The mortgage industry has often complained that government regulations and investor requirements are contributing to increased costs being passed on to consumers. And Rohit Chopra, the hard-charging director of Consumer Financial Protection Bureauwho are often the victims of such complaints, he apparently agrees. At least when it comes to confusing refinances, that is.
“We really think that closing costs can be a big barrier to refinancing,” Chopra said at a co-hosted AI and technology conference. ICE Mortgage Technology as well as National Housing Conference New York Stock Exchange on Monday. “They can cover a few percent of the total loan amount. This means that it will not make sense for borrowers to refinance unless the offering interest rate is significantly lower than their current rate.”
In his keynote address, Chopra pointed to closing costs that borrowers can’t afford as delinquent — credit reports, FICO scores, employment verification and a borrower’s title policy. But he also noted that some things do not work under the microscope.
“We’re looking at whether we should make some changes to the existing mortgage rules to streamline the process and reduce closing costs,” he said. “When an existing or competing lender wants to refinance the loan at a much lower rate or a very similar quote, it may not be helpful for the borrower to repeat many of the steps taken during the purchase process.”
He continued: “We are very interested in the cost and time it takes to renew a loan that is only related to compliance with the federal mortgage law, rather than steps that investors may want for other reasons.” We are also looking to identify ways to introduce competition in certain categories of closing costs, which could help stimulate more activity. Thirdly, we are pursuing laws to speed up the reform of opening up banks with mortgages in mind.”
The CFPB will be scrutinizing the implementation of new real estate technologies, including applications that advertise using artificial intelligence, he said. There are novel uses of data, including generative AI at many stages of the mortgage process, and many could represent breakthroughs that benefit lenders and consumers. But the wrong implementation could exacerbate existing disparities and create new ones, Chopra said.
Chopra noted that the CFPB in recent years has hired more experts to identify areas that are ripe for startups, but also to prosecute violations.
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