Junk fees that the federal consumer financial protection agency says are pushing up mortgage closing costs are the object of a public inquiry announced Thursday.
A request for information (RFI) from the Consumer Financial Protection Bureau (CFPB) is slated for publication in the Federal Register. The draft notice shows a public comment deadline of Aug. 2.
The CFPB said it is seeking to obtain information about why closing costs are rising, who is benefiting, and how costs for borrowers and lenders could be lowered. Thursday’s launch of this inquiry comes not too long after the agency’s April report (“Price Complexity in Laboratory Markets”) that focused on junk fees on a variety of loan products.
The new inquiry focuses specifically on fees charged by providers of mortgages and related settlement services. The CFPB pointed to a more than 36% increase in median total loan costs for home mortgages from 2021 to 2023. It said that in 2022, median closing costs were $6,000. Such costs “can quickly erode home equity and undercut homeownership,” it said.
Mortgage lenders are paying more as well, it noted. The bureau noted rising prices for mortgage lenders, such as credit report costs, costs to obtain FICO scores, and (drawing from a recent speech by bureau Director Rohit Chopra) income verification services – and said these rising costs are passed on to consumers or “eat into lenders’ bottom lines.”
The CFPB, in its draft Federal Register notice, said is interested in receiving all comments on mortgage closing costs and that it has created questions to help commenters develop responses:
- Are there particular fees that are concerning or cause hardships for consumers?
- Are there any fees charged that are not or should not be necessary to close the loan?
- Provide data or evidence on the degree to which consumers compare closing costs across lenders.
- Provide data or evidence on the degree to which consumers shop for closing costs across settlement providers.
- How are fees currently set? Who profits from the various fees? Who benefits from the service provided? What leverage or oversight do lenders have over third-party costs that are passed onto the consumer?
- Which closing costs have increased the most over the past several years? What is the cause of such increases? Do they differ for purchase or refinance? Please provide data to support if possible.
- What is driving the recent price increases of credit reports and credit scores? How are different parts of the credit report chain (credit score provider, national credit reporting agencies, reseller) contributing to this increase in costs? What competitive forces are or can be brought to bear on these costs? What are the impacts on consumers of the increased costs?
- Would lenders be more effective at negotiating closing costs than consumers? Are there reports or evidence that are relevant to the topic?
- What studies or data are available to measure the potential impact closing costs may have on overall costs, housing affordability, access to homeownership, or home equity?
The notice states that in general, all comments received will be posted without change to regulations.gov.
CFPB Launches Inquiry into Junk Fees in Mortgage Closing Costs