Mortgage Points and Fees

The Consumer Financial Protection Bureau (CFPB) on May 9, 2012 outlined proposed rules to simplify mortgage points and fees to bring more transparency to the mortgage loan origination market. The CFPB expects to finalize the rules by January 2013.  The rules are intended to make it easier for consumers to understand mortgage costs and compare loans so they can decide on the best transaction.

Many people have had to file bankruptcy as a result of not being able to make their mortgage payments.  Some of these people blame the banks for putting them in the financial predicaments and have sued their lenders while going through bankruptcy.

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) places restrictions on the points and fees offered with most mortgages. The CFPB proposals would require:

  • Interest-Rate Reduction When Consumers Decide to Pay Discount Points – Discount points are fees.  The fees are calculated as a percentage of the loan amount.  The fee is paid by the consumer to the creditor at the time of loan origination in exchange for a lower interest rate. Lenders convince consumers to pay for discount points by telling them they can reduce the monthly loan payments. If the discount points are “bona fide,” consumers receive a certain minimum reduction of the interest rate in exchange for paying the points.
  • Lenders Offer Consumers a No-Discount-Point Loan Option – A no-discount-point loan would enable the consumer to compare competing offers from different lenders.
  • No Origination Charges that Vary with the Size of the Loan – Not allow brokerage firms and creditors to charge origination fees that vary with the size of the loan. Consumers sometimes confuse origination fees with discount points. CFPB is considering allowing brokerage firms and creditors to charge only flat origination fees.

CFPB is also addressing mortgage loan originators’ qualifications. Mortgage loan originators such as mortgage brokers and loaners are those who take mortgage loan applications from homebuyers or homeowners who refinance a mortgage. The CFPB is considering implementing Dodd-Frank requirements that all loan originators be qualified. The proposal is intended to help consumers be confident that originators are ethical and knowledgeable.

The CFPB plans to engage with consumers and industry, including a Small Business Review Panel when formulating the proposed rules.

These improvements to the mortgage loan origination market might assist in ensuring people make good loan decisions so they are able to repay their loans and not have to resort to bankruptcy to keep their homes or get out of debt.

Contact an experienced New York bankruptcy attorney for questions on how to save your home or get out of debt through bankruptcy.