Friday May 11, 2012

WASHINGTON (AP) -- The government’s consumer-finance watchdog is weighing an overhaul of the fees consumers pay to obtain mortgages.

Regulators might ban origination fees that vary with the size of the loan, known as "origination points." They also might limit the use of "discount points" that are supposed to result in lower interest rates, the Consumer Financial Protection Bureau said late Wednesday.

The changes would help consumers understand the fees they are paying and guarantee that the fees provide any promised discounts, the agency said.

"Mortgages today often come with so many different types of fees and points that it can be hard for consumers to compare offers," CFPB Director Richard Cordray said in a 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."

Banning origination points would discourage lenders from pushing consumers to take out bigger loans merely to generate higher fees. Flat origination fees still would be allowed.

Consumers pay discount points when a loan is offered, supposedly in exchange for a lower rate. The points can benefit consumers by allowing them to reduce their monthly loan payments, the CFPB said.

However, some mortgage companies have included discount points in every loan they offer. When that happens, the points amount to an extra fee. The CFPB wants to make sure the points result in an actual discount.