The Consumer Financial Protection Bureau has issued a proposed rule and request for comment regarding a temporary delay in the June 1 effective date of a final rule provision that would prohibit the financing of credit insurance into a mortgage.
The provision, included in the CFPB's loan originator compensation rule finalized in January, caused confusion among mortgage lenders because the rule's vague language could potentially be applied to transactions other than the single-premium credit insurance premium it was intended to address.
"The prohibition applies to credit life, credit disability, credit unemployment, credit property insurance, and other similar products," the CFPB said Wednesday in the proposal. "The same provision states, however, that the prohibition does not apply to credit insurance for which premiums or fees are calculated and paid in full on a monthly basis or to credit unemployment insurance for which the premiums are reasonable, the creditor receives no compensation, and the premiums are paid pursuant to a separate insurance contract and are not paid to the creditor's affiliate."
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