On May 30, the Consumer Financial Protection Bureau (CFPB) released a Request for Information (RFI) regarding mortgage closing costs. The seven-page RFI provided nine questions about the impact of closing costs, and how they relate to borrowers and the mortgage market. Comments on the RFI are due by Aug. 2. The RFI follows CFPB’s March blog post on housing “junk fees,” detailing that the bureau would seek public input regarding mortgage closing costs. The below sections include an analysis of the RFI and the state of play around closing costs moving forward.

RFI Background Section

The RFI detailed the state of the mortgage market regarding closing costs, focusing on both borrowers and lenders. It stated that from 2021 to 2023, “median total loan costs increased by over 36% on home purchase loans.” The RFI also stated that costs for “credit scores, credit reports, and employment verification, for example, have all increased markedly over the last few years.”

Credit Reports

In the RFI, CFPB explained that credit reporting costs have risen “steeply” in the last two years, asserting that the credit reporting industry is “highly concentrated.” It also stated that soft credit report pulls now cost the same as hard pulls, which significantly increases overall credit reporting costs. CFPB also highlighted that smaller increases in the cost of hard credit pulls have an “outsized effect” because the Government Sponsored Enterprises (GSEs) and other government mortgage insurers currently require tri-merge reports for loans that are purchased or insured by them. The RFI noted that the bureau is interested in comments regarding the reasons for the “increase and variability in the fees lenders pay for credit reports” and how the costs are passed on to consumers.

Origination Fees

CFPB detailed that lenders can have high variability in the origination fees. The CFPB argues that this can complicate borrowers’ ability to compare costs between loan products.

Settlement Services/Title Insurance

In the RFI, CFPB noted that title insurance is “one of the costliest settlement services at closing.” CFPB added that, in the current market, borrowers are “forced” to pay for lenders’ insurance premiums at closing. It outlined that title insurance premiums often range from 0.5% to 1.0% of the purchase price.

RFI Questions

CFPB’s RFI seeks input from the public on the below questions:

• Are there particular fees that are concerning or cause hardships for consumers?
• Are there any fees charged that are not or should not be necessary to close the loan?
• Provide data or evidence on the degree to which consumers compare closing costs across lenders.
• Provide data or evidence on the degree to which consumers shop for closing costs across settlement providers.
• 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?
• 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.
• 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?
• Would lenders be more effective at negotiating closing costs than consumers? Are there reports or evidence that are relevant to the topic?
• 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?

Next Steps

Comments on the RFI are due by Aug. 2. CFPB Director Rohit Chopra will testify before the House Financial Services and Senate Banking committees on June 12 and 13, respectively. He will likely receive questions from legislators on the RFI and other CFPB efforts regarding mortgage closing costs. The CFPB is unlikely to release a proposed rule on mortgage closing costs ahead of the 2024 election, but it could be a major priority in a potential second Biden administration. On the other hand, since housing costs are a major election issue, it is possible that the CFPB may not have as big of an appetite to get involved in regulating closing cost pricing post-election, given the questionable legal authority to do this.

In the credit reporting space, the Federal Housing Finance Agency (FHFA) expects to implement its bi-merge credit reporting requirement in the fourth quarter of 2025. The updates will require the GSEs to mandate only two credit reports for single-family loan acquisitions instead of three credit reports. The CFPB is also expected to propose a rule for the Fair Credit Reporting Act in the next few weeks.