Why are mortgage closing costs in Texas the second highest in the US?

Bankrate.com survey of home mortgage closing costs finds Texas has the second highest closing costs among the states. New York state has the highest.

Researchers requested a good faith estimate for a $200,000 loan, assuming a 20 percent down payment and good credit. The result in Texas was origination fees of $1,951 and title and closing costs of $2,994. The resulting Texas closing costs of $4,944 exceed the national average by $874.

                 Origination fees  Title and closing  Total closing costs
Texas (2nd highest)        $1,951             $2,994               $4,944
National average           $1,614             $2,456               $4,070


I can think of no factors in Texas that could rationally account for these figures except for Texas weak regulators overseeing banks and mortgage lenders. That might explain the extraordinarily high origination fees Texans pay. Texas also has had weak insurance regulation that may partly account for the high title insurance rates Texas consumers must pay.

Also impacting the cost of housing for homeowners are Texas’ ridiculous;y high homeowner insurance costs. According to the public interest research organization Texas Watch

Not only do Texans pay the highest insurance premiums in the country, but we pay nearly twice the national average. At the same time, insurance policies have been continually whittled away, providing less and less coverage for more and more money.

Governor Perry has announced the appointment of a new state insurance commissioner. She should make looking into title insurance and homeowner insurance rates a priority.

Two years ago when Texas housing advocates asked the Texas Legislature to consider adding a $10 fee to property closings to fund the Texas Housing Trust Fund the title insurance industry rose up in opposition. It’s interesting to consider these disturbing statistics. In that light. it seems to me that the Texas tile insurance industry does not want to share any part of these unusually high fees they are collecting.

It appears the insurance industry has a pretty sweet deal.


  1. It seems strange to point out the high closing costs then to complain that an additional $10.00 was not tacked on to those closing costs. I would be interested to see an analysis as to the regulations and rules regarding title in other states. It may very well be that title insurance companies have to do more due diligence to insure clear title in Texas than in other states. I do not work for the insurance industry, but it seems like this article is jumping to conclusions and pointing fingers without looking at underlying causes.

  2. I admit I am not sure what has produced the outrageously high insurance and closing costs in Texas. I suggested in my original blog post that someone who can force disclosure needs to look into it. In I also suggested that be the new Texas insurance commissioner.

    It seems unlikely to me that, as you suggest, title insurance companies have to do more “due diligence” in Texas. Having spent a fair amount of time in offices of county clerks in Texas, and having colleagues in other states who have done the same, I don’t think the filing systems in Texas are any worse that other states in this region. So, it seems unlikely to me that is the source of these costs. I certainly don’t think the underwriting standards in Texas are inherently any different. I simply cannot see where more “due diligence” would account for this.

    As far as the $10 fee that the title insurance industry defeated that would have allowed lower income families to get help affording housing by endowing a state housing trust fund, I think you must have missed my point. I wrote, “it seems to me that the Texas tile insurance industry does not want to share any part of these unusually high fees they are collecting.” Texas closing costs are $874 more than the average of the states. I probably should have simply stated that it looks downright greedy for the industry to be charging consumers so much extra while fighting so hard to not return $10 for a public purpose.

    The Texas Legislature clearly failed in not exercising adequate oversight over the industry. Texas has a huge need for decent, affordable housing for the poor. For the Texas Legislature to permit the industry to overcharge consumers, while at the same time slashing state support for housing for the poor in half (as it did this session) is bad public policy.

    $874 in extra fees is pretty significant. Seems like $10 of that should have been used to help the poor.

    Thanks for your comment. I hope we find out what is behind all this.

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