In an attempt to make mortgage easier to understand, the Consumer Financial Protection Bureau has proposed that lenders be required to offer no-point, no-fee home loans to borrowers.
“Consumers have a hard time comparing loans when they are dealing with a bewildering array of points and fees,” said Richard Cordray, director of the Consumer Financial Protection Bureau, in a statement. “We want to provide consumers with clearer options and enable them to choose the loan that they believe is right for them.” .
Mortgage lenders typically charge consumers a variety of fees to put together a home loan and points to buy down the interest rate. It can be difficult for potential homebuyers to compare the cost of loans from one lender to another because of the myriad fees attached that are not easy to calculate. This proposal was made in hopes that by making every lender offer no-fee, no-point options it would be easier for consumers to compare and understand these important loans.
This new proposal is actually a compromise from earlier, stricter rules attached to the Dodd-Frank Act in 2010. Under that legislation, mortgage lenders were prohibited from charging any extra points and fees on loans when the loan officer made a commission, which was typically the case. The CFPB’s proposal allows lenders to charge fees and points to willing borrowers as long as they are in exchange for lower interest rates.
The overall effect is likely to be that these “no-fee” loans will actually have much higher interest rates than today’s typical loans, as lenders will try to recoup their profits in the rates. And lenders may still try to advertise their lower interest rate, higher fee loans, but from a consumer perspective, it could be nice to have a simple way to compare mortgages across the board.