WASHINGTON Jan 18 New rules that aim to
eliminate incentives for mortgage brokers to push unsafe loans
were announced on Friday by U.S. consumer regulators, but they
backed away from a rule that would have required lenders to
offer borrowers a loan option without extra fees.
Mortgages carry different combinations of points and fees
that borrowers can pay to reduce the interest rate on a loan.
The U.S. Consumer Financial Protection Bureau had proposed
to permit mortgages to carry such upfront charges as long as
lenders also gave consumers the option of a loan with no points
Instead of finalizing that plan, the bureau will study how
the raft of new rules it has put forth in recent weeks affects
the mortgage market before issuing any new regulations for
upfront points and fees, CFPB officials said on Friday.
"Once our new mortgage rules take effect, we will study how
they are affecting consumer understanding and decision-making
about upfront origination charges, and we will consider further
how to protect consumers in this area," CFPB director Richard
Cordray told reporters on Friday.
The 2010 Dodd-Frank financial oversight law, which created
the consumer bureau, would have banned lenders from attaching
points and fees to most loans, but it gave the CFPB leeway on
Under the CFPB's original proposal, mortgage brokers that
offered loans that allowed borrowers to lower their interest
rates by paying points and fees would also have to offer a loan
with no such extra payments.
But bank groups said the plan could cause headaches for
lenders. The CFPB decided not to put it in place after
determining there could also be problems for consumers.
For example, officials said offering both options
side-by-side could lead borrowers to believe they should choose
the mortgage with no upfront charges, even though paying fees in
exchange for a lower interest rate could be the better choice
for some borrowers.
Under the current rules, lenders will be able to continue
offering loans with such upfront charges while the bureau
studies the issue, CFPB officials said.
The CFPB did announce final regulations for how loan
officers and mortgage brokers are paid, which it also proposed
During the years leading up to the 2007-2009 U.S. financial
crisis, loan officers and brokers often had financial incentives
to lead consumers to loans with unfavorable terms, the consumer
Under the rules announced on Friday, mortgage brokers and
loan officers would be prohibited from being paid more when
consumers take on loans with higher interest rates or fees.
The rules also block loan originators from being paid by
both the consumer and the creditor, and they require brokers and
loan officers to pass character reviews and meet training