In early August, NTU filed comments with the Consumer Financial Protection Bureau (CFPB) in response to a request for public input on what it called “junk fees” in home loan closing costs. The basic thrust of our 10-page submission was to recommend that government officials look in the mirror when it came to making home purchases less affordable.
Apparently, Washington, DC, remains in short supply of mirrors. Today, a planned increase in the fee that the Internal Revenue Service (IRS) charges for its Income Verification Express Service (IVES) will take effect, from $2 per report to $4. This is a 100 percent jump. IVES can be a part of the Proof of Income process that a lender uses to help determine whether a borrower qualifies for a given loan amount, whether it be for a home, a car, or something else. It is also important to note that the IVES process may be required multiple times during a loan, thereby making the actual cost increase more than $2.
Before readers scoff at a $2 difference, this is precisely the methodology that CFPB was using to describe what it apparently believed were alarming increases in certain private-sector fees associated with loan closing, among them charges for credit score reports. CFPB noted anecdotal accounts claiming that such reports had jumped in price by 25 to 400 percent, burying the fact that the actual difference in cost amounted to about $30 to $60.
Perhaps CFPB Director Chopra owes IRS Commissioner Werfel a call. Until more of that sort of communication occurs, the government’s diversion tactics will persist over what’s really behind so many of the fee burdens about which consumers are supposedly complaining. Among the findings of our comments to CFPB:
- Various government charges, including property taxes, transfer taxes, and document recordation fees, comprise more than 40 percent of the typical home closing cost experience. In some areas of the country, local tax-related burdens on would-be homebuyers are absurd, adding nearly $5,000 to the tab.
- Tax relief provisions on the federal level, such as deductions for private mortgage insurance, have been allowed to lapse.
- A major source of CFPB’s consternation over the increase in closing costs is due to homeowners paying more for points to buy down the high interest rates on their loans. These interest rates are a response to inflation, which government itself helped to drive by excessive spending policies during and after the pandemic.
- Deadweight regulations, ranging from building permits to labor restrictions, likewise boost the costs of homes, putting them out of financial reach for many Americans.
The White House itself defined “junk fees” as “unnecessary, unavoidable, or surprise charges that inflate prices while adding little to no value.” Is the IRS’s fee hike “necessary”? According to the Service, the IVES charge “is increasing due to additional costs incurred by the IRS, such as increased labor costs, to process each transcript request.” The trouble is, taxpaying consumers don’t have access to any IRS decision-making documents as to how the 100 percent cost-hike was determined. Is the fee itself “unavoidable”? For all practical purposes, it is, because no other comparable service exists to provide the level of detail lenders want. Is the fee hike a “surprise”? Most first-time homebuyers are likely unaware of it in advance. The fee undoubtedly adds value in providing accurate appraisals of a borrower’s payment capacity, but many private sector fees labeled as “junk” by the government can be said to add some kind of value too. Washington’s double standard is unacceptable.
A more thorough examination of IRS fees will appear on our website soon, but this one example should be a standout for government regulators seeking to parse out blame for “junk fees” that supposedly plague consumers. Once again, taxpayers are left to wonder just how the federal government, in its quest to identify and stamp out “junk fees,” can continue denying the costs it imposes on Americans trying to pursue their American Dream.