Reuters: Regulatory News: CFPB eyeing rules mortgage loan costs

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CFPB eyeing rules mortgage loan costs May 10th 2012, 01:59 Wed May 9, 2012 9:59pm EDT * CFPB plans to release proposed rule this summer * Proposal would bar basing fees on size of loan * Discount points would have to go toward lowering interest rate WASHINGTON, May 9 (Reuters) - The U.S. consumer financial watchdog plans to release a proposal this summer that would put restrictions on the fees lenders can charge borrowers when they take out a home loan. The Consumer Financial Protection Bureau (CFPB) on Wednesday said the intent of the proposal is to make it easier for borrowers to understand loan terms and fees before committing to a mortgage lender. "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," CFPB Director Richard Cordray said in a statement. The proposal will be reviewed in the coming weeks by a small business advisory panel that will provide feedback to the agency. It is expected to be formally issued this summer with a final rule set to be in place by January. Under the proposal being considered, a lender would be required to reduce the interest rate on a home loan if a borrower pays upfront fees, known as discount points. The intent is to make sure these payments are not pocketed or used to cover costs involved with originating a loan instead of going toward lowering the interest rate. The lender would also have to offer the same loan amount without the points option so the borrower could compare what they would owe in monthly payments under both loan types. In addition, origination fees, which are used to cover administrative costs, that vary depending on the size of the loan would be banned under the proposal being considered. Instead, flat origination fees would be required. The consumer agency was created by the 2010 Dodd-Frank financial oversight law to oversee consumer financial products, such as credit cards and mortgages. The rule set to be proposed this summer would also set standards for the loan officers and mortgage brokers who originate loans, including requiring them to go through criminal background checks. Link this Share this Digg this Email Reprints

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