The Community Home Lenders of America (CHLA) on Thursday issued a comment letter to the Consumer Financial Protection Bureau (CFPB), saying that a major reason for the increase in mortgage closing costs from third parties is due to a lack of competition among third-party providers.
On top of “click fees” that CHLA said are charged by ICE Mortgage Technology to facilitate data access between lenders and vendors, “fees for necessary loan functions have grown exponentially in recent years, in areas where mortgage lenders have no other real alternatives to a dominant service provider,” according to the letter reviewed by HousingWire.
This past January, CHLA released a white paper regarding the major credit bureaus’ moves to drastically raise their prices for the compilation of credit reports. In April, the organization submitted a letter to the CFPB requesting the compilation of a report on a series of third-party mortgage fees — including credit report fees, title insurance and Equifax employment verification fees.
In May, the CFPB issued a request for information concerning “fees charged by providers of mortgages and related settlement services,” leading to the latest response by CHLA.
“CHLA’s overall conclusion is that the common factor underlying excessive third party mortgage provider fee increases is a lack of competition for each product, combined with the fact that most of these products are effectively required on all mortgage loans by federal mortgage programs,” the CHLA letter stated.
Among these are mortgages backed by entities including Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) and the Rural Housing Service (RHS) overseen by the U.S. Department of Agriculture (USDA).
“CHLA believes that an important strategy in addressing excessive fees by providers in markets that lack competition is to shine a bright spotlight on such pricing and practices,” the letter explained. “This can have a real impact. For example, in January 2023 CHLA highlighted unfair pricing discounts FICO granted to only a handful of large lenders. Under pressure, FICO eliminated these discriminatory pricing policies just one year later.”
But other steps can be taken, the organization said. Ensuring that consumers are aware they’re entitled to one free credit report per year would help, as would encouraging “FHFA as conservator [to] explore whether it is appropriate to have them limit excessive cost increases” for FICO credit scores.
CHLA also supports a recent Fannie Mae pilot program that would lower title insurance costs on some refinance loans, as well as the development of an alternative to Equifax’s Work Number verification service, but it remains critical of ICE’s vendor access fees.
“CHLA commends the CFPB for highlighting these concerns and recognizing the increasing costs and lack of competition in third party provider mortgage origination and settlement fees,” executive director Scott Olson said in a statement.
