NEWS: As part of the CFPB’s war on so-called “junk fees,” a recent Bureau blog post asked consumers for feedback about residential mortgage closing costs, like title insurance, credit report charges, origination fees, discount points, and appraisal costs.
The CFPB cited a 21.8% increase from 2021 to 2022 in the median total costs for closing home purchase loans. It noted that many of these costs are fixed and do not vary based on interest rates or loan amounts. The result, the Bureau said, is “an outsized impact on borrowers with smaller mortgages, such as lower income borrowers, first-time homebuyers, and borrowers living in Black and Hispanic communities.” The Bureau said that it is paying particular attention to the rise in discount points, because a higher percentage of borrowers reported paying them in 2022 than any year since this data point was first reported in 2018. (The Bureau did not, however, acknowledge that this is likely due to the current high interest rate environment.)
The CFPB attributed the rise in closing costs to a lack of competition among providers. “It appears that some closing costs are high and increasing because there is little competition,” the Bureau wrote. “Borrowers are required to pay for many of the costs associated with closing a home loan but cannot pick the provider and do not benefit from the service. In many cases, the lender simply picks from a very small universe of providers, and the costs are then passed on to the borrower.” It cited lender’s title report costs and credit report fees as two examples.
Husch Blackwell, which is The League’s outside law firm, recently published a Legal Update about the CFPB’s new focus on mortgage closing costs. Co-authored by attorney Mike Silver, former CFPB senior counsel and now a Husch Blackwell partner, the article analyzes the Bureau’s announcement about these fees, noting that:
The blog post fails to indicate how mortgage closing costs—which must be disclosed under the statutorily-mandated 2013 TILA-RESPA Integrated Disclosure (TRID) rule the CFPB promulgated after a lengthy process of developing and testing new disclosure forms—are “junk fees.” Nor does the CFPB indicate what authority it would use to issue guidance or rules addressing the price of these fees.
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Ultimately, the CFPB could simply be signaling a policy concern about which it may lack legal authority to take concrete action—in other words, a classic “bully pulpit” move, and one that is timed with other administration-wide efforts.
The League expects that we’ll see additional CFPB guidance, enforcement actions, or rulemaking on mortgage closing costs soon. The CFPB wrote, “In the coming months, the CFPB will continue working to analyze mortgage closing costs, seek public input and, as necessary, issue rules and guidance to improve competition, choice, and affordability. We will also continue using our supervision and enforcement tools to make it safer for people to purchase homes and to hold companies accountable when they violate the law.”