The Consumer Financial Protection Bureau's definition of a "rural" market needs to be more flexible according to state banking regulators.
"Under its proposed lending guidelines, the CFPB has essentially banned balloon mortgages, but it gave an exemption to community banks in rural or underserved markets. Many loans in those markets do not meet the criteria for being sold on the secondary market and therefore are held in banks' portfolios," writes American Banker's Alan Kline.
The CFPB, created under the 2010 Dodd-Frank reform law, is using an existing designation set by the U.S. Department of Agriculture to determine if an area is considered rural.
"These…rural requirements will have a significant effect on the responsible mortgage products offered in many states," John Ryan, the chief executive of the Conference of State Bank Supervisors, wrote in a March 26 letter.
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