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Wednesday, May 22, 2013

Consumer Financial Protection Bureau narrowly defines 'rural,' which may tighten credit for farmers

Some farmers in Ohio, and probably most other states, may not be able to get certain types of mortgages because "They don’t live in counties defined by regulators as 'rural,' even if they’re surrounded by cows, pigs, chickens or soybeans," reports Stephen Koff, Washington correspondent for The Plain Dealer of Cleveland. The list for your state is here.

The Consumer Financial Protection Bureau last week finalized its list of "rural counties" for the purpose of mortgage lending "and left off the majority of Ohio farm counties," Koff writes. "The rural label packs a federal regulatory punch, especially as it pertains to balloon mortgages, or short-term mortgages that farmers often obtain."

"Of the state’s 88 counties, 44 are normally considered rural for census and state government purposes," Koff reports. "But for mortgage purposes, the CFPB only counted 20, leaving off places that proudly proclaim their status as boondocks country, such as Van Wert County, Wayne, Huron, and Auglaize."

"That has a real adverse, practical effect in a lot of Ohio communities," Jeffrey Quayle, senior vice president at the Ohio Bankers League, told Koff. Without the rural designation, "Banks there say they will be much less willing to issue balloon mortgages, or three- to five-year property loans that require repayment or refinancing at the end of the term," Koff writes. "That’s because a CFPB rule starting next January will restrict mortgages associated with steep payoff requirements. Balloon mortgages sought by farmers who cannot get traditional mortgages are among them."

"The CFPB says it wants to end predatory loan practices that led too many home buyers to foreclosure in recent years," Koff reports. "But community bankers serving small towns and rural counties say their loans did not cause the mortgage meltdown, and that the new regulations will unfairly hurt their future borrowers. The community banks hold all the risk because they do not sell these loans to third-party investors." (Read more)

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