Housing Finance at a Glance: Monthly Chartbooks
The May 2018 edition of At A Glance, the Housing Finance Policy Center’s reference guide for mortgage and housing market data, includes updated figures describing GSE guarantee fees, mortgage delinquency rates, Federal Reserve’s MBS purchase activities and the composition of the mortgage insurance market.
The 2017 HMDA Data
On May 7th, the Federal Financial Institutions Examination Council announced the availability of Home Mortgage Disclosure Act (HMDA) data on mortgage lending activities in 2017. The richness of this data has been instrumental in helping researchers, academics and policymakers understand critical developments in mortgage lending across the nation.
Overall, in 2017 lenders originated a total of over 6.0 million home mortgages, about 1 million fewer than the 7.0 million they originated in 2016. This drop was driven by a substantial reduction in refinance originations in 2017 amidst rising mortgage rates.
Compared to 2016, there were 1.1 million fewer refinance originations in 2017. At the same time, purchase originations increased by over 150,000. The table below shows the origination loan count by loan purpose.
HMDA data also provide insight into lending patterns by race. The overall share of purchase mortgage lending to minorities saw a modest increase in 2017. Blacks, Hispanics, and Asians all received a slightly higher share of purchase mortgages in 2017 than they did in 2016. See table below.
Minorities (especially black and Hispanic borrowers) tend to have lower incomes, savings, and wealth; they are also more likely than non-Hispanic whites (“whites”) to have weaker credit (lower credit score, higher LTV, higher debt-to-income ratio). Although two-thirds of all purchase mortgages in 2017 went to white borrowers, the minority share increased slightly to 23.6 percent in 2017, from 22.7 percent in 2016.
HMDA data also sheds light on the denial rate of mortgage applications, i.e, the ratio of mortgages approved to total applications evaluated by lenders. In 2017, the denial rate for all purchase originations continued its downward trend and declined to about 10 percent, down from 11 percent in 2016. This is consistent with the improvements in credit availability as witnessed by the gradual decrease in credit scores and increases in debt-to-income ratios of recent originations (see pages 13 and 14).
In 2017, mortgage denial rates were also down for minorities. Both blacks and Hispanics saw a slight reduction in denial rates, while whites and Asians were as likely to be denied a mortgage in 2017 as they were in 2016.
This could be explained by two factors – the improvement in the overall credit profile of the application pool, and the loosening of tight lending standards. For the latter, as the HCAI shows (page 16), overall credit availability remains very tight compared to historical standards. Although the progress made in 2017 is small, it suggests we are at least moving in the right direction.