The Consumer Financial Protection Bureau (CFPB) has announced its latest proposal to bring greater transparency to the mortgage marketplace and simplify the understanding of mortgage costs and comparison shopping for consumers. The CFPB is seeking comment on and will finalize these rules by January 2013.
Click here to view the CFPB's latest round of proposed rules.
Highlighted among the rules set forth by the CFPB:
►Require lenders to make a no-point, no-fee option available: This option would enable prospective homebuyers or those seeking to refinance a simpler method of comparing varying offers, making it simpler to compare offers from a particular creditor, and deciding whether they would receive an adequate reduction in monthly loan payments in exchange for the choice of making upfront payments.
►The prohibition of steering incentives towards LOs: The CFPB’s rule would implement the Dodd-Frank Act provision and clarify certain issues in the existing rule that have created industry confusion.
►Require an interest-rate reduction when consumers elect to pay upfront points or fees: The CFPB is seeking comment on proposals to require that any upfront payment, whether it is a point or a fee, must be “bona fide,” which means that consumers must receive at least a certain minimum reduction of the interest rate in return for paying the point or fee.
In addition to regulating upfront points and fees, the CFPB is proposing changes to existing rules governing mortgage loan originators’ qualifications and compensation.
►Set screening standards: The CFPB is proposing rules to implement Dodd-Frank Act requirements that all loan originators be qualified. The proposal would help level the playing field for different types of loan originators so consumers could be confident that originators are ethical and knowledgeable. The proposed rule includes: Character and fitness requirements, criminal background checks; and training requirements.
►Restrictions on arbitration clauses and financing of credit insurance: The proposal implements Dodd-Frank Act provisions that, for both mortgage and home equity loans, prohibit including mandatory arbitration clauses in loan documents and increasing loan amounts to cover credit insurance premiums.
“Consumers have a hard time comparing loans when they are dealing with a bewildering array of points and fees,” said CFPB Director Richard Cordray. “We want to provide consumers with clearer options and enable them to choose the loan that they believe is right for them.”
The CFPB has engaged with consumers and industry, including through a Small Business Review Panel, and used this feedback in developing the proposed rules. The CFPB believes that this proposal, if adopted, would promote stability in the mortgage market, which would otherwise face radical restructuring of the current pricing structure in order to comply with Dodd-Frank.
“The CFPB has released a number of rules in the last few weeks that, if finalized properly over time, will go a long way toward proving needed clarity and certainty to lenders and consumers, helping increase access to credit for qualified borrowers, stabilizing and growing the housing market," said David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA). "We look forward to reviewing the proposed rule more thoroughly over the coming weeks and providing comprehensive comments."
The public will have 60 days, until Oct. 16, 2012, to review and provide comments on the proposed rules. The CFPB will review and analyze the comments before issuing final rules in January of 2013.
