[Federal Register Volume 89, Number 110 (Thursday, June 6, 2024)]
[Notices]
[Pages 48400-48402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12443]


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CONSUMER FINANCIAL PROTECTION BUREAU

[Docket No. CFPB-2024-0021]


Request for Information Regarding Fees Imposed in Residential 
Mortgage Transactions

AGENCY: Consumer Financial Protection Bureau.

ACTION: Request for information.

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SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) is 
seeking information and comments from the public related to fees 
charged by providers of mortgages and related settlement services.

DATES: Comments must be received on or before August 2, 2024.

ADDRESSES: You may submit information or comments, identified by Docket 
No. CFPB-2024-0021, by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include 
Docket No. CFPB-2024-0021 in the subject line of the message.
     Mail/Hand Delivery/Courier: Comment Intake--Residential 
Mortgage Fees Assessment, Consumer Financial Protection Bureau, 1700 G 
Street NW, Washington, DC 20552.
    Instructions: The Bureau encourages the early submission of 
comments. All submissions should include document title and docket 
number. Please note the number of the topic on which you are commenting 
at the top of each response (you do not need to address all topics). 
Because paper mail in the Washington, DC area and at the Bureau is 
subject to delay, commenters are encouraged to submit comments 
electronically. In general, all comments received will be posted 
without change to https://www.regulations.gov.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Proprietary information or sensitive personal information, such as 
account numbers or Social Security numbers, or names of other 
individuals, should not be included. Comments will not be edited to 
remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: George Karithanom, Regulatory 
Implementation & Guidance Program Analyst, Office of Regulations, at 
(202) 435-7700 or https://reginquiries.consumerfinance.gov/. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    People rely on mortgage loans to buy their homes, tap home equity 
at key life moments, and refinance those loans when interest rates 
decline. Mortgages come with many associated fees and costs, referred 
to as ``closing costs,'' that are due by the time the loan closes or 
when the borrower signs the loan agreement. These closing costs, and 
particularly the costs the lender imposes on the borrower as part of 
the cost of getting the loan, have recently risen sharply.\1\ From 2021 
to 2023, median total loan costs increased by over 36% on home purchase 
loans. The median dollar amount paid by borrowers in 2022 was nearly 
$6,000 in these costs and fees. This, along with increased home prices 
and interest rates, have placed increased pressure on borrowers' 
budgets, contributing to a lack of access to credit and decreased home 
affordability. Many of these costs are fixed and do not change based on 
the size of the loan, resulting in an outsized impact on borrowers with 
smaller mortgages, such as lower income or first-time homebuyers.\2\
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    \1\ https://www.consumerfinance.gov/about-us/blog/junk-fees-are-driving-up-housing-costs-the-cfpb-wants-to-hear-from-you/.
    \2\ https://www.fanniemae.com/research-and-insights/publications/barriers-entry-closing-costs-first-time-and-low-income-homebuyers.
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    Lenders are also impacted by rising closing costs. The cost for 
credit scores, credit reports, and employment verification, for 
example, have all increased markedly over the last few years. Dominant 
market players have driven up costs through annual price increases that 
significantly outpace inflation, leaving lenders with little choice but 
to pay these higher rates. These higher costs are passed on to the 
consumer or eat into lenders' bottom lines, in a market where mortgage 
originators are already facing financial challenges.\3\ Lenders facing 
higher costs for evaluating applicants due to increasing costs for the 
basic information in credit reports may rationally choose to evaluate 
fewer applicants, potentially resulting in decreased access to credit.
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    \3\ Lenders keep losing money on every loan produced, MBA says 
 National Mortgage News.
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    Under Federal law and CFPB regulations,\4\ borrowers receive 
disclosures of closing costs through the Loan Estimate and Closing 
Disclosure.\5\ These standardized disclosures list out the closing 
costs and divide them into loan costs and other costs.\6\ Loan costs 
are further divided into required services that the consumer can shop 
for (such as lender's title insurance) and required services that 
cannot be shopped for (such as credit reporting costs). The largest 
disclosed closing costs are origination fees paid to the lender 
(including discount points). Title fees (including title insurance, 
title search, and settlement fees) are the next largest category of 
closing costs (and loan costs).\7\
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    \4\ Truth in Lending Act, 15 U.S.C. 1601 et seq., 12 CFR part 
1026 (regulation Z).
    \5\ https://www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/tila-respa-integrated-disclosures/forms-samples/.
    \6\ Other costs include items such as recording fees, 
homeowners' insurance, and property taxes.
    \7\ https://www.fanniemae.com/research-and-insights/publications/barriers-entry-closing-costs-first-time-and-low-income-homebuyers.

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[[Page 48401]]

    Borrowers may encounter dozens of different fees, all of which can 
impact the overall cost of a mortgage. The Mortgage Industry Standards 
Maintenance Organization (MISMO) lists more than 200 fees that have 
been found on closing disclosures.\8\ This complex set of fees may 
result in borrowers paying more. A recent study performed by the CFPB 
suggests that consumers pay more when prices are separated into 
multiple fees.\9\ Other research has demonstrated that mortgage 
borrowers underreact to closing cost pricing.\10\ The financial impact 
of these closing costs can be amplified when they are financed and 
included in the loan amounts.
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    \8\ https://www.fanniemae.com/research-and-insights/publications/barriers-entry-closing-costs-first-time-and-low-income-homebuyers.
    \9\ https://www.consumerfinance.gov/about-us/newsroom/cfpb-publishes-research-finding-higher-price-complexity-leads-consumers-to-pay-more/.
    \10\ https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2019/non-salient-fees-in-the-mortgage-market.pdf.
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    Credit reports are an example of a cost that impacts both lenders 
and consumers and which has risen steeply over the last two years.\11\ 
The credit reporting industry is highly concentrated, with a handful of 
dominant players dictating the price of credit reports and scores. 
Credit reports play a critical role in the mortgage origination 
process. They help lenders price loans, and investors gauge credit 
risk. However, lenders have few options due to a lack of 
competition.\12\
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    \11\ Lenders have reported to CFPB that their cost to obtain 
credit reports have increased 25 to 400 percent in recent years.
    \12\ FICO is the only credit score used for mortgage 
originations, however FHFA announced the GSEs will begin requiring 
VantageScore for loans purchased by the GSEs in addition to FICO in 
the future. Each credit report for a borrower includes credit 
scores. Additionally, there are only three national credit reporting 
agencies that collect the data used to produce credit reports.
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    Lenders typically pull credit reports at least twice, once at the 
initial application stage (a ``soft pull'') and once when they are 
finalizing the loan terms (a ``hard pull''). Lenders report that ``soft 
pulls,'' often used to prescreen applicants, were significantly 
discounted until recently and now cost the same as the ``hard pull.'' 
Smaller recent increases in the cost of the ``hard pull'' may have an 
outsized effect because the Government Sponsored Enterprises (GSEs) 
Fannie Mae and Freddie Mac, as well as Federal Housing Administration 
(FHA), United States Department of Agriculture (USDA), and Veterans 
Affairs (VA), currently require that mortgage lenders use credit 
reports from the three national credit report companies, known as 
``tri-merge'' reports, for loans that are purchased or insured by 
them.\13\ While a consumer can obtain their own consumer report file by 
law for free the first time and $15.50 thereafter, a lender pulling 
such a report on their behalf can pay twice that.\14\ One midsize 
lender reported an increase for the hard-pull tri-merge report from $50 
to $110 in the last two years, and a large lender reported an increase 
from under $30 to over $60. The CFPB is interested in learning more 
about what is driving the increase and variability in the fees lenders 
pay for credit reports and the extent to which these costs are passed 
on to consumers.
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    \13\ FHFA announced that the GSEs will move from a tri-merge 
report to a bi-merge report in the future which should foster 
competition and in turn, reduce credit report pricing.
    \14\ https://www.consumerfinance.gov/ask-cfpb/how-do-i-get-a-
free-copy-of-my-credit-reports-en-5/
#:~:text=By%20law%2C%20a%20credit%20reporting,reports%20at%20no%20cos
t%2C%20online.
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    Origination fees are charges from the lender to the borrower for 
making the mortgage loan. Mortgage origination services may include 
processing the application, underwriting and funding the loan, and 
other administrative services. Lenders can vary in which costs they 
include in the interest rate or origination charge and which they 
charge borrowers separately, further complicating borrowers' ability to 
compare costs across loan products. For example, advertisements and 
initial price quotes often include discount points in the fine print, 
which can make interest rates appear more competitive.\15\
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    \15\ https://www.consumerfinance.gov/data-research/research-reports/data-spotlight-trends-in-discount-points-amid-rising-interest-rates/.
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    Settlement services are the next largest component of loan costs. 
These include fees for title insurance, the preparation and 
notarization of the documents, and the physical processing of the 
settlement, as well as other fees. Appraisal fees and related valuation 
fees, including payments to appraisal management companies, also 
contribute to the total loan costs. Many of the fees are charged to 
cover the lenders' costs associated with closing a loan.
    Title insurance is one of the costliest settlement services at 
closing. Title insurance is meant to protect against someone else 
laying claim to a borrower's property. In the current market, consumers 
are forced to pay for the lender's insurance premiums in a one-time 
payment at closing. Borrowers need to purchase a separate owner's 
policy to cover losses not covered by the lender's policy. Title 
insurance premiums can be significant, and typically range from 0.5%-
1.0% of the purchase price.

II. Request for Information

    This request for information seeks 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. In addition to hearing from the general public, 
the CFPB is particularly interested in hearing from consumers, industry 
participants, social services organizations, small business owners, 
consumer rights and advocacy organizations, legal aid attorneys, 
academics and researchers, and State and local government officials.
    The CFPB welcomes stakeholders to submit stories, data, and 
information about mortgage closing costs. To assist commenters in 
developing responses, the CFPB has crafted the below questions that 
commenters may answer. However, the CFPB is interested in receiving any 
comments relating to mortgage closing costs.
    1. Are there particular fees that are concerning or cause hardships 
for consumers?
    2. Are there any fees charged that are not or should not be 
necessary to close the loan?
    3. Provide data or evidence on the degree to which consumers 
compare closing costs across lenders.
    4. Provide data or evidence on the degree to which consumers shop 
for closing costs across settlement providers.
    5. 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 onto the consumer?
    6. 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.
    7. 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?
    8. Would lenders be more effective at negotiating closing costs 
than

[[Page 48402]]

consumers? Are there reports or evidence that are relevant to the 
topic?
    9. 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?

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2024-12443 Filed 6-5-24; 8:45 am]
BILLING CODE 4810-AM-P