January 22, 2013
The CFPB issued rules for high-cost mortgages (those with high interest rates and/or points and fees). Importantly, the rules now apply to most mortgages, including purchase money mortgages; refis; home equity loans; and home equity lines of credit.
High-cost loans can no longer have prepayment penalties, balloon payments (except in special circumstances), big late fees and some other miscellaneous fees.
The high-cost mortgage rules have been criticized for not reaching many mortgages as they only kick in (in most cases) when the APR on a first mortgage is more than 6.5 percentage points higher than what people with good credit would pay or if the points and fees are more than five percent of the total loan amount. The new rule will still cover only a small number of loans, so it is not clear if the new rule will have much impact on the market, as opposed to the new Qualified Mortgage rules.