Analysis of the 2016 CFPB HMDA Data
Every year, HMDA loan data is made public on all reporting institutions. This data is used by public groups, agencies and businesses to assess mortgage lending and develop better ways of doing business. By analyzing the data, businesses can extrapolate trends and issues across the mortgage industry. The data can be accessed and downloaded from the CFPB website at: https://www.consumerfinance.gov/data-research/hmda/.
Overall, there was a 2% decrease of HMDA reporting institutions in 2016 despite a rise in overall submissions. 6,762 institutions handled 16.3 million loan records, which was a 14% increase compared to 2015. Independent mortgage companies submitted the largest number of mortgages with 53% of the market share. Banks continued to lose market share and only accounted for 34% of the market.
Home Purchase Market Share
The total number of originated loans increased by 1 million (13%) in 2016. Refinance loans showed the most growth at 16%, while home purchase loans increased by 11%. These increases are backed by more loans being approved by institutions. The number of denied loan applications fell by roughly 15%.
The share of low- and moderate-income borrowers decreased from 28% to 26% in 2016, while the average value of home purchase loans rose 3.2%. This brought the average value of home purchase loans up to $247,000. While more loan actions took place in 2016, home purchase loan types still remained unchanged from 2015.
One of the most notable elements of the 2016 HMDA data was the change in volume from the central U.S. Certain areas in Wyoming and Montana experienced decreases as high as 60% in loan volume. However, most regions of the U.S. saw increases in mortgage volume.
The share of home purchase loans for single family properties saw minor demographic changes. 2016 was the third consecutive annual rise for Black and Hispanic-white borrowers. Hispanic-white borrowers saw the largest share increase of home purchase loans from 7.9% to 8.4%. Black borrowers increased from 5.2% to 5.6 % and Asian borrowers increased from 5.5% to 5.7%. Refinance loans to Asian borrowers increased from 5.1% to 5.6%. The share of refinance loans made to Black and Hispanic-white borrowers remained at their 2015 levels of 4.9% and 5.6% respectively.
Denial rates for home purchase loans were 11.4%, which continued the downward trend of denial rates in past years. Black applicants experienced the highest denial rates for conventional home purchase loans. “Denial reasons varied across racial and ethnic groups to some degree. For example, among denied home-purchase loan applications in 2016, credit history was cited as a denial reason for 24% of denied black applicants, 17% of denied Hispanic white applicants, 18% of denied non-Hispanic white applicants, and just 11% of denied Asian applicants,” according to an article by the Federal Reserve.
Asians took out the largest loans, averaged at $373,000 for home purchases — compared to the average of $217,000 for black borrowers. The average LMI home purchase loan increased 3.4% to $146,000 in 2016.
Overall, 2016 was a good year for the mortgage industry — with more loans being originated and demographic shifts in market share, the market continued to move upward. The next step is to analyze your institution’s HMDA data to prepare for your next exam. Fair Lending Services from QuestSoft can help mine your HMDA data and find gaps in your lending.