CFPB issues final rules for high-cost mortgages

The Consumer Financial Protection Bureau (CFPB) issued final rules yesterday for high-cost mortgages that ban balloon payments, which are large, lump sum payments usually due at the end of a loan, with some exceptions. The rules also ban and limit certain fees and practices, including a ban on fees for modifying loans; capping late fees at four percent of the payment that is past due; prohibiting closing costs from being rolled into the loan amount; and restricting fees for payoff statements, according to a press release from the bureau. The rules also ban the practice of “encouraging a consumer to default on an existing loan to be refinanced by a high-cost mortgage.” The rules require consumers to receive housing counseling before taking out a high-cost mortgage and require lenders to provide a list of homeownership counseling organizations to consumers “shortly after they apply for a mortgage.” Creditors are now also required to extend the duration of an escrow account on high-cost mortgage loans from the current one year minimum to a minimum of five years. For more, read the full press release.

Consumer Financial Protection Bureau, Dodd-Frank, Federal Regulatory