The Consumer Financial Protection Bureau proposed rules on Friday that would enhance transparency and accountability in the mortgage origination industry.
The new rules, on which the agency is currently seeking comment and plans to finalize by January, will allow customers to more easily compare loans and understand mortgage costs.
“Consumers have a hard time comparing loans when they are dealing with a bewildering array of points and fees,” Richard Cordray, the director of the CFPB, said. “We want to provide consumers with clearer options and enable them to choose the loan that they believe is right for them.”
The 2010 Dodd-Frank Act limits points and fees associated with some mortgages. Without the CFPB rule, however, the legislation would prohibit payment of points and fees upfront for most mortgages, even if the consumer prefers a loan with more upfront costs and a lower interest rate.
The CFPB proposal would require lenders to make a fee- and point-free loan option available and require a reduction in interest rates if a consumer chooses to pay upfront fees or costs.
Additionally, the CFPB is considering making changes to existing rules that relate to the compensation and qualifications of a loan originator. The proposed changes would standardize qualification requirements for originators of all institutions, prohibit the use of steering incentives and prohibit the inclusion of mandatory arbitration clauses and the increase of loan amounts to cover insurance premiums.
The public has until Oct. 16 to comment on the rule, after which time the agency will review and analyze the comments before issuing the final rule set in January.