The Consumer Financial Protection Bureau has proposed rules that would dictate to mortgage lenders the type of loans they would be required to make available to borrowers, in an effort to help consumers more easily compare loan offers.
The proposed rules, on which the CFPB is seeking comment through Oct. 16 and would finalize by January, would require lenders to make available to borrowers a mortgage without discount points or origination points or fees, unless the borrower is unlikely to qualify for such a loan.
The no points or fees option would help consumers decide whether they would receive an adequate reduction in monthly loan payments in exchange for the choice of making upfront payments, the bureau said Friday.
“Consumers have a hard time comparing loans when they are dealing with a bewildering array of points and fees,” said CFPB Director Richard Cordray. “We want to provide consumers with clearer options and enable them to choose the loan that they believe is right for them.”
The proposed rule would also require lenders to provide a minimum interest rate reduction when borrowers pay upfront points or fees.
The CFPB is proposing changes that would require mortgage loan originators to meet character, fitness and financial responsibility standards, pass criminal background checks and meet new training requirements.
The proposed change would bring consistency to originator standards, which currently are subject to different rules depending upon the type of lending institution, the CFPB said.
Finally, the proposed rules would implement Dodd-Frank Act provisions that ban paying loan originators based upon interest rates or loan terms, and prohibit including mandatory arbitration clauses in loan documents and increasing loan amounts to cover credit insurance premiums for both mortgages and home equity loans.