Apparently rural has more than one definition. In typical government fashion, two different agencies have decided to use different definitions in regulating overlapping issues… what a surprise!
The Consumer Financial Protection Bureau must need to create work to justify their existence. In the newly issued Qualified Mortgage rule, the CFPB enacts several requirements for lenders offering balloon payment loan programs in rural markets. While the concept of special exceptions or requirements in rural markets is somewhat of a given, the devil is in the details. And in this case, the details will inhibit lenders in rural or quasi rural markets and as a result, will decrease competition and increase costs to consumers. Consider us protected!
By now, most people in markets outside of major metro markets have at lease a basic awareness of the USDA rural housing loan program. For many folks during this cycle, a USDA loan was the only option available. As a lender, familiarity with the USDA’s definition or rural is as simple as following a link. Under the QM rule issued by the CFPB, you will have to determine if the entire county where the property is located is defined as rural as of the year the loan is originated by looking up the Urban Influence Code.
The Federal Reserve Bank of Dallas is on record as stating, “With the current definition of rural, I fear many borrowers will no longer have access to credit through the traditional community bank.”
You can read more about the definition or rural here.