CFPB Investigating Junk Fees in Mortgage Transactions

Today, the Consumer Financial Protection Bureau (“CFPB”) launched a public inquiry into what it referred to as “junk fees” associated with mortgage closings. A CFPB analysis indicates the median total loan costs have risen 36% from 2021 to 2023 and cites the steep rise in closing costs as one more factor making homeownership more difficult for an increasing number of borrowers. The CFPB’s “Request for Information” is asking for input from the public, including borrowers, lenders and other interested stakeholders, as to how closing costs may be inflated and constraining the mortgage lending market.

“Junk fees and excessive closing costs can drain down payments and push up monthly mortgage costs,” said CFPB Director Rohit Chopra in today’s announcement. “The CFPB is looking for ways to reduce anticompetitive fees that harm both homebuyers and lenders.”

The announcement makes it clear that while lenders are charging some of these fees, lenders are also impacted by increasing costs that are out of their control such as credit scores, credit reports, and employment verifications. Lenders are forced to pass these costs on to borrowers or reduce their profit margin to absorb the increased costs.

The CFPB is specifically requesting information on the following:

• Which fees are subject to competition

• How fees are set and who profits from them

• How fees are changing and how they affect consumers

Comments must be received on or before August 2, 2024. For information on the Request for Information and how to submit comments, please visit CFPB Request for Information Regarding Fees Imposed in Residential Mortgage Transactions.