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Refis Propelled 2020 Surge in Originations

An analysis by the Consumer Financial Protection Bureau (CFPB) of Home Mortgage 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 substantially 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 (excluding 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 due attributed to the refinance boom in 2020. The data point also notes that, while the number of financial institutions reporting 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 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. 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 implementing 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 applications 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 refinance 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 (excluding 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 borrowers increased in 2020; and
  • The refinance boom observed in 2020 largely continued the trends since Q2 of 2019.

Click here to view the CFPB’s Data Point: 2020 Mortgage Market Activity and Trends.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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