The Consumer Financial Protection Bureau finalized rules for high-cost mortgages Thursday, implementing guidelines first outlined in the Dodd-Frank Act.  

Mortgages qualified as high-cost can no longer feature balloon payments, although there are a few exceptions for loans made by creditors serving rural or underserved areas. The guidelines also ban penalties for paying off high-cost loans early.

The rule also bans fees for modifying loans, caps late fees at 4% of the payment past due, prevents closing costs from being rolled into the loan amount and restricts the charging of fees when a consumer asks for a payoff statement, the CFPB said in a statement.

The high-cost loan guidelines also end the practice of encouraging a homeowner to default just to obtain refinancing options on a high-cost mortgage.

"To preserve access to credit, the rule exempts loans made by certain creditors that operate predominantly in rural or underserved areas, as long as certain other criteria are met," the CFPB said when discussing escrow account guidelines.  

The CFPB also outlined a rule requiring the establishment of escrow accounts for a minimum of five years when dealing with certain higher-priced loans. The minimum five-year requirement goes well beyond the 1-year escrow account period required by law today.

"Addressing problems in the mortgage market is critical to helping our economy recover," said CFPB director Richard Cordray. "Today's changes will better help consumers to understand the real costs of owning a home while protecting them from harmful practices that can trap them into high-cost mortgages."

The new guidelines also require consumers to obtain housing counseling before taking out a high-cost mortgage. To help borrowers make better choices, the CFPB implemented a Dodd-Frank rule, which requires lenders to offer consumers a list of homeownership counseling agencies when shopping for a high-cost home loan.