Home Mortgage Mortgage Closing Costs, Fees Leapt 22% in 2022, Study Shows

Mortgage Closing Costs, Fees Leapt 22% in 2022, Study Shows

by Joshua Garcia

Residential mortgage lending activity experienced a sharp decline in 2022, according to a new report. The report, released by the Consumer Financial Protection Bureau (CFPB), highlights the impact of higher interest rates, closing costs, and denials for insufficient income on the mortgage market.

Rohit Chopra, the director of the CFPB, stated that the higher interest rate environment had profound effects on the mortgage market, resulting in borrowers paying significantly more in monthly payments. Chopra also predicted that these trends would continue with further increases in interest rates in 2023.

The CFPB’s annual report on residential mortgage lending activity and trends revealed a significant decrease in mortgage applications and originations in 2022 due to the rising interest rates, fees, and other costs. This decline is further supported by the Mortgage Bankers Association’s weekly mortgage applications survey, which showed a shrinking mortgage demand as a result of high interest rates.

The report also highlights that more borrowers paid discount points in 2022 than in any other year since 2018. The median borrower paid $2,370 for discount points, representing a 32.1% increase from 2021.

The findings in the report are based on data collected under the Home Mortgage Disclosure Act, which requires financial institutions to collect and disclose certain loan-level information on mortgage applications and originations. The data provides insight into the challenges faced by borrowers in an environment of increasing interest rates and fees.

Borrowers who did secure mortgages in 2022 experienced a significant increase in their monthly mortgage payments, with an average increase of 46%. The median interest rate for a 30-year fixed-rate mortgage reached 6.5% at the end of the year, and closing costs rose by 21.8% to an average of $5,954.

The report also highlights a steep decline in refinances, with a 73.2% drop to 2.2 million. However, there was a 33.3% increase in home equity lines of credit as the only form of refinancing that showed growth.

One concerning finding from the report is the disparities in outcomes for Black and Hispanic borrowers. These groups faced higher denial rates, smaller loans, higher interest rates, and more upfront fees compared to white and Asian borrowers. However, some of these disparities diminished for FHA loans.

In response to the report, the CFPB plans to focus more attention on helping borrowers navigate alternatives to foreclosure during times of financial distress. This may involve exploring amendments to mortgage servicing standards and simplifying the refinancing process for borrowers.

The CFPB encourages individuals to visit its website or call their helpline to submit complaints about mortgage or refinance issues, as well as other financial products or services. The agency also provides a consumer education center on mortgages for more information on obtaining and maintaining a mortgage.

Overall, the report highlights the challenges faced by borrowers in a higher interest rate environment, as well as the need for further assistance and support to ensure fair lending practices and equal access to opportunities for all borrowers.

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