CFPB: Interpretive Rule Issued on Method for Determining Underserved Areas

The Consumer Financial Protection Bureau (Bureau) today issued an interpretive rule to provide guidance to creditors and other persons involved in the mortgage origination process about the way in which the Bureau determines which counties qualify as “underserved” for a given calendar year.

The Bureau’s annual list of rural and underserved counties and areas is used in applying various provisions under Regulation Z, which implements the Truth in Lending Act. These provisions include the exemption from the requirement to establish an escrow account for a higher-priced mortgage loan and the ability to originate balloon-payment qualified mortgages and balloon-payment high cost mortgages.

Regulation Z states that an area is “underserved” during a calendar year if, according to Home Mortgage Disclosure Act (HMDA) data for the preceding calendar year, it is a county in which no more than two creditors extended covered transactions secured by first liens on properties in the county five or more times. The Bureau previously interpreted how HMDA data would be used to determine which areas meet this standard using a method set forth in the commentary to Regulation Z. However, portions of this method have become obsolete because they rely on data elements that were modified or eliminated by certain 2015 amendments to the Bureau’s HMDA regulations, which became effective in 2018.

The interpretive rule describes the HMDA data that will instead be used in determining that an area is “underserved” for purposes of the standard described in Regulation Z. This interpretation supersedes the outdated methodology set forth in the commentary to Regulation Z.

The list of rural and underserved counties, using the HMDA data described in the interpretive rule, can be found on the Bureau’s website at https://www.consumerfinance.gov/policy-compliance/guidance/mortgage-resources/rural-and-underserved-counties-list/.

The interpretive rule can be found here: https://files.consumerfinance.gov/f/documents/cfpb_interpretive-rule_determining-underserved-areas-using-hmda-data.pdf .

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