US bureau to propose rules to simplify home loans

Washington The US Consumer Financial Protection Bureau will propose new rules "this summer" aimed at simplifying how lenders market mortgages with so-called points and fees, the agency said in an emailed statement.

"Mortgages today often come with so many different types of fees and points that it can be hard to compare offers," Richard Cordray, the bureau's director, said in the statement.

"We want to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them."

The agency will propose the rules this summer, seek public comment, and complete them by January, it said.

Borrowers can pay points, expressed as a percentage of a loan amount, up front in return for a lower interest rate. For example, a borrower might pay 1 point, or $1,000 (Dh3,670), on a $100,000 loan, and get a rate of 3.75 per cent instead of 4 per cent.

The new rules would require lenders to actually deliver the interest rate reduction if points are paid, the agency said. Lenders who do offer points that result in a lower interest rate would also be required to put forward a no-point loan so borrowers can compare competing offers.

The bureau would also ban origination fees, known as "origination points", that vary with the size of the loan, on the grounds that they are too easily confused with discount points. Lenders would still be able to charge flat origination fees.