Banks in Many Nebraska, Iowa Counties Qualify for Exceptions under New Mortgage Rules
A preliminary list of rural and underserved counties released this month by the CFPB shows that many community banks that predominantly operate in rural counties in Nebraska and Iowa will qualify for special exceptions under a number of the Bureau’s new rules affecting mortgage lending practices.
The first such rule, implementing certain escrow requirements Escrow Requirements under the Truth in Lending Act, takes effect June 1, 2013. The rule generally requires escrow accounts to be maintained for a minimum of 5 years for higher-priced mortgage loans (HPMLs) but exempts HPMLs made by certain small lenders that operate primarily in rural or underserved counties.
Other exceptions to recent changes to mortgage rules that are keyed to the list of rural and underserved communities include:
- The Ability to Repay and Qualified Mortgage Standards Under the Truth in Lending Act rule, under which mortgage loans with balloon payments will not meet the qualified mortgage (QM) standard in most cases. However, certain small lenders that operate predominantly in rural or underserved counties will be eligible to originate balloon-payment QMs;
- The Bureau’s High-Cost Mortgage and Homeownership Counseling Amendments to the Truth in Lending Act rule (the HOEPA rule), under which creditors that operated primarily in rural and underserved counties will be exempt from restrictions on balloon payments for certain high-cost mortgages; and
- The interagency Appraisals for Higher-Priced Mortgage Loans rule, under which certain HPMLs will be exempt from new second appraisal requirements if they are originated in rural counties.
These three rules will take effect in January 2014.
Since most Nebraska and Iowa counties qualify as “rural” or “underserved,” it is easier to note those counties that do not qualify for the exceptions. Counties that are not eligible for these exceptions in Nebraska include Dodge, Douglas, Gage, Lancaster, Sarpy, Seward, Saunders and Washington counties. Counties that are not eligible for these exceptions in Iowa include Clinton, Dallas, Dubuque, Harrison, Jackson, Jasper, Mills, Polk, Pottawattamie and Warren counties.