FURTHER CHANGES TO “RURAL OR UNDERSERVED”

Congress passed the FAST (Fixing America’s Surface Transportation Act) Act on December 4, 2015. Title LXXXIX of the FAST Act is the Helping Expand Lending Practices in Rural Communities Act of 2015 (HELP Rural Communities Act).

Congress removed the word “predominantly” from the phrase “operates predominantly in rural or underserved areas” in sections 129C and 129D of the Truth in Lending Act. The phrase is used to define, in part, which creditors are permitted to make balloon-payment qualified mortgage loans and are exempt from the escrow requirement for higher-priced mortgage loans.

Although the changes to the law were effective on December 4, the language of Regulation Z has not changed yet. The CFPB must define the term “operating in rural or underserved areas.” The change has the potential to restore a balloon lending option to those knocked out balloon lending, as of April 1, 2016. The debate should be lively, and interesting.

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