House prices are stubbornly high, and mortgage rates remain substantially above their prepandemic level. Now, with the spring home buying season looming, shoppers have a new worry: A major federal consumer watchdog has been hobbled.
Without the Consumer Financial Protection Bureau, the agency responsible for overseeing most aspects of the home buying process, consumer advocates say home buyers need to be their own watchdogs.
“Now, when you buy a house, you are much more vulnerable to being misled,” said Sharon Cornelissen, housing director with the Consumer Federation of America. “It’s important to be on guard, because guardrails are being taken away.”
Buying a home is the biggest financial decision most Americans will make in their lives. The typical home price is about $397,000, according to the National Association of Realtors, but prices are far higher in some parts of the country. In several California counties, for instance, the median price at the end of last year was over $1.5 million, with monthly mortgage payments over $8,000.
What role has the consumer bureau played in home buying?
The consumer bureau was created after the financial and housing crisis in 2007-8 to streamline oversight of lenders and financial companies serving consumers. Over the years, the bureau has moved to ease the mortgage shopping process by offering simplified forms and educational tools, and has taken action against an array of banks and lenders. In 2022, for instance, the bureau ordered Wells Fargo to pay $3.7 billion for mishandling a variety of customer accounts, including improperly denying thousands of requests for mortgage loan modifications that in some cases led borrowers to lose their homes to “wrongful” foreclosures.
On Jan. 17, in the final days of the Biden administration, the bureau reached a settlement with Draper and Kramer Mortgage Corporation for discouraging borrowers from applying for loans to buy homes in majority Black and Hispanic neighborhoods in Chicago and Boston. In an email, the lender’s lawyers said Draper and Kramer “considers the matter closed and denies” the bureau’s claims, but chose to settle in part to avoid “protracted legal costs.”
What has changed under the Trump administration?
Since President Trump took office on Jan. 20, the consumer bureau has taken a hands-off approach. Last month, it dropped legal action against Rocket Homes Real Estate, which had been accused in December of illegally steering prospective borrowers to an affiliate, Rocket Mortgage. In an emailed statement, Rocket Homes said it “has always connected buyers with top-performing agents based only on objective criteria like how well they helped home buyers achieve their dream of homeownership.”
The bureau also dropped a suit against Vanderbilt Mortgage and Finance, owned by Berkshire Hathaway, for making loans to buyers of manufactured homes who it knew could not afford to repay them. A rule requiring mortgage lenders to verify that borrowers are able to pay was a key aspect of changes put in place after the financial crisis, when many people lost their homes because they couldn’t make their loan payments. In a prior statement, Vanderbilt said the lawsuit was “unfounded and untrue, and is the latest example of politically motivated, regulatory overreach.” Vanderbilt also said it exceeds legal requirements for assessing a borrower’s ability to pay.
Alys Cohen, a senior attorney with the National Consumer Law Center, said the bureau had effectively stopped overseeing if lenders were complying with consumer protection laws. Other federal regulators oversee banks, she said, but their main focus is an institution’s overall safety and soundness, rather than its treatment of consumers. States also regulate banks and other lenders.
“People may be exposed to high prices and hidden relationships they may not know about,” she said. (The center has joined a lawsuit opposing the administration’s efforts to dismantle the consumer bureau.)
The consumer bureau didn’t respond to an email seeking comment on its activities.
The relaxed oversight comes as buyers navigate what has been a challenging housing market. Lawrence Yun, chief economist with the National Association of Realtors, said in a statement that “it’s evident that elevated home prices and higher mortgage rates strained affordability” in January, when pending home sales fell almost 5 percent.
Mortgage rates have dipped recently, with the average rate on a 30-year fixed-rate home loan falling to 6.63 percent as of Thursday, down from 6.76 percent a week earlier, the mortgage financing giant Freddie Mac reported.
How can home buyers manage costs and reduce risks?
Research by the consumer bureau found that only about half of borrowers shop for better terms and interest rates when taking out a new home loan or refinancing a mortgage. That may be because getting quotes takes time, and consumers may get confused when comparing complex choices, leading them to rely on a loan officer they already know or a single referral from a real estate agent or friend.
Yet shopping around with different lenders to compare costs can save borrowers thousands of dollars, according to research from Freddie Mac. Getting two rate quotes could save as much as $600 annually, and getting at least four quotes could save more than $1,200 a year, Freddie Mac said.
Home buyers use referrals from their real estate agents for providers like title insurers and home inspectors, but borrowers should shop around for these providers as well, housing advocates say. The consumer bureau found last year that home loan closing costs had risen significantly, in part because rising interest rates were leading more borrowers to pay upfront for “discount points,” to reduce the rate on their loans.
Ms. Cohen, of the consumer law center, also suggested taking a home buyer education course, particularly if you are a first-time buyer. (Lenders may require the courses in some cases, such as if you seek help with a down payment.) The courses, offered in person or online, help shoppers understand what’s involved in finding, financing and owning a home, including how to select a lender. To find a course approved by the Department of Housing and Urban Development, check the agency’s website.
What if I run into a problem with my mortgage or my home lender?
You can file a complaint with the consumer bureau, although it’s unclear if complaints are being processed. “The law stands,” Ms. Cornelissen said. “It’s just harder to enforce” without the bureau.
In a court filing this week, the chief of staff for the bureau’s office of consumer response said that many people “are not receiving timely responses to their complaints” and that for those facing urgent situations, like losing their home to an imminent foreclosure, “there is simply no one at the C.F.P.B. to help.”
Christopher Peterson, a professor at the University of Utah’s Quinney College of Law and an expert in consumer law, said, “I still think it’s worth complaining.” It’s not yet clear, he said, how legal fights over efforts to “de-staff” the consumer bureau will be resolved, but the law requires the bureau to maintain a complaint process.
After showing an error message for weeks, the consumer bureau’s website now opens directly onto its complaint portal.
You can also complain to the consumer protection arm of your state attorney general’s consumer office, Mr. Peterson said. State regulators may not always have the same resources and expertise as federal agencies, he said, but they may take on a larger enforcement role if the consumer bureau is diminished.
Ms. Cohen also noted that if you had certain types of government-backed mortgages, like one insured by the Federal Housing Administration, you could contact HUD’s national servicing center, which works with borrowers to prevent foreclosure. Cuts to HUD’s budget may curtail the servicing center’s functions, she said, but as of now it remains an option.
Can I take my mortgage lender to court?
Some consumer loans require private arbitration of disputes outside the courts, but that’s not the case with mortgages, Mr. Peterson said. If you believe you were overcharged or otherwise mistreated, you can bring legal action yourself. Such claims can be complicated, he said, but because a home purchase “can affect your financial destiny for a long period of time,” a lawsuit may be worth it.
One way to find a lawyer who specializes in consumer rights law is to search the website of the National Association of Consumer Advocates.
