The head of the Mortgage Bankers Association (MBA) has criticized the Consumer Financial Protection Bureau (CFPB) of being both “politically motivated” and ignorant regarding the closing costs process in homebuying.
On Friday, the CFPB published a blog post under the headline “Junk fees are driving up housing costs. The CFPB wants to hear from you.” The agency took aim at closing costs, arguing that these fixed costs “have an outsized impact on borrowers with smaller mortgages, such as lower income borrowers, first-time homebuyers, and borrowers living in Black and Hispanic communities.” The blog post also criticized lender’s title insurance as “a fee borrowers face at closing where the borrower has no control over cost” and fees related to credit reports – the latter generated the CFPB’s complaint that “nationwide credit reporting companies made over $1.3 billion annually … in a market that lacks competition.”
The CFPB issued a blunt warning that it would be taking aim at companies in the housing market.
“In the coming months, the CFPB will continue working to analyze mortgage closing costs, seek public input and, as necessary, issue rules and guidance to improve competition, choice, and affordability,” the blog post stated. “We will also continue using our supervision and enforcement tools to make it safer for people to purchase homes and to hold companies accountable when they violate the law. Our research findings and market insights guide our work, as well as information from consumers that helps us better understand how issues like mortgage closing costs affect households and families.”
MBA President and CEO Bob Broeksmit responded to the CFPB’s blog post by questioning whether the agency understood the subject it was criticizing.
“The CFPB’s blog post is baffling and reveals little understanding of how the mortgage market works or awareness of its own regulations that provide for full fee transparency and limits on what can be charged,” Broeksmit said. “The fees mentioned are clearly disclosed to borrowers well before a home purchase on forms developed and prescribed by the Dodd-Frank Act and the CFPB itself. The illogical use of the term ’junk fee’ contradicts even the White House’s own definition, which cites the lack of disclosure of the fee being charged.”
“Any suggestion that this disclosure regime is unfair and rife with junk fees defies the CFPB’s own analysis,” he added. “In 2015, the industry implemented the Bureau’s ‘TRID’ rule, which comprehensively reformed mortgage disclosures. In 2020, the CFPB issued a report praising its own rule for improving ’consumers’ ability to locate key information, compare terms and costs between initial disclosures and final disclosures, and compare terms and costs across mortgage offers. There are CFPB-imposed limits on fees that lenders can charge, and the services covered by these fees are integral to the efficient operation of the mortgage market.”
President Biden has spent several months denouncing “junk fees” and raised the subject in his politically charged State of the Union speech last Thursday. Broeksmit questioned the timing of the CFPB’s blog posting, stating the MBA “will vigorously oppose politically motivated proposals that only increase regulatory costs, reduce competition, or otherwise make it more difficult for Americans to get the credit necessary to achieve homeownership.”
