The Consumer Financial Protection Bureau (CFPB) launched a public inquiry, May 29, into junk fees that are increasing mortgage closing costs. Mortgage lenders and borrowers are encouraged to respond within 60 days of the request being published to help the CFPB understand why costs are rising, who is benefiting, and how costs may be lowered.
Upon analysis, the CFPB found that the closing costs borrowers pay in connection with a mortgage have risen steeply in recent years. From 2021 to 2023, the median total loan costs for home mortgages surged by more than 36% due to unavoidable fees borrowers pay at closing, straining their ability to save up for a down payment. Those fees also limit the ability of lenders to offer competitive mortgages, since they have to either absorb the higher cost or pass it onto their borrowers.
“Junk fees and excessive closing costs can drain down payments and push up monthly mortgage costs,” said CFPB Director Rohit Chopra. “The CFPB is looking for ways to reduce anticompetitive fees that harm both homebuyers and lenders.”
Borrowers are charged for a number of fees when purchasing a home with a mortgage, such as credit reporting fees and title insurance fees. In 2022, median closing costs were $6,000, and those fees can quickly erode home equity and undercut homeownership, the CFPB stated in a press release.
For mortgage lenders, the cost of a credit report has risen substantially, preventing lenders from competing for every potential mortgage because fees drive up the cost of considering an applicant.
The CFPB also points out title insurance as another major fee paid at closing. In most cases, lender’s title insurance is paid by the borrower to protect the lender against problems with the property. Consumers typically have limited options to shop around for title insurance.
The CFPB’s request for information seeks input from borrowers and lenders about how mortgage closing costs may be inflated and constraining the mortgage lending market. Specifically, the CFPB asks for information about:
- Which fees are subject to competition
- How fees are set and who profits from them
- How fees are changing and how they affect consumers
Consumers can submit complaints about financial products or services by visiting the CFPB’s website. Comments must be received within 60 days of the request for information being published in the Federal Register.
