CBAI will be submitting two comment letters; this letter regarding the definition of

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Antony Evans
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Ms. Monica Jackson Office of the Executive Secretary Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Re: Amendments Relating to Small Creditors and Rural and Underserved

1 Ms. Monica Jackson Office of the Executive Secretary Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC Re: Amendments Relating to Small Creditors and Rural and Underserved Areas Under the Truth in Lending Act (Regulation Z) Docket No. CFPB and RIN 3170-AA43 Dear Ms. Jackson: The Community Bankers Association of Illinois ( CBAI ), which represents approximately 380 Illinois community banks and thrifts, appreciates the opportunity to provide our observations and recommendations regarding the Consumer Financial Protection Bureau s ( CFPB or Bureau ) proposed amendments ( Proposed Amendments ) to certain mortgage rules issued in 2013, revising the Bureau s definitions of small creditor, and rural and underserved areas, for purposes of special provisions and exemptions under the CFPB s ability to repay ( ATR ), qualified mortgage ( QM ) underwriting requirements, and escrow requirements for higherpriced mortgage loans ( HPML ). The Bureau is issuing these Proposed Amendments pursuant to its authority under the Dodd-Frank Act ( Dodd-Frank ) and Truth in Lending Act ( TILA ). CBAI will be submitting two comment letters; this letter regarding the definition of The Community Bankers Association of Illinois (CBAI) is dedicated to exclusively representing the interests of Illinois community banks (and many Illinois thrifts) through effective advocacy, outstanding education and high quality products and services. CBAI s 380 members hold over $72 billion in assets, operate in 860 locations statewide and lend to consumers, small businesses and the agricultural community. For more information please visit

2 Page 2 underserved areas and a second letter regarding the proposed definitions of small creditor and rural areas. The Bureau has been granted broad authority under the Dodd-Frank section of TILA which authorizes the Bureau to prescribe residential mortgage rules and that such rules may contain additional requirements, provisions, classifications, definitions, exceptions, revisions, additions/subtractions and adjustments as, in the judgment of the Bureau, are appropriate, necessary and proper to effectuate the purposes of TILA. Based on this broad authority the Bureau created and defined a small creditor (i.e., community banks and thrifts) exemption and exemptions for rural and underserved areas. CBAI recommends that all community bank and thrift loans held in portfolio for the life of the loan, including balloon payment loans, in all geographic areas, should receive automatic QM status and an automatic exemption from escrow requirements for HPMLs. If the Bureau chooses not to implement our recommendation, then in the alternative, CBAI supports a special accommodation for small creditors which provide these institutions with greater flexibility in serving the needs of their customers, particularly those in rural and underserved areas. In the Proposed Amendments, the Bureau revised the definitions of small creditor and rural areas but unfortunately chose not to revise the definition of underserved areas at this time - believing it is appropriately defined as areas in which the withdrawal of a creditor from the market could leave no meaningful competition for consumer mortgage business. CBAI believes the Bureau has mistakenly chosen a lack of competitors as the sole definitional standard to designate areas as underserved and is missing a valuable opportunity to better serve consumers and communities by not modifying the definition to incorporate additional characteristics of an area. In its comment letter of February 22, 2013, and again on September 22, 2014, CBAI urged the CFPB to consider more than simply the number of competitors in a county in defining an area as underserved and to expand the definition to include economically challenged areas. Many of these areas were devastated by the financial crisis and are being served by nontraditional lenders or those operating in the deep shadows. These lenders have higher costs/risks to consumers, and are not traditional Main Street lenders. Unfortunately, given the current definition, and the Bureau s decision not to revise the definition of underserved areas at this time, areas which

3 Page 3 are economically challenged will not qualify as underserved yet the CBAI believes they truly are. Community banks and thrifts have an outstanding record of responsibly serving all of their customers and communities which will benefit from these institutions expanding their residential mortgage lending efforts. The Bureau recognized the importance of these institutions by highlighting in the Proposed Amendments the role they play in providing mortgage credit to consumers, their (versus larger institutions) better assessing ability to repay, a lending model based on maintaining ongoing relationships with their customers, having a more comprehensive understanding of the financial circumstances of their customers, and a more in-depth understanding of the economic and other particular circumstances of their communities. As with the definition of rural areas, there are dozens of different definitions of economically challenged areas which are used by financial industry regulators and Federal Agencies. Illinois community banks and thrifts are most familiar with the following: low- and moderate-income census tracts for CRA purposes, and distressed nonmetropolitan middle-income geographies and underserved nonmetropolitan middle-income geographies for FFIEC purposes. Other economically challenged areas in Illinois and around the country, although this is not a definitive list, include: counties with high poverty rates, qualified, distressed or highly distressed census tracts for New Market Tax Credit Programs, high migration rural counties, designated distressed areas by the Appalachian Regional Commission or the Delta Regional Authority,

4 Page 4 Federally designated Empowerment Zones, Enterprise Zones and Communities, Renewal Communities, U. S. SBA-designated HUB Zones, areas encompassed by a HOPE VI redevelopment plan, Federally designated Native American or Alaska Native areas, Hawaiian Homelands, or redevelopment areas by the appropriate Tribal or other authority, medically underserved areas, state or local tax-incremental financing districts, River Edge Redevelopment Zones, and counties for which the Federal Emergency Management Agency (FEMA) has issued a "major disaster declaration" since July 15, CBAI again urges the Bureau to expand the definition of underserved areas, to include those identified above, which is completely within the discretion of the CFPB under the Dodd- Frank/TILA, while remaining consistent with providing a reasonable exception in the Ability to Repay requirements and Qualified Mortgage rules under the Truth in Lending Act (Reg Z). Community banks and thrifts should be encouraged to serve economically challenged areas, and these communities and consumers will benefit from this special accommodation. If you have any questions or require any additional information, please contact me at

5 Page or at davids@cbai.com. Sincerely, /s/ David G. Schroeder Vice President Federal Governmental Relations Community Bankers Association of Illinois 901 Community Drive Springfield, Illinois 62703

Re: Amendments to the 2013 Escrows Final Rule under the Truth in Lending Act. Regulation Z [Docket No. CFPB ]

May 3, 2013 Monica Jackson Office of the Executive Secretary Consumer Financial Protection Bureau 1700 G Street, NW Washington, DC 20552 Re: Amendments to the 2013 Escrows Final Rule under the Truth in