Consumer bureau plans new rules on mortgage fees

Proposals from the Consumer Financial Protection Bureau include requiring flat origination fees so that consumers could more easily compare them.

The Consumer Financial Protection Bureau is considering new rules on mortgage fees, including banning origination charges based on the size of the loan.
The agency, which said the new rules would make it easier for potential home buyers to understand and compare mortgages, also is proposing that brokers and loan officers undergo criminal background checks and go through special training.

The preliminary proposals, unveiled Wednesday, also would prohibit incentives to steer consumers into higher priced loans.
“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,” said Richard Cordray, the agency’s director.

The 2010 financial reform law that created the consumer bureau mandated that it address mortgage fees and qualifications of mortgage originators.
One proposal the agency is considering would require flat origination fees so that consumers could more easily compare mortgages. The amount of work required to originate a mortgage doesn’t vary with its size, so agency officials argued that the origination fee shouldn’t either.

The agency also wants to make changes to discount points — a form of pre-paid interest — to prevent consumers from being misled about how much of a break they are receiving.

There are a couple of proposals regarding points. One would require that they come with at least a certain minium reduction in a loan’s interest rate. Another would require lenders and brokers to offer consumers a loan without discount points to enable better comparison shopping.

In addition, the bureau is working on standardized qualifications and screening procedures for people who originate mortgages. The goal is to help level the playing field between employees of banks, savings and loans, nonprofit groups and mortgage brokerages.

The agency is seeking feedback from the public and the mortgage industry before making formal proposals this summer. Comments can be emailed to
Jim Puzzanghera

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