WASHINGTON D.C. โ The Consumer Financial Protection Bureau (CFPB) today released a public inquiry in junk fees that are increasing mortgage closing costs. The CFPB wants to understand why closing costs are rising, who benefits, and how costs could be reduced for borrowers and lenders. According to a CFPB Analysis, the closing costs borrowers pay in connection with a mortgage have increased significantly in recent years. From 2021 to 2023, average total home loan costs increased more than 36%. The unavoidable fees that borrowers must pay at closing can strain family budgets and families' ability to afford the down payment. Fees can also limit lenders' ability to offer competitive mortgages because they have to absorb higher costs or pass them on to borrowers.
"Jubbly fees and excessive closing costs can drain down payments and increase monthly mortgage costs," said CFPB Director Rohit Chopra. "The CFPB is looking for ways to reduce anticompetitive fees that hurt both homebuyers and lenders."
People rely on mortgage loans to purchase their homes and access home equity. When people buy a home with a mortgage, they pay a number of fees, such as credit report fees and title insurance. Even if they are disclosed, borrowers are required to pay the fees and may have no control over the cost. In 2022, average closing costs were $6,000and these fees can quickly erode home equity and undermine home ownership.
Mortgage lenders also pay a price when it comes to junk fees and excessive closing costs. For example, in recent years the cost of a credit report has increased substantially. Rising costs can prevent lenders from competing for every potential mortgage because these fees raise the cost of considering an applicant.
Title insurance is another important fee paid at closing. Lender's title insurance is typically paid for by the borrower to protect against problems with the property. Consumers typically have limited options for comparing title insurance prices.
The CFPB's information request seeks input from the public, including borrowers and lenders, on how mortgage closing costs may be inflated and limiting the mortgage lending market. Specifically, the CFPB requests information on:
- What rates are subject to competition: The CFPB is interested in the extent to which consumers or lenders currently exert competitive pressure on third-party closing costs. The CFPB also wants to learn about market barriers that limit competition.
- How rates are set and who benefits from them: The CFPB wants to know who benefits from required services and whether lenders monitor or influence third-party costs that are passed on to consumers.
- How rates are changing and how they affect consumers: The CFPB wants information about which costs have increased the most in recent years and the reasons for those increases, including the increase in the cost of credit reports and credit scores. The CFPB is also interested in data on the impact of closing costs on housing affordability, access to homeownership, or home equity.
The CFPB encourages comments and data from the public and all interested parties. Comments must be received within 60 days of publication of the request for information in the Federal Register.
The CFPB administers many laws and regulations related to mortgage lending and real estate settlements, including the Truth in Lending Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act. The findings from this research will help inform policymaking, guidance, and other policy initiatives.
Read today's Request for Information on Commissions Imposed on Residential Mortgage Transactions.
Consumers can file complaints about financial products or services by visiting the CFPB website or calling (855) 411-CFPB (2372).
The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information visit www.consumerfinance.gov.
