The Consumer Financial Protection Bureau is considering the use of its special regulatory powers to blunt certain provisions in the Dodd-Frank Act that would ban consumers from paying upfront fees -- such as discount points or origination fees, when the loan officer is being compensated on the back-end by the buyer or table funder.
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But the bureau is considering only a “partial exemption” and wants to place conditions on discount points, and origination points and fees.
These points and fees are “confusing” to consumers, the CFPB proposal says, and it is difficult to tell if they are getting anything of value in return for their money.
To that end, the new bureau might require lenders and mortgage brokers to show consumers the full interest rate on a no-discount point loan so they can tell if they are getting a real reduction in their interest rate when they pay discount points.
“Mortgages today often come with so many different types of fees and points that it is hard to compare offers,” CFPB director Richard Cordray said. “We want to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them.”
On origination fees, the bureau is proposing that lenders charge a “flat” processing fee that does not vary based on the loan size. The flat fee proposal caused panic among LOs and brokers Wednesday afternoon when CFPB officials first described it during a briefing for industry officials.
In a briefing for reporters, a CFPB official noted the rules would allow banks, mortgage companies and brokerages to recover their origination costs.
The mortgage proposal also will clarify certain issues in the Federal Reserve Board’s loan officer compensation rule that has “created industry confusion,” the CFPB said in a press release.
The bureau is planning to convene a small business review panel soon, allowing CFPB officials to get feedback from creditors and brokers on the impact of their proposals.
