The mortgage industry has complained loud and clear that government regulations and investor demands have contributed to skyrocketing costs being passed on to consumers, and a frequent target of those complaints, Rohit Chopra, the tough-talking director of the Consumer Financial Protection Bureau, seems to agree — at least when it comes to refinancing job cuts.
“We really think that closing costs can be a big barrier to refinancing,” Chopra said Monday at the AI & Technology Conference, co-hosted by ICE Mortgage Technology and the National Housing Conference at the New York Stock Exchange. “They can amount to several percent of the total mortgage amount, which means that refinancing doesn't make sense for borrowers unless the interest rate offered is significantly lower than their current interest rate.”
Chopra pointed to closing costs that borrowers can't compare — credit reports, FICO scores, employment verification, lender title insurance — as a factor, but he also said certain job cuts are coming under scrutiny.
“We are considering whether certain changes should be made to existing mortgage regulations to streamline the process and reduce closing costs,” he said. “If existing or competing lenders are willing to refinance your mortgage at a much lower interest rate or with a substantially similar quote, it may not make much sense for a lender to repeat many of the steps taken during the purchase process.”
He continued: “We are particularly interested in the cost and time it takes to refinance a mortgage that is solely related to compliance with federal mortgage law, not a step that an investor may request for other reasons. We are also exploring ways to stimulate competition in certain closing cost categories, which could also lead to more activity. Third, we are seeking to enact rules that will accelerate the transition to open banking with mortgages in mind.”
The CFPB will be closely monitoring the introduction of new mortgage technology, including applications touted as leveraging artificial intelligence, Chopra said. There are several new uses of data, including AI-generated ones, at many stages of the mortgage process, many of which could be breakthroughs that benefit lenders and consumers. But poor adoption could exacerbate existing disparities and create new ones, Chopra said.
Chopra noted that the CFPB has been hiring more technologists in recent years not just to identify areas of potential innovation but also to prosecute violations of the law.