CFPB Releases 4th Annual Data Point on 2020 Mortgage Market Activity and Trends
Happy Wednesday, and first day of September! If you’re like me, September means changes are coming – from my wardrobe (goodbye swimsuit, hello sweaters!) to my meal prep (all the soup!), to the days getting even shorter. I love to use this time of year to check in with myself and the goals I have been working on throughout the year and identify what’s working, what’s not working, and any trends that may have emerged in my habits.
The CFPB also subscribes to this activity, and on August 19th, released its fourth annual Data Point on 2020 Mortgage Market Activity and Trends, based on the data collected under the Home Mortgage Disclosure Act (HMDA). The report discusses mortgage applications and originations, mortgage outcomes by demographic groups and loan types, monthly mortgage trends and activities, mortgage trends and activities by state, and lending institutions using HMDA data from 2018 to 2020.
Mortgage Applications & Originations
2020 saw an increase in both data reported on applications (50% increase) and originations (56% increase), despite almost 19% fewer financial institutions reporting likely due to a change in reporting threshold in the 2020 HMDA rule. The CFPB reports that “the large increase in the total number of originations and applications in 2020 is driven by the increase in closed-end mortgages,” as HELOC originations continue to decline. However, the data shows that reverse mortgage originations have increased by 8,000, from 35,000 in 2019 to 43,000 in 2020.
The report reveals that a significant majority of the increased closed-end site-built single-family originations in 2020 was due to the increase in refinances, with refinance originations increasing by 149% in 2020, compared to 2019. Another trend the CFPB noted is that “less than half of refinance loans were cash-out refinances.” This suggests that the low interest rates that carried over and continued to decrease in 2020 were “likely a main driver” in the decision to refinance mortgage loans.
The report provides a detailed chart on pages 13-14 with the aggregate data, which is then broken down into various categories, across the 3 year reporting period (2018 – 2020).
Mortgage Outcomes by Demographic Groups and Loan Types
The CFPB identified trends based on various demographic groups and loan types. One such trend is the share of home-purchase loans by demographic group. Shares of home-purchase loans by Black borrowers increased to 7.3% in 2020, compared to 6.8% in 2018. The share of home-purchase loans by Hispanic white borrowers decreased slightly, from 9.2% in 2019 to 9.1% in 2020; however, remaining above the 2018 report of 8.9%. The share of home-purchase loans for non-Hispanic white borrowers decreased to 59.1% in 2020, from 62% in 2018.
Another metric the CFPB reported is the share of refinance loans by demographic group. The majority of all refinance loans in 2020 (61%) were made to non-Hispanic white borrowers. The share of refinance loans by Asian borrowers increased to 6.7% in 2020, contrasted with the 2019 report of 5.5%. Refinance loan shares decreased in 2020 for Black and Hispanic white borrowers. Black borrowers’ share of refinance loans were 4.2% (compared to 5.3% in 2019), and Hispanic white borrowers’ share of refinance loans made up 5.3% (compared to 6.2% in 2019). The CFPB notes that, while “the share of refinance loans for most racial/ethnic groups, low- to moderate-income (LMI) borrowers, and LMI neighborhoods has decreased, because of the increase in the total number of refinance loans, the number of refinance loans has increased for all groups between 2018 and 2020.” The table on page 18 of the report shows the distribution of home-purchase and refinance loans by borrower and neighborhood characteristics over the reporting period (2018 – 2020).
The report also discusses mortgage characteristics of home loans. Tables 3A and 3B provide the median loan amount, borrowers’ credit scores, interest rates, and total loan costs for home-purchase loans and refinance loans, broken down by race/ethnicity, borrower income, neighborhood income, and loan types over time.
The bureau states that median loan amounts have “risen consistently across all categories, likely reflecting the rise in home prices.” In 2020, the report notes that the median loan amount for home-purchase loans for LMI borrowers was just over half the median loan amount for high-income borrowers ($180,000 v. $350,000). The data on credit scores show that the median scores for home-purchase loans have increased from 2019 to 2020, but “variations of mediation credit scores among different groups remain.” The report also discloses that credit scores of home-purchase borrowers are lower than those of refinance loan borrowers, across the board.
There is more information in the full report, including denial rates, monthly mortgage trends and activities, mortgage trends and activities by state, lending institutions, and some helpful visual representations of the data within each section. Be sure to check out the full report on the CFPB’s website to get the full picture of 2020’s HMDA data and trends.
About the Author
Rebecca Tetreau joined NAFCU as regulatory compliance counsel in February 2021. In this role, Rebecca helps credit unions with a variety of federal regulatory compliance issues.