ALTA Responds to CFPB’s Request for Information on Closing Costs

May 30, 2024

ALTA responded to the Consumer Financial Protection Bureau’s public inquiry into mortgage closing costs by explaining the services provided by title professionals and the ongoing protection of a title insurance policy are some of the most essential, but least expensive, parts of the homebuying process.

On May 30, the bureau issued a request for information (RFI) seeking input to understand why closing costs are increasing, who is benefiting, and how costs for borrowers and lenders could be lowered. The CFPB cited cost for credit scores, credit reports and employment verification as examples. The bureau also mentions lender’s title insurance and in the RFI said “title insurance is one of the costliest settlement services at closing.”

“In a period of increased inflation, thanks to industry innovation, the cost of title insurance coverage has decreased 5% over the last five years alone,” said Diane Tomb, ALTA’s chief executive officer. “We appreciate the opportunity to educate federal agencies as to how the title insurance market works and collaborate with policymakers on thoughtful approaches to the important issue of housing affordability.”

Fees for title insurance and other closing costs must be provided and disclosed to consumers under the TILA-RESPA Integrated Disclosure (TRID) rule that the CFPB developed in 2015. Lumping title insurance and settlement services into the category of “junk fees” conflicts with the White House’s own definition, which cites the lack of disclosure of the fee being charged.

The CFPB’s research from 2020 shows these disclosures are working to educate consumers about closing costs. The bureau's report praised its own rule for improving “consumers ability to locate key information, compare terms and costs between initial disclosures and final disclosures, and compare terms and costs across mortgage offers.” 

Title insurance is comprehensively regulated at the state level by departments of insurance. Title insurance companies are required to file their policies and rates with state regulators to ensure they are fair, non-discriminatory and adequately protect consumers. Insurers must justify their rates using actuarially supported data.

ALTA has shared that the title industry does more than just issue insurance policies. The industry performs vital work to cure defects in the chain of title and collects $3 billion annually in delinquent federal income taxes ($2.4 billion), delinquent property taxes ($600 million) and unpaid child support ($55 million). The industry also helps combat wire and deed fraud to protect consumers.

Comments must be sent to the CFPB by Aug. 2.

Specifically, the CFPB seeks information to the following:

  1. Are there particular fees that are concerning or cause hardships for consumers?
  2. Are there any fees charged that are not or should not be necessary to close the loan?
  3. Provide data or evidence on the degree to which consumers compare closing costs across lenders.
  4. Provide data or evidence on the degree to which consumers shop for closing costs across settlement providers.
  5. How are fees currently set? Who profits from the various fees? Who benefits from the service provided? What leverage or oversight do lenders have over third-party costs that are passed onto the consumer?
  6. Which closing costs have increased the most over the past several years? What is the cause of such increases? Do they differ for purchase or refinance? Please provide data to support if possible.
  7. What is driving the recent price increases of credit reports and credit scores? How are different parts of the credit report chain (credit score provider, national credit reporting agencies, reseller) contributing to this increase in costs? What competitive forces are or can be brought to bear on these costs? What are the impacts on consumers of the increased costs?
  8. Would lenders be more effective at negotiating closing costs than consumers? Are there reports or evidence that are relevant to the topic?
  9. What studies or data are available to measure the potential impact closing costs may have on overall costs, housing affordability, access to homeownership, or home equity?

Contact ALTA at 202-296-3671 or [email protected].