U.S. consumer agency proposes new rules for mortgage points, fees

(Reuters) - The U.S. consumer protection agency on Friday proposed new rules for fees often attached to mortgages, as well as new restrictions on mortgage loan originators, in an effort to help consumers compare loan options.

Mortgages can carry different combinations of fees and points, which are payments borrowers can make to reduce the interest rate on a loan. This can make it difficult to compare competing loans and pick the best deal, the Consumer Financial Protection Bureau said.

Under the proposed rules, creditors could continue offering such loans as long as they also provide consumers a loan option with no fees or points attached.

"We want to provide consumers with clearer options and enable them to choose the loan that they believe is right for them," CFPB Director Richard Cordray said in a statement. The CFPB said it expects to issue final rules in January.

The new rules create an exemption to a provision in the 2010 Dodd-Frank financial oversight law that banned the imposition of points and fees for most loans. Under the exemption, the practice could continue as long as borrowers also have the option of taking out a mortgage with no points or fees attached.

Regulators are seeking comments on how to ensure that borrowers who choose loans with upfront payments such as points and fees receive a fair reduction of monthly payments in return.

The mortgage industry came under scrutiny after reckless lending led borrowers to take on loans they could not afford, contributing to the 2007-2009 U.S. financial crisis. The Dodd-Frank law created the consumer watchdog in response to the crisis and gave it authority to oversee the mortgage market.

Loan officers and brokers often had financial incentives to steer consumers toward loans with unfavorable terms, the CFPB said. In addition, qualification standards differ depending on whether loan originators work for banks, thrifts, mortgage brokerages or non-profit groups.

The CFPB said its new rules would address these problems.

Once finalized, the rules would implement a ban on the industry practice of using loan interest rates to determine compensation for loan originators. They also would set across-the-board qualification standards for loan originators.

(Reporting by Emily Stephenson; Editing by Dan Grebler)