CFPB Considers Mortgage Origination Rules

Final rules could be in place by January 2013.

July 1, 2012
In May, the Consumer Financial Protection Bureau (CFPB) outlined rules it’s considering to “simplify mortgage points and fees” and bring “greater transparency to the mortgage loan origination market.”

The CFPB plans to publish a Notice of Proposed Rulemaking this summer, and a formal comment period will follow. Expect final rules by January 2013.

The Dodd-Frank Wall Street Reform and Consumer Protection Act placed certain restrictions on the points and fees offered with most mortgages. The CFPB is considering proposals that would:

Require an interest-rate reduction when consumers elect to pay discount points;

Require lenders to offer consumers a no-discount-point loan option; and

 Ban origination charges that vary with the size of the loan (i.e., creditors would be allowed to charge only flat origination fees).

The CFPB is also considering rules to implement Dodd-Frank requirements that all mortgage loan originators (MLOs) meet certain qualification standards. Credit union and bank MLOs aren’t required to be state-licensed under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act). CFPB rules wouldn’t require nonlicensed MLOs to obtain a state license. But MLOs would have to meet certain character and fitness requirements, and undergo training to ensure they have the knowledge necessary for the types of loans they originate.

In 2010, the Federal Reserve Board issued a rule that prohibits loan originators from directing consumers toward higher-priced loans. Dodd-Frank requires the CFPB to issue rules as well. The proposals the CFPB is considering would reaffirm the Fed’s rule, which bans the practice of varying loan originator compensation based on interest rates or certain other loan terms. The CFPB’s proposal also would clarify certain issues in the existing rule that have created industry confusion.

The CFPB plans to engage with consumers and the industry during rulemaking—including a Small Business Review Panel that will meet with representatives of small financial services providers directly affected by these proposals. The panel will issue a report summarizing this feedback, which the CFPB will consider when formulating the proposed rules.

More information is available at