If you’re as busy as I am, asking you to weigh in on yet another request for comment from the Consumer Financial Protection Bureau is likely to be greeted with a well-understood “humph.”
Since the bureau’s inception, it’s been asking consumers for feedback on issues such as student loans, credit cards and how you’re affected by mandatory arbitration clauses.
Now the CFPB is soliciting your opinion on mortgage points and fees. The agency wants to make it easier for you to understand what you are paying so you can compare loan deals.
Here’s some of what the bureau is considering:
• A rule that makes sure consumers who pay upfront discount points at least get a certain minimum reduction of the interest rate in return. Often a borrower will pay a discount point, which is a fee expressed as a percentage of your loan, to get a lower interest rate. Typically, depending on the creditworthiness of the borrower, a discount point costs 1 percent of the total loan. So, for instance, on a $300,000 loan, each point would cost $3,000.
• A rule that lenders would have to offer consumers the option of a no-discount-point loan.
• Wouldn’t it be nice to have a flat origination fee? The bureau thinks so. Another proposal would no longer allow origination fees that vary with the size of the loan.
With the dizzying array of mortgage fees, it’s hard for people to compare offers. So the bureau wants to also get your feedback on a no-point, no-fee loan. However, the difference between the higher interest rate on a no-fee loan and the lower rate on the loan with upfront fees must be reasonably related to the amount of these fees.
In addition to mortgage fees, the bureau wants to address the qualifications and compensation for mortgage loan originators. The originators, who take applications from people who want to buy or refinance a home, include mortgage brokers and loan officers.
Mortgage fraud and predatory lending practices spurred many states to toughen the qualifications for mortgage loan originators. Yet loopholes still allowed many individuals to originate loans without being properly licensed or trained.
Several years ago, I investigated an operation that was using unlicensed mortgage brokers to arrange home loans that for many borrowers were inappropriate and overpriced given the loan applicants’ credit histories. Despite being banned from arranging loans in several states, the company continued to skirt the law. The salespeople for the company — many of whom had little if any experience as loan originators — were sent out to meet borrowers in their homes to conduct what they called kitchen-table presentations. At these presentations, borrowers were persuaded to refinance into high-fee mortgages.
Right now, under state and federal rules, loan originators operate under different sets of standards, depending on whether they work for a bank, thrift, mortgage brokerage or nonprofit organization, according to the CFPB. The agency is considering rules that would make all loan originators subject to the same standards. They would be screened for felony convictions and required to undergo certain training to ensure they understand the loans they are selling.
The bureau also wants to piggyback and implement rules similar to ones issued by the Federal Reserve Board that became effective last year. Those rules prohibit loan originators from directing consumers into higher-priced loans that would pay the originators more money.
The Fed effectively banned an industry practice that paid loan originators more money if a borrower accepted an interest rate higher than the rate required by the lender. Often borrowers weren’t aware they were unnecessarily agreeing to the higher interest rate and that it affected the total cost of their loans. Under the Fed’s final rule, a loan originator can’t receive compensation based on the interest rate or other loan terms.
The CFPB expects to announce its proposed rule changes this summer and finalize them by next January. So go to the agency’s website at www.ConsumerFinance.gov and read the overview of the proposals under consideration.
And just in case you need more motivation to respond, try this. Pull out your mortgage paperwork from the last time you purchased or refinanced a home. Look over all the fees you had to pay, most of which you probably hadn’t a clue what they were for. Then e-mail your thoughts on the proposed rules to MortgageLoanOrigination@cfpb.gov. The CFPB just might save you some grief in the future.
Readers can write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071, or email@example.com. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read previous Color of Money columns, go to postbusiness.com.