Will the CFPB Be Targeting Home Lending Fees Next?

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On March 8, 2024, the Consumer Financial Protection Bureau (CFPB) released a blog post focused on what it says are junk fees driving up housing costs. According to the agency, in 2022 the median amount paid by borrowers on closing costs was almost $6,000. A 2021 study found nearly 15% of lower income homebuyers had closing costs exceeding the amount of their down payment. 

The CFPB is also concerned about discount points. More borrowers are paying discount points than ever before. In 2022, about 50.2% of home purchase borrowers paid some discount points, up from 32.1% in 2021. The amount paid in discount points is also increasing, with borrowers paying discount points of $2,370 in 2022, up from $1,225 in 2021. The agency believes these points may not always save borrowers money and instead add to borrowers' costs.

The agency contends lack of competition is what is driving up closing costs. They stated borrowers are required to pay for many closing costs but cannot pick the provider. In many cases, the lender picks from a very small universe of providers and the costs are then passed on to the borrower. The CFPB uses credit reports as an example. For real estate loan underwriting, borrowers pay for credit reports from the three nationwide credit reporting companies. These credit report costs have spiked, while the CFPB says nationwide credit reporting companies make over $1.3 billion annually. 

The industry can expect new CFPB guidance and/or rules in the coming months.

Doeren Mayhew’s compliance pros will continue to follow updates provided by the CFPB regarding home lending fees.

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John Zasada
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John Zasada is a Principal in Doeren Mayhew's Financial Institutions Group, where he assists financial institutions in navigating regulatory compliance.

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