Premiums paid for optional credit insurance cannot accurately be labeled as contributing to the cost of a loan, since they are a cost of insurance that is voluntarily purchased. The inclusion of premiums for optional credit insurance in computing the cost of a loan simply does not make sense and would limit the availability of an important insurance product. Any concerns about whether the premiums paid for optional credit insurance are predatory are already addressed through the regulation of credit insurance as an insurance product. Credit insurance is heavily regulated by the states through premium rate, loss ratio, disclosure and benefit content requirements, which are reviewed at least every three years in most states. Those requirements are designed to ensure that borrowers are appropriately treated with regard to insurance terms.
Most states require refunds of unearned credit insurance premiums.
If a mortgage loan is refinanced, there is a pro rata refund of the unearned premiums for credit insurance purchased on the first loan. As a result, there are already sufficient provisions in state and federal law to protect consumers who finance the purchase of credit insurance related to a home loan. The effect of the proposal on consumers and lenders Furthermore, the proposal would adversely affect both consumers and lenders. This would seriously inconvenience both the consumer and the lender. The change in the points and fees trigger would effectively act as a prohibition on the making of home loans where credit insurance is to be financed.