In its latest campaign against “junk fees,” the CFPB announced that it was requesting consumer feedback on fees incurred as part of the residential home loan closing process, such as title insurance, credit reporting, and origination fees, as well as appraisal costs.
In a March 8 blog post, the CFPB noted a substantial rise in closing costs for borrowers, citing a 21.8% increase in median total loan costs from 2021 to 2022. The Bureau noted that many of these costs are fixed and do not change based on the interest rate or size of the loan, resulting in an outsized impact on lower income borrowers and first-time homebuyers. The Bureau noted it was paying particular attention to the recent rise in discount points as a higher percentage of borrowers reported paying them in 2022 than any other years since this data point was first reported in 2018. This is likely in large part due to the current high interest rate environment, a fact that was curiously absent from the Bureau’s post.
The CFPB attributed the rise in closing costs to a lack of competition among providers. It noted that it was working to analyze mortgage closing costs, seek public input and, if necessary, “issue rules and guidance to improve competition, choice, and affordability.”
Putting It Into Practice: The Bureau’s assault on fees continues (previously discussed here and here). Notably, the residential mortgage market is highly regulated. In fact, in 2015 the industry implemented the CFPB’s TILA-RESPA Integrated Disclosures (TRID) Rule, which significantly reformed and consolidated mortgage disclosures provided to borrowers. Notwithstanding this recent regulation, the CFPB appears to want a second bite at the apple, and is expected to target disclosures and closing fees with additional regulatory guidance and possible rulemaking.