A controversial resource launched by the Consumer Financial Protection Bureau (CFPB) this month has garnered considerable opposition from forward mortgage industry advocates who argue the tool is misleading.
Those in reverse lending rest assured, as the CFPB confirmed today that it has no plans to expand the Rate Checker to include reverse mortgages, a CFPB spokesman confirmed Monday to RMD.
Concerned that almost half of consumers fail to shop around before applying for a mortgage, the CFPB earlier this month released its “Owning a Home” toolkit as part of its Know Before You Owe initiatives launched in November 2013.
While the intent was essentially aimed at creating an educational resource that enables consumers to be more savvy shoppers, the mortgage industry asserts the “Rate Checker” tool was insufficiently developed and does not provide an accurate picture of the mortgage market and what consumers can expect.
Organizations such as the Mortgage Bankers Association and the National Association of Mortgage Bankers (NAMB) argue that the tool will do nothing but confuse consumers in their shopping experience, as it does not fully take into consideration ice range of variables that can have an effect on mortgage rates.
“These rates do not account for closing costs, APR, Loan Level Price Adjustments or other key factors,” said NAMB President John Councilman in a written statement. “More important than rate, is quality of service and closing reputations of others involved in the transaction. If a private company released this exact product, the CFPB and state regulatory authorities would have a team sent in to shut the site down.”
Others have raised concerns that the tool was developed without real input from industry and other affected parties, and that an overarching emphasis on rate may sent the wrong impression that a mortgage loan is merely a uniform commodity.
“If consumers only pay attention to the rate, this could create incentives for loan originators to lower the rate and make up for this through other fees, which could overall be less advantageous to the borrower,” said the Community Home Lenders Association (CHLA) and Community Mortgage Lenders of America in a joint letter.
Though currently live on CFPB’s site in beta form, the Rate Checker allows consumers to enter their state, home price, adjust their credit score range, and select between Federal Housing Administration, VA and Conventional loan programs.
The system also lets users differentiate their search queries by choosing between fixed and adjustable rate types, as well as when choosing between 30- to 15-year loan terms.
Written by Jason Oliva