The Consumer Financial Protection Bureau proposed a rule Monday that would ban and limit fees on high-cost mortgages while also banning balloon payments and stopping prepayment penalties on certain loans.
If the rule is implemented in its current form, it will essentially serve as the official congressional extension of the Home Ownership Equity Protection Act, or HOEPA.
The proposal, which is available for the public to review and provide comment through Sept. 7, essentially bans balloon payments and prepayment penalties on high-cost loans that are deemed as such based on interest rates, points, fees and prepayment penalties.
In addition, the proposal would ban fees for modifying loans, cap late fees, restrict the charging of fees when consumers request a payoff statement and require housing counseling for borrowers who take out qualifying high-cost mortgages.
First-time borrowers who shop for loans allowing negative amortization also would be required to go through Truth-In-Lending Act counseling requirements.
The consumer agency will review the comments before issuing its final rules in January of next year.