On May 30, 2024, the Consumer Financial Protection Bureau (“CFPB”) issued a Request for Information (“RFI”) to ask for comments related to closing costs charged for mortgage loans and related settlement services. The purpose of the RFI is to ask for responses to questions about rising closing costs and the use of fees, which may be used later by the CFPB as a basis for further rulemaking on closing costs.
The CFPB cites to two studies that are related to the impact of rising closing costs on borrowers. The RFI states that from 2021 to 2023, the total cost of closing a home loan has risen by 36%. This is attributed to various factors, such as increasing home prices, rising interest rates, and higher fees paid by lenders for third party services such as credit reports and employment verifications. Origination fees and settlement fees, including title insurance, are mentioned as making up the largest components of loan costs. Title insurance costs are highlighted as being significant for borrowers, as they are required to pay for the lender’s insurance premium at closing, in addition to an owner’s policy.
Additionally, the RFI refers to the high number of fees that a borrower may see itemized on closing disclosures and suggests that consumers may pay more when prices are separated into multiple fees, based on an analysis conducted by the CFPB.
The RFI asks for input “on the impact closing costs have on borrowers, and the mortgage market, including the degree to which they add overall costs or otherwise cause borrower harm, and any impact such fees may have on the ability to purchase a home, anticipate and afford monthly payments, or refinance an existing mortgage.” Data, stories, or other information about mortgage closing costs may be submitted. In addition, the CFPB has provided a set of questions in the RFI that commenters may respond to:
- 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 on to 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?
Comments must be received on or before August 2, 2024, and must include the document title and Docket No. CFPB-2024-0021. All submissions will be posted and will become part of the public record. DocMagic will provide updates as they become available.
