The Consumer Financial Protection Bureau (CFPB) has outlined rules that it is considering to simplify mortgage points and fees and bring greater transparency to the mortgage loan origination market. The CFPB expects to propose the rules this summer and finalize them by Jan. 21, 2013. The CFPB is considering proposals that would:
►Ban origination charges that vary with the size of the loan: Brokerage firms and creditors would no longer be allowed to charge origination fees that vary with the size of the loan. Under the rules considered by the CFPB, brokerage firms and creditors would be allowed to charge only flat origination fees.
►Require an interest-rate reduction when consumers elect to pay discount points: The CFPB is considering proposals to require that any discount point 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.
►Require lenders to offer consumers a no-discount-point loan option: Under the CFPB's proposal, consumers must also be offered a no-discount-point loan.
►Set qualification and screening standards: Under state law and the federal Secure and Fair Enforcement (SAFE) Act, loan originators (LOs) currently have to meet different sets of standards, depending on whether they work for a bank, thrift, mortgage brokerage, or non-profit organization.
►Set up character and fitness requirements: All LOs would be subject to the same standards for character, fitness and financial responsibility through criminal background checks (screening LOs for felony convictions), and training requirements where LOs woudl be required to meet educational standards on the products they offer.
►Prohibit paying steering incentives to LOs: The proposals considered would ban the practice of varying LO compensation based on interest rates or certain other loan terms. The CFPB’s proposal would also clarify certain issues in the existing rule that have created industry confusion.
“Mortgages today often come with so many different types of fees and points that it can be hard to compare offers,” said CFPB Director Richard Cordray. “We want to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them.”
In developing a formal proposal, the CFPB plans to engage with consumers and industry, including a Small Business Review Panel that will meet with a group of representatives of the small financial services providers that would be directly affected by the proposals under consideration. The documents that the CFPB will be sharing with these small providers include an overview of the proposals under consideration and a list of questions for input. The small provider representatives will provide feedback to the panel on the proposals the CFPB is considering and suggest alternatives. The Panel will issue a report summarizing this feedback, which the CFPB will consider when formulating the proposed rules.
The public can e-mail the CFPB their comments and feedback at [email protected]