The Consumer Financial Protection Bureau has issued a proposedrule and request for comment regarding a temporary delay in theJune 1 effective date of a final rule provision that would prohibitthe financing of credit insurance into a mortgage.

The provision, included in the CFPB's loan originatorcompensation rule finalized in January, caused confusion among mortgage lendersbecause the rule's vague language could potentially be applied totransactions other than the single-premium credit insurance premiumit was intended to address.

“The prohibition applies to credit life, credit disability,credit unemployment, credit property insurance, and other similarproducts,” the CFPB said Wednesday in the proposal. “The sameprovision states, however, that the prohibition does not apply tocredit insurance for which premiums or fees are calculated and paidin full on a monthly basis or to credit unemployment insurance forwhich the premiums are reasonable, the creditor receives nocompensation, and the premiums are paid pursuant to a separateinsurance contract and are not paid to the creditor'saffiliate.”

The CFPB said it did not receive comments regarding theprovision when it was first proposed, and anticipated it would notrequire clarification. Additionally, consumer groups urged thebureau to give the provision an early effective date.

However, since the final rule was published, the CFPB said“industry stakeholders” have communicated concerns that theregulation's text and preamble created “substantial uncertainty”about whether, and under what circumstances, premiums for certaincredit insurance products can be charged in connection with acredit transaction secured by a dwelling.

The CFPB will give commenters 15 days to submit suggestionsregarding ways it could clarify the rule's language.

CUNA, which requested the delay in April, said it has asked the CFPB toextend the provision's effective date until January 2014, whenother mortgage compensation provisions are scheduled to go intoeffect.

In an April 19 letter to CFPB Director Richard Cordrayrequesting the delay, CUNA President/CEO Bill Cheney said thepractice of charging members monthly for insurance products isfairly common, because credit union data processing systems areprogramed to add the charges.

“It will be quite costly for the necessary changes to be made byJune,” he said.