The CFPB recently released a report entitled Data Point 2020: Mortgage Market Activity and Trends addressing 2020 Home Mortgage Disclosure Act (HMDA) data.
Among various highlights, the Report provides that 4,472 financial institutions reported at least one closed-end loan in 2020, which is down by 18.8 percent from 5,505 financial institutions that reported in 2019. The CFPB notes that the decline likely is related to the change in the HMDA reporting trigger that became effective on July 1, 2020. Prior to that date, based on the October 2015 amendments to the HMDA rule, for closed-end mortgage loans the trigger was the origination of at least 25 loans in each of the previous two years. The change increased the trigger to at least 100 loans in each of the previous two years. Despite the change, the CFPB notes that among the newly exempted institutions, more than half voluntarily reported closed-end mortgage loan HMDA data for 2020.
Based on the low interest rates that prevailed in 2020, it is not surprising that the Report shows a significant increase in refinance loans from 2019 to 2020. Total closed-end mortgage loan originations (excluding reverse mortgage loans) increased from about 8.26 million in 2019 to about 13.64 million in 2020, an increase of about 65.2%. The increase was largely driven by refinance loans, which increased from about 3.38 million in 2019 to about 8.42 million in 2020, an increase of about 149.1%. In contrast, purchase money loan volume on site-built one-to-four family homes increased from about 4.31 million in 2019 to about 4.69 million in 2020, an increase of about 9.0%. Home equity line of credit originations decreased from about 1.04 million in 2019 to about 869,000 in 2020, a decrease of about 16.6%.
Other highlights noted in the Report include:
- The share of loans secured by closed-end home-purchase loans for site-built, one-to-four-family, first lien, principal-residence properties for Black borrowers increased in 2020 and the share of refinance loans for Asian borrowers increased in 2020.
- Black and Hispanic white borrowers had lower median loan amounts, lower median credit scores, higher denial rates, and paid higher median interest rates and total loan costs compared to non-Hispanic white and Asian borrowers.
The denial rates for home purchase loan applications were about 18.1% for Black applicants, about 12.5% for Hispanic white applicants, about 9.7% for Asian applicants and about 6.9% for non-Hispanic white applicants. The overall denial rate for home purchase loan applications was higher in 2020 than the rate in 2019, although the denial rate for non-Hispanic white applicants decreased slightly in 2020 from the rate in 2019. The denial rates for refinance loan applications were about 23.2% for Black applicants, about 17.6% for Hispanic white applicants, about 12.1% for Asian applicants and about 11.0% for non-Hispanic white applicants. The overall denial rate for refinance loan applications was lower in 2020 than the rate in 2019.
Independent mortgage companies originated about 8.2 million loans, banks originated about 3.8 million loans, credit unions originated about 1.1 million loans and depository institution affiliates originated about 518,000 loans. The Report notes that “smaller shares” of loans originated by depository institutions went to minority borrowers, low-to-moderate income borrowers, and borrowers in low-to-moderate income neighborhoods than loans originated by non-depository institutions.