The Consumer Financial Protection Bureau (CFPB) recently released its annual report on residential mortgage lending activity and trends. The report, titled “Data Point: 2022 Mortgage Market Activity and Trends,” provides insights into the state of the mortgage market in 2022.
According to the report, mortgage applications and originations significantly declined in 2022 compared to the previous year. This decline was coupled with an increase in rates, fees, discount points, and other costs, resulting in a decrease in overall affordability. Borrowers were spending a larger portion of their income on mortgage payments, and lenders were denying applications more often due to insufficient income. Furthermore, the report revealed that most refinances during the reported period were cash-out refinances, and the median credit score of refinance borrowers dropped below the median credit score of purchase borrowers.
“The higher interest rate environment had profound effects on the mortgage market in 2022, with borrowers paying much more in monthly payments,” said CFPB Director Rohit Chopra. He also mentioned that these trends are likely to continue as interest rates are expected to further increase in 2023.
Key findings from the report include a significant drop in the total number of mortgage applications and originations in 2022. Applications decreased by 38.6%, and originations decreased by 44.1%. The report also highlighted the dominance of independent lenders in the home mortgage lending sector, except for home equity lines of credit (HELOCs).
In terms of loan costs, borrowers paid significantly higher fees in 2022 compared to the previous year. The median total loan costs for home purchase loans increased by 21.8%, representing the largest annual increase since this data was first collected. Refinance loans also saw a significant increase in total loan costs, with a rise of 49.3%.
The report also revealed disparities among borrowers of different racial and ethnic backgrounds. Black and Hispanic white borrowers, low- or moderate-income borrowers, and borrowers with properties in low- or moderate-income neighborhoods accounted for a larger share of refinance loans in 2022. However, they also experienced higher median interest rates, total loan costs, and denial rates compared to non-Hispanic white and Asian borrowers.
The rise in mortgage interest rates had a significant impact on borrowers’ monthly payments. The average monthly payment for borrowers with conventional conforming 30-year fixed-rate mortgages increased by 46.1% in just one year. Additionally, the debt-to-income ratio rose significantly for all groups, especially for Hispanic white and Black borrowers.
The report also mentioned that the data reflected changes implemented by the 2015 Home Mortgage Disclosure Act (HMDA) rule. The HMDA requires financial institutions to collect and make public certain loan-level information on mortgage applications and originations. The CFPB has been working to improve public access to this data since it took over the implementation of the Act in 2011.
Overall, the CFPB’s report offers valuable insights into the state of the mortgage market in 2022. It highlights the challenges faced by borrowers, such as declining affordability and higher costs, while also shedding light on disparities among different racial and ethnic groups. As interest rates continue to rise, it will be crucial to monitor how these trends evolve in the coming years.