The Consumer Financial Protection Bureau will propose rules this summer that simplify mortgage points and fees to create greater transparency into originations.
The rules, expected to be finalize by January 2013, will make it clearer for consumers to understand mortgage costs and compare loans, allowing them to choose the best deal.
The CFPB is proposing a requirement that creditors reduce interest rates when consumers elect to pay discount points, which are fees — expressed as a percentage of the loan amount — paid by the consumer to the creditor at the time of loan origination in return for a lower interest rate. Discount points allow consumers to reduce their monthly loan payments.
Lenders must also offer consumers a no-discount-point loan option to make it easier for consumers to compare loan offers who have different combinations of points, fees, and interest rates. This, the bureau says, will enable homebuyers to better compare competing offers from different lenders.
The bureau hopes to ban brokerage firms and creditors from enforcing origination charges that vary with the size of the loan. Instead, they will be allowed to charge only flat origination fees.
“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.”
The new lending proposals arrive a month after the CFPB brought forth potential changes to how mortgage servicers interact with customers. The changes include clarifying billing statements and giving advance warning of interest-rate changes and so-called force-placed insurance. The bureau intends to finalize these rules by January 2013 as well.
In addition to regulating origination points and fees, the CFPB’s proposals address loan originators’ qualifications, compensation, character, criminal background checks and training requirements.