The Consumer Financial Protection Bureau Friday afternoon unveiled its latest proposal on loan officer compensation, providing more leeway for lenders to charge upfront points and points.
In moving in this direction, bureau officials also dropped the idea of requiring lenders and brokers to charge a flat origination fee, which raised objections from both industry and consumer groups.
In many cases, it is in the consumer’s best interest to pay points and fees upfront, a CFPB official told reporters—to reduce the overall cost of the mortgage over the life of the loan.
When upfront points and fees are charged, the lender or mortgage broker should offer a no-fee, no-point alternative so the consumer can see the differences and compare the costs of the two loans.
“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 bureau expects the wholesaler to provide mortgage brokers with the pricing for the no-fee, no-point alternative. But this no-fee, no-point offer is not required if the consumer is “unlikely to qualify for the zero-zero alternative,” the proposed rule says. (The CFPB refers to the no-fee, no-point alternative as a zero-zero alternative.)
The bureau is seeking comments on what approach to take in situations where the consumer does not qualify for a zero-zero alternative.
The comment period on the proposed rule ends Oct. 16. The bureau plans to finalize the rule in January.
