"Covered transaction" is the term used and it is defined in 1026.43. It is any "consumer credit transaction that is secured by a dwelling, as defined in § 1026.2(a)(19), including any real property attached to a dwelling, other than [HELOCs and reverse mortgages]."

To meet the requirement, you look at a subset of covered transactions -- those that are first-lien secured by a property in an R/U area.

If the property address is reported by the Bureau's tool as located in an R/U area, you can count it.