The Consumer Financial Protection Bureau (CFPB) has launched an investigation into "junk fees" associated with mortgage closing costs, which have seen significant price increases in recent years. This blog explores the types of fees under scrutiny and the impact on homeownership affordability.

Mortgage closing fees, often a surprise to new homeowners, are under federal scrutiny due to their rising costs and complexity. Last week, the Consumer Financial Protection Bureau (CFPB) announced an investigation into these so-called "junk fees" which include charges for home appraisals, title insurance, and more, that significantly inflate the final buying cost.

Understanding Junk Fees

"Junk fees" refer to costs that exceed the actual service value. Key fees under review include:

Discount points: 

Upfront payments to reduce loan interest rates.

Credit report fees: 

Charges for accessing borrower credit histories.

Home appraisal fees:

Costs for property valuation.

Title insurance fees: 

Charges for insurance against property title issues.

Mortgage origination fees: 

Fees charged for processing new mortgage applications.

Why Are Fees Rising?

Inflation and increased labor costs are driving up appraisal and credit report fees. As home prices soar, so do related fees, impacting overall affordability and complicating the dream of homeownership for many.

Government Concerns and Actions

The CFPB worries these fees hinder buyers from affording down payments and maintaining mortgage payments. They are exploring regulatory changes to potentially lower or eliminate some fees to ease the financial burden on homebuyers.

The Bottom Line

With homeownership rates slightly declining, addressing excessive mortgage fees is crucial for improving access to affordable housing. The outcome of the CFPB’s efforts could play a significant role in shaping the future landscape of homeownership in the U.S.