The annual report on changes in the residential mortgage lending sector was produced by the Consumer Financial Protection Bureau (CFPB). With loan applications and originations falling by roughly a third from 2022, 2023 experienced a sharp downturn in mortgage lending activity. With single-family refinance originations down over two-thirds from 2022, the fall was more pronounced in refinancing activity than in house purchases.
In 2023, a greater proportion of borrowers reported having paid discount points than in any previous year since data tracking started, and the median overall loan payments also increased dramatically.
Since 1975, financial institutions have been required by the Home Mortgage Disclosure Act (HMDA) to gather and disclose specific loan-level data regarding mortgage applications and originations. In 2011, HMDA administration was turned over to the CFPB.
Key Highlights from the CFPB Report:
- In 2023, there was a sharp decline in loan originations and applications for both homebuying and refinancing. Compared to 2022, the number of applications and originations fell by 30% and 32%, respectively, in 2023, continuing their downward trend. Single-family home refinances decreased by 64%. Cash-out refinance loans accounted for the majority of the remaining refinance originations in the market.
- Higher monthly mortgage payments were caused by rising interest rates. For borrowers obtaining a standard conforming 30-year fixed-rate mortgage, the average monthly payment (without taxes and insurance) increased from $2,045 in December 2022 to $2,295 in December 2023. The increase in mortgage interest rates accounted for nearly all of the monthly payment increase. In spite of this, there was no variation in the average debt-to-income ratio of applications for home purchases from year to year. This probably indicates that lenders are moving away from lower-income borrowers and toward higher-income ones.
- Discount points were paid by more than half of the borrowers. Nearly a 13% rise over 2022, over 56% of single-family loan originations paid some discount points in 2023. The median discount points paid were approximately $3,900 for refinance loans and $3,000 for home purchase loans.
- The overall cost of loans went up, but the hikes for Black and Hispanic borrowers were greater. In 2023, the median total loan cost for refinance loans was over $7,300, while the median total cost for home purchase loans was over $6,700. Interestingly, the median total loan costs for house purchase loans increased more quickly for Black and Hispanic borrowers than for Asian and non-Hispanic white borrowers.
- The share of originations from non-depository institutions kept rising. Independent mortgage businesses and other non-depository entities created a lot more loans than banks and credit unions. Nearly 62% of all closed-end house purchase loans and more than 64% of refinance loans were originated by independent mortgage companies in 2023.
To read the full report, including more data, charts, and methodology, click here.
