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Business

The Color of Money

Consumer bureau wants to make it easier to decipher mortgage costs

If you’re as busy as I am, asking you to weigh in on yet another request for comment from the Consumer Financial Protection Bureau is likely to be greeted with a well-understood “humph.’’ Since the bureau’s inception, it’s been asking for feedback on issues from student loans to credit cards.

Now the CFPB is soliciting your opinion on mortgage points and fees. The agency wants to make it easier for you to understand what you are paying so you can compare loan deals. Here’s some of what the bureau is considering:

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- A rule that makes sure consumers who pay upfront discount points at least get a certain minimum reduction of the interest rate in return.

- Another proposal would prohibit origination fees that vary by loan size.

With the dizzying array of mortgage fees, it’s hard for people to compare offers. So the bureau wants to also get your feedback on a no-point, no-fee loan. However, the difference between the higher interest rate on a no-fee loan and the lower rate on the loan with upfront fees must be reasonably related to the amount of these fees.

In addition, the bureau wants to address the qualifications and compensation for mortgage loan originators. The originators, who take applications from people who want to buy or refinance a home, include mortgage brokers and loan officers. Mortgage fraud and predatory lending practices spurred many states to toughen the qualifications. Yet loopholes still allowed many individuals to originate loans without being properly licensed or trained.

Right now, under state and federal rules, loan originators operate under different sets of standards, depending on whether they work for a bank, thrift, mortgage brokerage, or nonprofit, according to the CFPB. The agency is considering rules that would make all originators subject to the same standards.

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The bureau also wants to piggyback and implement rules similar to ones issued by the Federal Reserve Board that took effect last year. Those rules prohibit loan originators from directing consumers into higher-priced loans that would pay the originators more money.

The Fed effectively banned an industry practice that paid loan originators more money if a borrower accepted an interest rate higher. Often borrowers weren’t aware they were agreeing to the higher interest rate and that it affected the total cost of their loans. Under the Fed’s final rule, a loan originator can’t receive compensation based on the interest rate or other loan terms.

So go to www.ConsumerFinance.gov and read the overview of the proposals.

And just in case you need more motivation to respond, try this. Pull out your mortgage paperwork from the last time you purchased or refinanced a home. Look over all the fees you had to pay. Then e-mail your thoughts on the proposed rules to MortgageLoanOrigination@cfpb.gov. The CFPB just might save you some grief in the future.

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