CFPB Releases LO Comp Rule Proposal


CFPB Releases LO Comp Rule ProposalOn Friday, the Consumer Financial Protection Bureau proposed new rules regarding mortgage originations, intending to make the loan comparison process simpler for consumers to understand.CFPB Releases LO Comp Rule ProposalOn Friday, the Consumer Financial Protection Bureau proposed new rules regarding mortgage originations, intending to make the loan comparison process simpler for consumers to understand.

On Friday, the Consumer Financial Protection Bureau proposed new rules regarding mortgage originations, intending to make the loan comparison process simpler for consumers to understand.

The regulations modify the limitations on points and fees which were laid out in the Dodd-Frank Act that might have actually kept consumers from paying upfront fees if they desired.

If consumers would qualify for such a loan, the new CFPB proposal would require lenders to give potential borrowers a loan option without any discount points or origination points or fees. That no-fee proposal, which the CFPB is calling a "zero-zero" loan, would make it easier for borrowers to weigh the benefits of paying points.

The proposal would also require lenders to give a reduced interest rate when consumers do choose to pay upfront fees. The agency is asking for public comment on whether it should establish a "bona fide" requirement that would set a minimum interest rate reduction consumers could receive for paying points or fees.

"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."

Mortgage Loan Originator Requirements

Specific to loan offer qualifications and compensation, the agency laid out three additional points.

Minimum Qualifications for Training and Character - All loan originators would be required to meet character, fitness and financial responsibility guidelines, pass a criminal background check and complete training courses equivalent to the Secure and Fair Enforcement for Mortgage Licensing Act.
Loan Steering Prohibited - The regulations prohibit loan originators from pushing consumers into higher-priced loans to enhance their own compensation. However, loan originators would be able to reduce their compensation to make up for unanticipated increases in closing costs. Originators could also receive bonuses in some situations if they were not based on specific loan terms.
Restrict Arbitration Clauses and Credit Insurance Financing - The rule also incorporates Dodd-Frank rules in prohibiting mandatory arbitration or requiring higher loan amounts to cover credit insurance premiums.

A summary of the proposed rules can be found here.

The rules are open for public comment through October 16, 2012. The final rules are expected to be released in January 2013.

 


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