No Points or Fees Attached
The U.S. Consumer Financial Protection Bureau, the financial services watchdog, recently proposed that lenders be required to make no-point, no-fee mortgages available. This rule would simplify the process of choosing a mortgage for qualified prospective borrowers.
According to a release by the CFPB, zero-fee, zero-point mortgage options would allow a consumer purchasing or refinancing a residence to better compare competing offers from different creditors or loan offers from a particular creditor. Consumers could also more easily decide whether they would receive an adequate reduction in monthly loan payments in exchange for opting to make upfront payments in the form of points and/or fees.
Additionally, it would require lenders to provide interest rate reductions if consumers choose to pay upfront fees and/or points.
The public has until October 16, 2012, to review and offer comments on the CFPB’s proposed rules (go to www.cfpb.gov for more information). The CFPB will scrutinize and evaluate the comments prior to issuing its final rules in January 2013.
Rick Sharga, executive vice president of Carrington Mortgage Holdings in Santa Ana, Calif., says that eager homebuyer and refinancer candidates don’t have to wait until next year and hope that the new rules stick. No-point, no-fee mortgages are already an option right now for many borrowers, who can request a no-closing-cost mortgage from a lender in exchange for a slightly higher interest rate.
“However, the average borrower probably isn’t sophisticated enough to know about all the various options available, and is often fixated on getting the best rate, even if that loan doesn’t provide the best deal,” says Sharga. “What [the CFPB proposal] will really do is make sure every borrower who qualifies will get a chance to see which options are available and what the financial implications are.”
While Sharga doesn’t believe the new rules will substantively change things in the mortgage industry, “they will provide a level of transparency that may help rebuild some of the trust that has been damaged during the recent boom/bust cycle.”
