InfoBytes Blog
CFPB looks at mortgage-pricing differences
On May 24, the CFPB reported price dispersion trends in the mortgage industry, finding that borrowers could save at least $100 per month by choosing cheaper lenders. Price dispersion—the difference in interest rates charged by different lenders for the same loan product—is significant in the mortgage market, the Bureau said, following a review of 2021 HMDA data focusing on numbers for the 20 largest-volume lenders for each of the market segments. Examining price dispersion by loan type, including FHA and Department of Veterans Affairs loans, loans backed by Fannie Mae and Freddie Mac, and jumbo loans, the Bureau considered several potential factors contributing to price dispersion such as lender differences, competition, and increased demand. Additionally, the Bureau found that various options provided by lenders may account for different costs and choices made by consumers who may not select the cheapest option due to other factors that outweigh price differences. Data also suggested that competition in the mortgage market does not always translate into lower prices, the Bureau reported, noting that a recent study administered by the Bureau and the FHFA revealed that “most borrowers who recently took out a mortgage responded that they believe they would pay the same price regardless of which lender they choose” and that few borrowers consider more than two options. The data also found that lenders who choose to take on riskier loans may compensate for the risk by charging higher prices.