The Consumer Financial Protection Bureau (CFPB) has made much of its effort to simplify mortgage loan fee structures so that consumers can better understand how much they’re paying and for what, but critics say the proposed new “flat fee” does little to solve the problem. The flat fee is designed to consolidate or eliminate discount point fees and origination fees, and replace it with one fee that will not change with the size of the loan. One look at the CFPB’s proposed rule change, however, and it is apparent that consumers will still need professional help understanding the new loan pay scheme. For more on this continue reading the following article from JDSupra.
"Bureau officials said that the rules, which were released Wednesday ahead of formal introduction this summer, would ban mortgage companies from charging origination fees that vary with the amount of the loan.
Those fees are sometimes referred to as origination points and are disclosed in a blizzard of documents and fees that most home buyers face at closing. But they can easily be confused with the upfront discount points that borrowers often pay to secure a lower interest rate."
"Ban Origination Charges that Vary with the Size of the Loan:
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Brokerage firms and creditors would no longer be allowed to charge origination fees that vary with the size of the loan. These ‘origination points’ are easily confused with discount points. Instead, under the rules the CFPB is considering, brokerage firms and creditors would be allowed to charge only flat origination fees."
The CFPB will allow the consumer a choice of paying discount points in creditor-paid transactions only if: (1) the points actually result in a "minimum reduction" in the interest rate for each point paid; and (2) the lender also offers the option of a no discount point loan. (At this time, the CFPB actually provides no details for the correlation between "minimum reduction" and the interest rate.)
Brokerage is a company or firm that serves as a MLO in a wholesale loan transaction.
Broker is an MLO that is an employee of a brokerage.
Commission is compensation that is tied to a particular transaction.
Salary is compensation that is not tied to a particular transaction.
"Brokerage firms and creditors would no longer be allowed to charge origination fees that vary with the size of the loan. These ‘origination points’ are easily confused with discount points. Instead, under the rules the CFPB is considering, brokerage firms and creditors would be allowed to charge only flat origination fees."
This article was republished with permission from JDSupra.