MBA slams CFPB’s focus on closing costs as misguided

The Mortgage Bankers Association is pushing back against the CFPB’s claims of excessive mortgage closing costs, calling it misguided and stressing that necessary fees are inaccurately labeled as “junk fees.”

The comments came in response to the CFPB’s Request for Information (RFI) on what it refers to as “junk fees”, which the Bureau argues are contributing to the rising costs of homeownership.

The CFPB issued a request for information (RFI) in May seeking public input on mortgage closing costs, citing a significant increase in median total loan costs from 2021 to 2023. The agency expressed concerns about the impact of these fees on home affordability.

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

The MBA contended that the primary drivers of current barriers to homeownership and affordability are low housing inventory and pandemic-induced macroeconomic conditions, rather than closing costs. The association pointed out that rising closing costs are a consequence of these issues and not a primary driver of affordability challenges.

Contrary to the CFPB’s narrative, the MBA reported that mortgage lenders have suffered eight straight quarters of net production losses.

“With this significant decrease in profitability, it becomes apparent that lenders are in fact not benefiting from the increase in closing costs,” the MBA stated.

In a comment letter, MBA president and CEO Robert Broeksmit said that the CFPB’s focus on mortgage closing costs was misguided, as it overlooked the broader economic factors driving housing costs, such as low inventory and inflation.

“[It] inaccurately characterizes certain disclosed, required and necessary mortgage-related fees as ‘junk fees’ in its press releases, blogs, circulars, advisory opinions, and public speeches,” said Broeksmit. “These statements suggest that the CFPB may have already arrived at predetermined conclusions about the questions in this RFI and the validity of these charges.”

The MBA also highlighted that mortgage lenders have faced eight consecutive quarters of net production losses, challenging the CFPB’s narrative that lenders benefit from high closing costs.

The association highlighted several factors contributing to increased closing costs:

• Rising third-party service fees, many of which are required for loan securitization or guarantees.
• Decreased loan pull-through rates, resulting in lenders bearing more costs when borrowers do not close transactions.
• Increased credit reporting fees, even during a time of decreased origination volume.

The association suggested that instead of focusing on closing costs, the CFPB should consider revising existing regulations that add to these costs.

Among the recommendations were changes to the Loan Officer Compensation Rule and the TILA-RESPA Integrated Disclosure (TRID) rules, which the MBA argues could help reduce compliance costs and provide clearer disclosures to consumers.

Read more: Mortgage industry: CFPB ignores its own role in junk fees

In addition, the MBA pointed out that many fees, such as those for credit reports, appraisals, and title insurance, are necessary to meet investor and guarantor requirements. These fees, they argue, are beyond the control of lenders and are essential for securing loans.

“The CFPB should consider reviewing other regulations as a means to decrease closing costs,” Broeksmit said. “However, no matter the solution, the CFPB must address closing costs within the framework established by Congress. And any solution should reflect an accurate understanding of what is driving the costs of originating and closing loans – both collectively, and with respect to the types of specific charges the CFPB appears to be most focused on. It is against that backdrop MBA appreciates the opportunity to offer detailed comments on the CFPB’s mortgage closing costs RFI”

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