Mortgage refinance loans drove an increase in closed-end originations, new CFPB report

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WASHINGTON, D.C. – A new Home Mortgage Disclosure Act (HMDA) data report  on residential mortgage lending trends released today by the Consumer Financial Protection Bureau finds that the total number of closed-end originations as well as applications increased substantially between 2019 and 2020. Closed-end originations (excluding reverse mortgages) increased in 2020 by 65.2 percent, from 8.3 million in 2019 to 13.6 million in 2020. Most of the increase was driven by the refinance boom observed 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.”

The 2020 HMDA data mark 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, today’s report only covers HMDA data from 2018 to 2020 and focuses on trends in mortgage applications and originations during these three years. Among other recent trends in mortgage applications and originations found in the 2020 HMDA data point are:

  • 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 percent 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 percent, 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 the second quarter of 2019.

Enacted by Congress in 1975, HMDA requires many financial institutions to maintain, report, and publicly disclose loan-level information about mortgages. Each year, millions of people apply for mortgages. HMDA data allow policymakers, industry, and the public to learn what happened to a great majority of those applications and compare the data to previous years. These data help show whether lenders are serving the housing needs of their communities, provide information that can help create more fair and equitable mortgage markets and policies, and shed light on lending patterns that could be discriminatory. The public data are modified to protect applicant and borrower privacy.

Read more about HMDA.

The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.