MReport September 2021

TheMReport — News and strategies for the evolving mortgage marketplace.

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38 | M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Refis Propelled 2020 Surge in Originations An analysis of HMDA data by the CFPB has found that closed-end originations increased in 2020 by 65.2%, with much of that spike attributed to the refinance boom. A n analysis by the Consumer Financial Protection Bureau (CFPB) of Home Mort- gage Disclosure Act (HMDA) data on residential mortgage lending trends, Data Point: 2020 Mortgage Market Activity and Trends, found that the total number of closed-end originations, as well as applications, increased substan- tially between 2019 and 2020. Enacted by Congress in 1975, HMDA requires many financial institutions to maintain, report, and publicly disclose loan-level information about mortgages. Closed-end originations (exclud- ing reverse mortgages) increased in 2020 by 65.2%, from 8.3 million in 2019 to 13.6 million in 2020, with much of that spike attributed to the refinance boom in 2020. The data point also notes that, while the number of financial institutions re- porting 2020 HMDA data declined compared to 2019, the number of closed-end records in 2020 increased compared to the previous year. While mortgage activity generally increased, year over year, significant differences between demographic groups persisted, including higher interest rates and denials among Black and Hispanic consumers in the mortgage market. "Initial observations about the nation's mortgage market in 2020 are welcome news, with improve- ments in the overall volume of home-purchase and refinance loans compared to 2019," CFPB Acting Director Dave Uejio said. "Unfortunately, Black and Hispanic borrowers continued to have fewer loans, be more likely to be denied than non-Hispanic white and Asian borrowers, and pay higher median interest rates and total loan costs. It is clear from that data that our economic recovery from the COVID-19 pandemic won't be robust if it remains uneven for mortgage borrowers of color." An examination of 2020 HMDA data marks the third year of data that incorporates amendments made to HMDA by the Dodd- Frank Wall Street Reform and Consumer Protection Act of 2010. Changes included new data points, revisions to certain existing data points, and authorizing the CFPB to require new data points. The CFPB issued a final rule imple- menting significant changes in October 2015 (2015 HMDA rule), reflecting the changing needs of homeowners and evolution in the mortgage market. Because these changes began with the 2018 HMDA data, the new report only covers HMDA data from the timeframe of 2018-2020, and focuses on trends in mortgage applications and originations during that span. Other trends in mortgage ap- plications and originations found in the 2020 HMDA include: » 4,472 financial institutions reported at least one closed-end record in 2020, down from 5,505 financial institutions who reported in 2019 » The number of home-purchase loans secured by site-built, one- to four-family properties increased by about 387,000, whereas the number of refi- nance loans increased by 149.1% from 3.4 million in 2019 to 8.4 million in 2020 » The number of open-end line- of-credit originations (exclud- ing reverse mortgages) in 2020 decreased by 16.6%, from 1.04 million in 2019 to 869,000 in 2020 » 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 bor- rowers increased in 2020 » The refinance boom observed in 2020 largely continued the trends since Q2 of 2019

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