The new rules are expected to take effect in Janaury and require banks and mortgage lenders to provide a “no-discount” loan that allows American consumers to more easily shop for and compare various loans through different lenders, The Street reports.
One of the provisions affords home buyers a lower mortgage interest rate when they pay discount points, which will ultimately reduce the monthly mortgage payment.
The CFPB is also trying to end the practice of mortgage lenders charging homebuyers exorbitant fees that are tied to the loan amount and can rise with the loan amount. Under the new rules, mortgage lenders are only allowed to charge a one-time, fixed and up-front origination fee.
CFPB Deputy Director Raj Date recently said that the mortgage industry has failed America, adding that “mortgage reform is appropriately front and center on the CFPB’s agenda,” The Street reports.
Date also said that the bureau advocates for a free and transparent mortgage marketplace.
“Markets don’t work well if both parties to a transaction don’t understand what they’re getting into,” Date said, according to The Street. “At the CFPB, we are already hard at work on this issue… The idea is for borrowers to have a better chance to actually understand the price and risk profile of their obligations, and that’s better for everyone involved.”
Date also said the agency has implemented “common-sense” rules for mortgage servicers to ensure greater transparency.
“Servicers should give borrowers better information about how much they owe every month; or maybe they should give an earlier heads-up that an adjustable rate payment is about to change; or maybe they should warn borrowers that they are going to be force-placed into a potentially expensive insurance policy,” Date said, The Street reports. “We’re just at the early stages of these particular rule-makings, but I’m optimistic that we can find a common-sense path forward.”