CFPB To Probe Home Sale Closing Costs

If you’ve bought or sold a house lately and raised an eyebrow at the myriad fees you had to pay, you’re now in good company: a federal regulator is taking a look at them. 

The Consumer Financial Protection Bureau (CFPB) is asking the public as well as people in the mortgage business for commentary about closing costs for home loans, which have risen sharply in recent years. Median costs for home loans rose 36% between 2021 and 2023, the bureau said, with borrowers paying a median of nearly $6,000 in costs and fees in 2022.

“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 anti-competitive fees that harm both homebuyers and lenders.”

The bureau wants to hear about the “dozens” of different fees that are tacked on when it’s time to close a mortgage—sometimes mystifying buyers seeing them for the first time. Those include credit checks, settlement service fees, origination fees, and title insurance to name a few.

The bureau is looking for “input from the public 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.”

This Could Be The First Step In A Rule Making Process

The CFPB, which regulates financial institutions, seeks information like this as an early step in its process of creating new rules.

Should the bureau’s inquiry into mortgage fees result in regulations, it wouldn’t be the first recent shakeup in real estate transactions. A big shift is already set to occur this July when procedures around real estate agent commissions are set to change as a result of a lawsuit against the National Association of Realtors.

Three trade groups representing lenders said the closing fees are necessary, with some being required by federal regulations.

“Many of those disclosed costs, such as title, appraisal and credit reports are required by federal statutes, safety and soundness guidelines, and the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), and Fannie Mae and Freddie Mac as a condition of buying and insuring a mortgage. Moreover, the services these fees cover mitigate risk for taxpayers and borrowers alike,” the American Bankers Association, the Housing Policy Council, and the Mortgage Bankers Association said in a press release.