The Consumer Financial Protection Bureau (CFPB) has launched a public inquiry into junk fees that are increasing mortgage closing costs. The CFPB wants to understand why closing costs are increasing, who is benefiting, and how costs for borrowers and lenders could be lowered.

According to CFPB analysis, the closing costs borrowers pay in connection with a mortgage have risen steeply in recent years. From 2021 to 2023, median total loan costs for home mortgages increased by over 36%. The unavoidable fees borrowers must pay at closing can strain household budgets and families’ ability to afford a down payment. The fees may also limit the ability of lenders to offer competitive mortgages. That is because they have to absorb the higher costs or pass them on to borrowers.

“Junk fees and excessive closing costs can drain 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.”

In 2022: median closing costs were $6,000

People rely on mortgage loans to buy their homes and to access home equity. When people purchase a home with a mortgage, they pay a number of fees. These include charges for credit reporting and title insurance. Even if disclosed, borrowers are compelled to pay the fees and may have no control over cost. In 2022, median closing costs were $6,000, and these fees can quickly erode home equity and undercut homeownership.

Mortgage lenders also pay a price when it comes to junk fees and excessive closing costs. For example, in recent years the cost of a credit report has risen substantially. Rising costs can prevent lenders from competing for every potential mortgage because these fees drive up the cost of considering an applicant.

Title insurance is another major fee paid at closing. Most commonly, 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.

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The CFPB’s request for information seeks input from the public, including borrowers and lenders, about how mortgage closing costs may be inflated and constraining the mortgage lending market.