If you wondered why the Federal Housing Finance Authority this week proposed requiring Fannie Mae & Freddie Mac to significantly increase goals for homeownership among minorities and low-income families, a new report from the Consumer Financial Protection Bureau (CFPB) offers some answers.
The CFPB’s latest Home Mortgage Disclosure Act (HMDA) data report on residential mortgage-lending trends released Thursday found that while the total number of closed-end loan originations increased substantially between 2019 and 2020, minority borrowers received fewer of those loans.
The CFPB reported that closed-end originations (excluding reverse mortgages) increased in 2020 by 65.2%, to 13.6 million in 2020 from 8.3 million in 2019. Not surprisingly, most of the increase was driven by refinancing.
The agency, though, reported significant differences in the results among demographic groups, noting in particular that Black and Hispanic consumers faced higher interest rates and more loan denials.
“Initial observations about the nation’s mortgage market in 2020 are welcome news, with improvements in the overall volume of home-purchase and refinance loans compared to 2019,” said CFPB Acting Director Dave Uejio. “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.”
Uejio added that 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.”
This marks the third year of HMDA data that incorporates amendments made 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 implementing significant changes in October 2015, reflecting the changing needs of homeowners and evolution in the mortgage market. Because these changes began with the 2018 HMDA data, Thursday’s report covers HMDA data only from 2018 to 2020 and focuses on trends in mortgage applications and originations during those three years.
Among other recent trends in mortgage applications and originations found in the 2020 HMDA data point are:
- The number of financial institutions reporting declines: 4,472 financial institutions reported at least one closed-end record in 2020, down from the 5,505 that reported in 2019;
- The number of home-purchase loans secured by site-built, one-to-four-family properties increased by about 387,000, while the number of refinanced loans increased by 149%, from 3.4 million in 2019 to 8.4 million in 2020;
- The number of open-end line-of-credit originations (excluding reverse mortgages) in 2020 decreased by 16.6%, from 1.04 million in 2019 to 869,000 in 2020; and
- 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.
Read more about HMDA, click here.
