Junk Fees

Demystifying Junk Fees in Mortgage Closings: What Borrowers Need to Know

Understanding Junk Fees

Junk fees, often sneaky charges imposed by lenders during mortgage closings, can catch borrowers off guard and inflate the cost of purchasing a home. Despite being listed on the HUD-1 settlement statement, these fees are considered excessive and not in good faith, leaving borrowers feeling blindsided. While not illegal or hidden, junk fees are often overlooked, allowing lenders to profit at the borrower's expense.

Consumer Financial Protection Bureau (CFPB) Reforms on the Closing Process

In 2015, the Consumer Financial Protection Bureau (CFPB) implemented reforms aimed at curbing deceptive lending practices and protecting borrowers from excessive fees. These reforms include restrictions on fee inflation, ensuring that no fee can be increased by more than 10% from the lending estimate to the final closing statement. Despite these regulations, borrowers must remain vigilant and challenge unnecessary fees to negotiate fairer costs.

Challenging Junk Fees: A Borrower's Right

While junk fees may not be inherently illegal, borrowers have the right to challenge and negotiate these fees with their lenders. However, many lenders bank on borrowers failing to scrutinize these charges, leading to increased costs and dissatisfaction with the home buying process. By understanding their rights and advocating for fair treatment, borrowers can navigate mortgage closings with confidence.