The government's consumer-finance watchdog is weighing an overhaul of the fees consumers pay to obtain mortgages.
Regulators might ban origination fees that vary with the size of the loan, known as "origination points." They also might limit the use of "discount points" that are supposed to result in lower interest rates, the Consumer Financial Protection Bureau said late Wednesday.
The changes would help consumers understand the fees they are paying and guarantee that the fees provide any promised discounts, the agency said.
"Mortgages today often come with so many different types of fees and points that it can be hard for consumers to compare offers," CFPB Director Richard Cordray said in a statement. "We want to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them."
Banning origination points would discourage lenders from pushing consumers to take out bigger loans merely to generate higher fees. Flat origination fees still would be allowed.
Consumers pay discount points when a loan is offered, supposedly in exchange for a lower rate on the mortgage. The points can benefit consumers by allowing them to reduce their monthly loan payments, the CFPB said.
However, some mortgage companies have included discount points in every loan they offer. When that happens, the points amount to an extra fee. The CFPB wants to make sure the points result in an actual discount.
To accomplish that, the agency is considering a rule that would require any discount point to carry with it a certain minimum reduction of the interest rate.
The agency also might force lenders to offer an option without discount points, so that consumers can see clearly how the fee affects their monthly payments. It also would allow easier comparisons between loans offered by different companies.
The CFPB is overhauling mortgage rules as part of the financial overhaul law passed in 2010. The agency was created under a separate section of that law.
Any proposed rule will be reviewed next by the agency's Small Business Review Panel. After the panel weighs in on how the rule would affect small businesses, the agency will publish a formal proposal to enact the rule later this summer. The rule is expected to be finalized in January.
Daniel Wagner can be reached at www.twitter.com/wagnerreports.
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