Biden administration targets mortgage industry in crackdown on junk fees

The Biden administration is making waves in the mortgage industry by cracking down on junk fees that are driving up the costs of home purchase loans. The Consumer Financial Protection Bureau (CFPB) has expressed concerns about the significant increase in closing costs for both home purchase loans and refinances, with first-time homebuyers and lower-income borrowers being hit the hardest.

Closing costs typically include origination fees, appraisal fees, credit report fees, title insurance, discount points, and other fees. The CFPB is working to combat the proliferation of these junk fees and ensure that mortgage companies are not adding on unlawful charges to pad their profits.

One particular area of contention is discount points, which are fees paid upfront at closing to lower the interest rate on a mortgage. While some experts argue that discount points are not junk fees and are fully disclosed to borrowers, others believe that they may not always be in the best interest of the client.

The CFPB has also stepped into a lawsuit involving convenience fees charged by a mortgage company for online or phone payments, which were allegedly not agreed to by the borrowers when they took out their loan. The agency is committed to ensuring that illegal junk fees do not inflate prices in the consumer marketplace.

As the CFPB continues its crackdown on junk fees in the mortgage industry, industry experts warn that lenders may seek to recoup lost profits by increasing interest rates. It’s essential for borrowers to carefully review their loan estimates and ask their lenders about any fees before agreeing to a mortgage.

Overall, the efforts to reduce junk fees in the mortgage industry are aimed at protecting consumers and ensuring transparency in the homebuying process. By staying informed and asking the right questions, borrowers can make more informed decisions when it comes to their mortgage.