Prepared Remarks of CFPB Director Rohit Chopra at a White House Event Convening on Mortgage Closing Costs

Thank you to the Domestic Policy Council and the National Economic Council for bringing us together today.

Saving up for a down payment is a big obstacle when buying a home, and for many families the process takes years. This morning, the Consumer Financial Protection Bureau launched an inquiry into junk fees that drain down payments and push up the cost of closing on a mortgage for borrowers.

In a true competitive marketplace, people can clearly compare the full price and the key features upfront to select the best option. However, junk fees have been creeping across the economy for years, jacking up the prices we pay for all kinds of products and services. Sometimes, junk fees are charged for fake or worthless services that the customer never wanted. In other cases, junk fees are unavoidable charges imposed on captive customers who have no meaningful choice. Many junk fees are wildly inflated relative to the provider’s cost. Junk fees aren’t just an inconvenience or a nuisance. They represent what happens when companies exploit their customers, rather than competing for them.

Closing costs are the various fees tacked on to a mortgage transaction that are due by the time the loan closes or when the borrower signs the loan agreement. They include charges for things like credit reports and credit scores, title search and title insurance, and other settlement fees.

This wide assortment of fees—which can go by over 200 different names—can add up. These costs have recently risen sharply: from 2021 to 2023, median total loan costs increased by over 36 percent on home purchase loans.

While some of these fees may be providing a legitimate service at a fair price, many of these closing costs may not be subject to fair competition. These fees don’t just affect the consumers who face higher monthly mortgage costs and depleted down payments. Mortgage lenders themselves are battling junk fees, and when costs for things like credit reports increase it becomes more expensive for lenders to even consider an applicant.

There is broad concern from lenders and borrowers about credit report junk fees. Three conglomerates — Equifax, Experian, and TransUnion — dominate the market for credit reports. And they in turn rely on another company, the Fair Isaac Corporation, for the proprietary FICO score.

Mortgage lenders have told the CFPB that costs for credit reports and scores have increased, sometimes by 400%, since 2022. But because investors require the FICO score to analyze pools of mortgage and mortgage-backed securities, lenders are a captive customer base. They have no choice but to pay the fees if they hope to be able to sell the loan on the secondary market and continue to make more loans.

The Fair Credit Reporting Act limits fees charged to consumers for credit files to $15.50, but lenders pay way more. In certain circumstances, the CFPB has the authority to establish a “fair and reasonable” price for some of these reports.

Title insurance fees are a major expense at closing for homeowners, often costing thousands of dollars. Title insurance is an unusual product, typically paid in one big fee rather than regular monthly premiums. Many mortgage lenders require that the borrower purchase the lender’s title insurance—which protects the lender, not the borrower—against problems with the property’s title.

Homebuyers typically have few options when it comes to title insurance. And in many cases, the price borrowers are charged for lender's title insurance is significantly greater than the risk.

Finding ways to reduce these and other costs will help more Americans cross the finish line when it comes to buying a home.

As many of you know, the CFPB has been focused on reining in junk fees across the board. Our work is saving Americans billions of dollars. We are pleased to build on this work and join this multi-agency effort to combat junk fees in housing.

Too many Americans already face sky-high housing costs because of recent increases in interest rates and home prices. Junk fees in closing costs can add substantial out-of-pocket expenses for households. By draining down payments, they also make monthly mortgage costs even higher.

We want to hear from homebuyers and homeowners about how these fees are further straining their tight budgets. And we want to better understand from lenders how certain costs—like those associated with screening applicants’ creditworthiness—may affect their ability to offer loans to some prospective borrowers. We especially want to hear from mortgage lenders, who are already prohibited from inflating fees and paying kickbacks, about ways to stop down payment drain.

The CFPB administers many laws and regulations related to mortgage lending and real estate settlement, including the Truth in Lending Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act. Our inquiry will help to inform how we update rules, develop guidance, and pursue other policy initiatives with other federal and state agencies. We look forward to reviewing the public input we receive from as part of this inquiry.