CFPB releases procedures for new mortgage rules

The new regulations include those on appraisals, escrow accounts, and compensation and qualifications for loan originators and is the first round of what will likely be multiple updates.

In January, the CFPB issued numerous new regulations overhauling the mortgage market, many of which were required by the Dodd-Frank financial reform law, to fix problems that contributed to the 2008 financial crisis. 

The rules cover many stages of a consumer’s mortgage experience, from shopping for a loan to paying it off.

They set qualifications and screening standards for loan originators, including that they must be ethical and knowledgeable and must pass criminal background checks.

The guidance says that compensation for a loan officer generally cannot vary with the loan terms so they cannot get paid more if the consumer takes a loan with a higher interest rate, a prepayment penalty, or higher fees.

The rules prohibit a loan originator from getting paid by the consumer and another person, such as the creditor; extend from a minimum of one year to five years the duration of an escrow account on higher-priced mortgage loans; and ensure consumers can file a court claim on any federal violations on their loans. 

The rules also prohibit mandatory arbitration, require that lenders provide free appraisal reports and valuations on certain applications and prohibit single premium credit insurance.

Within the next several months, the CFPB will publish its first round of exam procedures for the ability-to-repay and mortgage servicing rules.