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Consumer Agency Begins Work on Mortgage Point Rules

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The Consumer Financial Protection Bureau (CFPB) gave consumers and lenders a first look last week at a number of new mortgage regulations it could be proposing officially later this year.

Mortgage points are the main target of the new rules, and the CFPB will now talk to consumers and industry representatives in addition to assembling a small business panel to further define the rules before the agency formally proposes them. (Want to learn more about points? Here’s a quick rundown.)

“Mortgages today often come with so many different types of fees and points that it can be hard to compare offers,” said CFPB Director Richard Cordray in a press release Wednesday. “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.”

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Specifically, the CFPB is mulling several possible rules for how mortgage points are presented to consumers. The first is a regulation of discount points, which are essentially fees that consumers pay to have their mortgage interest rates reduced. The CFPB is considering whether to make discount points standardized throughout the industry, so there would be a minimum interest-rate reduction that lenders would be required to give borrowers when borrowers pay a discount point.

Free Credit Check & MonitoringAnother proposal is being considered to eliminate origination fees often called “origination points,” which vary based on the size of the loan and can often be confused with discount points, according to the CFPB. For borrowers, this means that there would be flat origination fees only.

The CFPB is also discussing a rule that could require lenders to offer a no-points loan to make it easier for consumers to compare different loans from different lenders.
“It would be great for mortgage shoppers to be able to compare offers from different lenders,” Credit.com expert Gerri Detweiler says. “Comparing similar loans—loans with no discount points to other loans with no discount points, as the CFPB has proposed—may help. At the same time, though, trying to craft rules in the complex market of mortgages, where prices can change from one moment to the next, is going to be a challenge.”
Detweiler went on to say that consumers will still need to shop carefully and work with trusted lenders.

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Points aren’t the only target of the new proposals being considered. Loan originators could possibly be seeing new regulation from the federal level that would standardize the multiple and varying state and federal regulations currently in place that determine who is qualified to be a loan originator.

If you’re interested in giving the CFPB your comments or ideas about the rules, the agency asks that you email MortgageLoanOrigination@cfpb.gov.

Image: 401kcalculator.org, via Flickr

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