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CFPB could require option of no-point no-fee mortgages
WASHINGTON (8/20/12)--After floating the concepts earlier this year, the Consumer Financial Protection Bureau (CFPB) last Friday took the next step and issued a 369-page proposal on new loan origination standards and compensation rules for mortgage loan officers.

The CFPB proposal would require mortgage lenders to make no-point, no-fee mortgage loans available to their prospective borrowers, unless the borrower is unlikely to qualify for such a loan. This option would help consumers who are buying or refinancing a home compare their various loan offers, the CFPB said.

Lenders would also need to provide mortgage borrowers who pay upfront points or fees on their mortgages with a certain minimum interest rate reduction.

The CFPB noted that the Dodd-Frank Wall Street Reform Act places certain restrictions on the points and fees offered with most mortgages as well as on the qualification and compensation of loan originators. The act would prohibit payment of upfront points and fees for most mortgages, absent this CFPB rulemaking.

"Consumers have a hard time comparing loans when they are dealing with a bewildering array of points and fees," CFPB Director Richard Cordray said. The agency wants to "provide consumers with clearer options and enable them to choose the loan that they believe is right for them," he added.

The agency's proposed mortgage loan originator qualification and screening standards would replace varied state and federal Secure and Fair Enforcement for Mortgage Licensing Act standards for loan originators working at credit unions, banks, thrifts, mortgage brokerage firms and nonprofit organizations with a single federal standard.

Under the CFPB proposal, these loan originators would be subject to the same character, fitness and financial responsibility requirements, and be screened for felony convictions. They also would be required to take the same training courses.

The proposal would also clarify portions of the Dodd-Frank Act that prohibit payment of steering incentives to mortgage loan originators.

Portions of the Dodd-Frank Act that prohibit lenders from adding mandatory arbitration clauses and increasing loan amounts to cover credit insurance premiums would be implemented under the proposal, the CFPB said.

The Credit Union National Association (CUNA) is still reviewing this lengthy proposed rule. "While we initially see several positive elements--such as the CFPB's decision not to expand the certification test to cover registered mortgage loan origination employees--we remain concerned about the overall impact of this rule on credit unions. We will be analyzing the rule carefully with these concerns in mind," CUNA Deputy General Counsel Mary Dunn said.

The proposal will remain open for public comment until Oct. 16. A final version of the proposal will be released in January, the CFPB said.
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