Tighter mortgage lending regulations proposed by the Consumer Financial Protection Bureau will limit the fees that consumers are required by lenders to pay when they buy a home. One of the biggest proposed changes is to do away with origination fees, or origination points, which are levied at the close of the deal.
The New York Times reports that the agency is determined to do away with origination fees, which are calculated depending on the value of the loan being take out. Many consumers confuse origination fees with discount points, which are usually charged when a borrower wants to secure a lower interest rate on the mortgage.
In addition to doing away with origination fees, the Consumer Financial Protection Bureau wants to implement a new rule that would force lenders to offer interest at a lower rate if the borrower decides to pay off discount points upfront. In such a case, lenders would be compelled to offer a loan option that doesn’t include any discount points.
The thinking behind the changes is to make life easier for consumers wishing to compare different loan offers, explained Richard Cordray:
“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.”
Before being formally submitted, the proposals will need to be scrutinized by a special panel and public review, which should take place this summer. The Consumer Financial Protection Bureau says that so long as the proposals are accepted, they should come into effect by January 2013.