WASHINGTON–The Consumer Financial Protection Bureau is seeking consumer input on how fees have affected them in obtaining a mortgage.
The effort is part of a broader effort that has already taken aim at overdraft fees and credit card late fees and, as the CFPB has now announced, “closing costs too often are full of junk fees.”
“Closing costs are the fees you pay on the day you finalize the purchase of your home, and they include things like title insurance, credit report and appraisal fees, origination fees, and more,” the CFPB said in announcing it is seeking consumer input. “The Consumer Financial Protection Bureau (CFPB) is working to ensure that consumers can navigate the closing process more easily, shop around, and save money.
‘Pressure on Budgets’
“Closing costs have risen, putting pressure on borrowers’ budgets. While home prices and interest rates often command our attention, closing costs also contribute to borrowers’ monthly burdens,” the CFPB continued. “One measure of closing costs is total loan costs. Total loan costs include origination fees, appraisal and credit report fees, title insurance, discount points, and other fees. From 2021 to 2022, median total loan costs rose sharply, increasing by 21.8% on home purchase loans. In 2022, the median amount paid by borrowers was nearly $6,000 in these costs and fees…”
Because such costs are fixed, the Bureau said they can have an outsized impact on borrowers with smaller mortgages, such as lower income borrowers, first-time homebuyers, and borrowers living in Black and Hispanic communities.
‘Particular’ Focus
“We are paying particular attention to the recent rise in discount points,” the CFPB said. “A higher percentage of borrowers reported paying discount points in 2022 than any other years since this data point was first reported in 2018. In 2022 about 50.2 percent of home purchase borrowers paid some discount points, up from 32.1 in 2021.
“Borrowers are also paying more in discount points. The median discount points paid for home purchase loans in 2022 was $2,370 in 2022, up from $1,225 in 2021,” it continued. “Lenders sell discount points to borrowers to reduce interest rates. These points may not always save borrowers money, however, and may indeed add to borrowers' costs. The CFPB is continuing to monitor market trends in this area.”
‘Lack of Competition’
The CFPB further said a lack of competition and choice may add to already rising housing costs, and that lender’s title insurance is one example of a fee borrowers face at closing where the borrower has no control over cost.
“The CFPB has heard reports of recent costs spiking 25% to as much as 400%. At the same time, we estimate that nationwide credit reporting companies made over $1.3 billion annually,” the CFPB said. “These steep increases in a market that lacks competition and choice warrant further scrutiny.
Input Sought
In seeking consumer input, the CFPB said it is working on:
- Improving the ability of homeowners to refinance their mortgage when interest rates are favorable.
- Reducing risks for borrowers who fall behind in their mortgage payments.
- Making it easier for consumers to submit debt collection complaints to us about rental housing “so that we can address illegal fees and better identify emerging issues like rental payment platforms that target families with junk fees or the use of high-cost loans to pay rent.”
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