One part of our proposed rule to improve the disclosures consumers receive when applying for and closing on a mortgage was a change to the current definition of “finance charge.” The finance charge is intended to reflect the cost of credit for consumers as a dollar amount. It’s used to calculate the Annual Percentage Rate or “APR.”
The proposed rule would eliminate numerous exceptions that exclude common costs (such as title insurance) from the finance charge. We want APR to be a more accurate reflection of the overall cost of credit. However, higher APRs and finance charges could affect the number of loans subject to other legal requirements and protections, such as special disclosures and restrictions for high-cost mortgages. In , we also proposed an adjustment that would prevent that from happening, by changing the coverage test for the high-cost mortgage protections to account for the higher APRs.
Comments on the and the were originally due on September 7, 2012. Based on the feedback received, the Bureau now believes that it is appropriate to provide the public with additional time to prepare their comments. These comments are now due November 6, 2012. All other deadlines under both proposed rules remain unchanged.
For more information about the extensions, please see:
- for proposed changes to the definition of the finance charge
- on whether and how to account for the implications of a more inclusive finance charge on the scope of HOEPA coverage