Discussion Paper

The Rise in Mortgage Fees: Evidence from HMDA Data

Abstract: Although rising mortgage interest rates between 2022 and 2023 captured headlines, the cost of upfront mortgage fees also increased significantly during that time. Using new Home Mortgage Disclosure Act data on fees, collected since 2018, we estimate that borrowers’ out-of-pocket upfront costs for getting a home purchase mortgage rose nearly 33 percent from 2021 to 2023, to almost $6,500. We document that the main driver of this increase has been rising payments of “discount points,” as opposed to other types of lender fees and third-party fees. We show that loans originated by nonbanks, in particular, have seen large increases in discount points and yet also carry the highest interest rates, on average, after accounting for borrower and loan traits that influence risk premia.

Keywords: mortgage; closing costs; nonbanks; FinTech;

JEL Classification: G21; G51;

https://doi.org/10.21799/frbp.dp.2024.01

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Consumer Finance Institute discussion papers

Publication Date: 2024-11-12

Number: 24-01