CFPB Proposes Rules to Bring Accountability to Mortgage Market
by Anna DeSimone
President
On August 17, 2012 the Consumer Financial Protection Bureau (CFPB) proposed rules to bring greater accountability to the mortgage loan origination market. The rules are intended to help consumers understand mortgage costs and comparison shop. The CFPB is seeking public comment on a proposal that would:
Require Lenders to offer loans with a no-point, no-fee option
Under the proposed rule, creditors would have to make available to consumers a loan without discount points or origination points or fees, unless the consumers are unlikely to qualify for such a loan. These options would enable a consumer buying or refinancing a home to better compare competing offers from different creditors, better able to compare loan offers from a particular creditor, and decide whether they would receive an adequate reduction in monthly loan payments in exchange for the choice of making upfront payments.
Require an interest-rate reduction when consumers elect to pay upfront points or fees
The CFPB is seeking comment on proposals to require that any upfront payment, whether it is a point or a fee, must be “bona fide,” which means that consumers must receive at least a certain minimum reduction of the interest rate in return for paying the point or fee.
In addition to regulating upfront points and fees, the CFPB is proposing changes to existing rules governing mortgage loan originators’ qualifications and compensation. Mortgage loan originators, who take mortgage loan applications from consumers seeking to buy a home or refinance a mortgage, include mortgage brokers and loan officers. The rules the CFPB is proposing would:
Set qualification and screening standards
The CFPB is proposing rules to implement Dodd-Frank Act requirements that all loan originators be qualified. The proposal would help level the playing field for different types of loan originators so consumers could be confident that originators are ethical and knowledgeable. The proposed rule includes:
- Character and Fitness Requirements: All loan originators would be subject to the same standards for character, fitness, and financial responsibility;
- Criminal Background Checks: Loan originators would be screened for felony convictions; and
- Training Requirements: Loan originators would be required to undertake training to ensure they have the knowledge necessary for the types of loans they originate.
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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