Skip to Content
Blog

Rules Will Prohibit Steering Customers into Risky, High-Cost Mortgages

The Consumer Financial Protection Bureau (“CFPB”) is issuing rules to prevent mortgage lenders from steering borrowers into risky, high-cost mortgage loans. The new rules will prohibit certain incentives that loan originators previously had which led them to sell costly and risky loans to borrowers prior to the financial crisis.

Loan officers and mortgage brokers are known as mortgage loan originators and they generally present different kinds of loans to prospective borrowers depending on the consumer’s needs. In the years prior to the housing crisis, unscrupulous mortgage loan originators often led prospective buyers into risky, high-priced mortgage loans because they would generate higher compensation for themselves. The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau and charged the new agency with addressing problems in the consumer finance market that contributed to the financial crisis. The CFPB is finalizing regulations governing how loan originators may be compensated.

The new rules will do the following: (1) prohibit steering incentives by prohibiting compensation that varies with the loan terms, so a broker or loan officer does not receive greater compensation if a borrower takes out a costlier loan; (2) prohibits dual compensation whereby a loan originator would be paid both by the borrower and the creditor and thus would not necessarily look out for the borrower’s best interest; and (3) set qualification and screening standards for loan originators so that consumers can be confident that originators are both ethical and knowledgeable. The final rule also implements Dodd-Frank provisions that, for mortgage and home equity loans, generally prohibit mandatory arbitration of disputes related to mortgage loans and the practice of increasing loan amounts to cover credit insurance premiums. The rules will take effect in January 2014, except the prohibition on mandatory arbitration and on the financing of credit insurance will take effect in June 2013.

Read the new final rules regarding loan originators here or a summary of the final rules here.

Free Consultation
Martin & Jones, PLLC logo

“Forest, once again, my family and I thank you for obtaining another settlement on behalf of my Father. It’s almost uncanny that these checks seem to come at very opportune times. This one comes as we are expecting our fourth grandchild. It will provide her some sound footing towards her future college education, plus help Mom and Dad with the medical expenses. Sometimes, I think my Dad is helping you guys with this. Maybe so. Anyway, thank you again for your hard work.”

Martin & Jones, PLLC. Badges
Martin & Jones, PLLC. Badges
Martin & Jones, PLLC. Badges
Martin & Jones, PLLC. Badges
Martin & Jones, PLLC. Badges
Martin & Jones, PLLC. Badges

Contact Our North Carolina Personal Injury Law Firm

for a Consultation for Your Accident or Medical Malpractice Claim

Call us at 800-662-1234
Free Consultation

The law firm you choose makes a difference. If you are the victim of an accident or an illness that someone else caused, the North Carolina personal injury law firm of Martin & Jones has the depth of experience, skills and sensitivity to make your road to recovery as smooth as possible. Whether you have experience with the legal system or have never hired a medical malpractice or personal injury lawyer before, our attorneys and staff will do our best to answer your questions, provide clear advice and prepare you and your family for what to expect. If you would like more information or to meet with one of our attorneys, please fill out the form below or call us at 800.662.1234.