The Biden administration could soon expand its crackdown on junk fees and other closing costs in an effort to resolve the country's deepening housing affordability crisis, according to a report.
The Consumer Financial Protection Bureau (CFPB) is mulling whether to forbid mortgage bankers from charging homeowners for title insurance, as reported by Bloomberg News. The agency will soon begin laying the groundwork for the new measure. However, a final proposal will likely only come in 2025, the outlet noted, citing one of the people with knowledge of the matter. That being said, Bloomberg noted that the draft measure could still be abandoned altogether.
Should the measure be approved, it could provide relief to home buyers struggling with rising closing costs and soaring prices caused by limited inventory in the housing market. Closing costs typically include origination fees, appraisal, credit report fees, title insurance, and other fees.
"Families who manage to save up for a down payment and get approved for a mortgage often get an unwelcome surprise: closing costs that all too often are full of junk fees. The Consumer Financial Protection Bureau (CFPB) is working to ensure that consumers can navigate the closing process more easily, shop around, and save money," the CFPB said in a note published in March.
Rising Housing Costs
The report comes after the typical closing costs for home purchases rose almost 22% from 2021 to 2022, according to a recent report from the CFPB. Borrowers in 2022 typically paid $6,000 in closing costs on top of down payment and other costs related to home purchases. In comparison, borrowers in 2021 only had to pay about $4,900 in closing costs.
One likely factor in rising closing costs is an increase in the use of discount points, which are optional fees that home buyers pay upfront to reduce interest rates charged over the life of the loan, the report noted.
It also comes as home prices are soaring. The median price of homes in the U.S. is currently $412,095, per data from Redfin. Home prices are forecasted to increase by another 5% this year due to a lack of inventory. If the forecast comes true, home prices could increase to $432,699.
