CFPB launches inquiry into mortgage closing costs

The Consumer Financial Protection Bureau (CFPB) launched a new request for information into so-called “junk fees” associated with mortgage closing costs, seeking to understand why closing costs on mortgages are increasing and putting homeownership further out of reach. Specifically, CFPB is looking into why costs are rising, who is benefiting, and how those costs can be lowered for consumers. The announcement cites a recent analysis showing that between 2021 and 2023, median total loan costs for home mortgages rose over 36%, noting that these fees are unavoidable for homebuyers and make average closing costs $6,000, which can undercut homeownership. The announcement also notes that mortgage lenders are paying higher prices, citing the increasing cost of credit reports. 

“Junk fees and excessive closing costs can drain down payments and push up monthly mortgage costs,” said CFPB Director Rohit Chopra. “The CFPB is looking for ways to reduce anticompetitive fees that harm both homebuyers and lenders.”

The American Bankers Association, Housing Policy Council, and the Mortgage Bankers Association issued a joint response. “Given the significant home-price appreciation and swift inflation that consumers have encountered in recent years, a discussion about policies that address affordability burdens while maintaining healthy and competitive mortgage markets makes good sense,” the press release reads. “A rule-making process governed by the Administrative Procedure Act – and supported by a robust cost-benefit analysis – is the only appropriate vehicle to initiate that work. Such a rule-making process would allow for the proper level of engagement to produce changes that benefit consumers and do not add compliance costs and lead to negative unintended consequences.”

The Community Home Lenders of America (CHLA) supported the move. “CHLA commends the CFPB for highlighting third-party mortgage service provider junk fees, which can harm consumers and reduce access to homeownership,” said Executive Director Scott Olson. “In particular, we are pleased the CFPB focused on two areas of concern to our members, credit scoring and title insurance.” 

FHFA enhances loan modification program

The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will jointly update one of their loss mitigation solutions, Flex Modification, to more adequately serve homeowners who find themselves in long periods of financial hardship. Flex Modification incrementally lowers a borrower’s monthly mortgage through various solutions, including loan extension, interest rate reduction, and principal forbearance, to reduce the financial burden of monthly payments on distressed homeowners.

“The Flex Modification enhancements will support sustainable homeownership by allowing more eligible borrowers facing hardships to remain in their homes by achieving a meaningful mortgage payment reduction in the current environment of elevated interest rates and home prices,” said FHFA Director Sandra Thompson. She noted the Enterprises have completed over half a million modifications through Flex Modification offerings since 2017.

Along with other procedural changes, FHFA made these revisions to expand the eligible population for loss mitigation and achieve more equitable outcomes for borrowers. Lenders may implement these changes starting Nov. 1 and must do so by Dec. 1.

VA calls for extension of foreclosure moratorium

The Department of Veterans Affairs (VA) issued new guidance strongly encouraging mortgage servicers to extend the current foreclosure moratorium for veterans with VA-guaranteed loans through the end of this year. The moratorium is scheduled to expire on May 31. The extension would allow more time for families to keep their homes while servicers implement the new Veterans Affairs Servicing Purchase (VASP) program, which officially launches on May 31 but is not required to be implemented until Oct. 1.

“When a Veteran falls on hard times, we work with them and their loan servicers every step of the way to help prevent foreclosure, including offering repayment plans, loan modifications, and more,” said VA Under Secretary for Benefits Josh Jacobs. “We’re calling on mortgage servicers to follow a targeted foreclosure moratorium so we can make sure that Veterans get the support they need to stay in their homes.”

Members of Congress urge Treasury and IRS to provide VAWA guidance

U.S. Reps. Gwen Moore (D-Wis.) and Claudia Tenney (R-N.Y.) co-authored a bipartisan letter to Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel requesting that they issue clear guidance regarding protections granted by the Violence Against Women Act (VAWA) on properties that participate in the Low-Income Housing Tax Credit (LIHTC) program.

“Congress added the Housing Credit to the list of VAWA covered programs over a decade ago, yet, unlike HUD and several other federal departments that have published regulatory guidance and/or model forms to support their grantees in ensuring they appropriately comply with the protections afforded under VAWA, the IRS and Treasury have not issued guidance related to VAWA’s application to the Housing Credit program,” the letter reads.

VAWA prohibits housing providers who participate in covered programs from denying housing to survivors of domestic and sexual violence based on their survivor status and further guides how to handle domestic violence on-site. The letter notes that according to the National Network to End Domestic Violence, a lack of safe and affordable housing is a primary barrier for survivors of domestic violence when they choose to leave an abusive partner. The lack of clear guidance from Treasury and the IRS on how to apply these protections to LIHTC properties has resulted in a stratified, state-by-state response from housing finance agencies. This stratification ultimately undermines the goal of VAWA. The letter requests a response within 30 days.

HUD announces $150 Million for affordable housing in Tribal communities

HUD announced $150 million in funding for affordable housing in American Indian and Alaska Native communities via the Indian Housing Block Grant (IHBG) Competitive program. Richard Monocchio, HUD Principal Deputy Assistant Secretary for Public and Indian Housing, made the announcement during a visit to a construction site of the Nottawaseppi Huron Band of the Potawatomi in Michigan. A previous IHBG funded that project. 

HUD Acting Secretary Adrianne Todman highlighted the agency’s partnership with Tribes to improve housing conditions and community resilience. According to a 2017 HUD study, Tribal communities need 68,000 new homes to address severe housing issues. The new funds will support new construction, housing rehabilitation, and essential infrastructure projects to alleviate the Tribal housing shortage and enhance living conditions for Tribal members. You can learn more about the funding and application process here.  

HUD’s PD&R to host housing innovation panel discussions

On June 6-7, the Department of Housing and Urban Development’s (HUD) Office of Policy Development & Research (PD&R) will host hybrid panel discussions on housing innovation. These sessions will explore various topics, including offsite construction, building codes, manufactured housing, decarbonization, zoning, public and multifamily housing, resilience, and finance.

The discussions will bring together leaders from the public, private, and government sectors to focus on the cross-sector collaborations necessary for advancing innovative approaches to housing. The goal is to create more abundant, affordable, and sustainable housing for all Americans.

These sessions will serve as the opening for HUD’s annual Innovative Housing Showcase (IHS) taking place on the National Mall from June 7-9. The 2024 IHS aims to raise public awareness of cutting-edge and affordable housing designs and technologies.

Participants can attend the event either in person or via webcast. For more information about the sessions and panels, please click here.