New CFPB report confirms big drop in loan activity in 2023

Annual report is derived from HMDA loan-level data

New CFPB report confirms big drop in loan activity in 2023

Annual report is derived from HMDA loan-level data
Seal at CFPB headquarters

The most recent annual report from the Consumer Financial Protection Bureau (CFPB) confirmed that mortgage lending plunged substantially in 2023.

The report was derived from loan-level information made public via the Home Mortgage Disclosure Act (HMDA). Per HMDA data, the counts of both loan originations and applications were slashed by one-third on an annual basis, with the former down by 32% and the latter by 30% from one year prior. The number of originations decreased by some 2.7 million, with 2023’s volume standing at just 38% of the recent peak in 2021.

The drop in refinance volume was more pronounced than in purchase activity; single-family refis fell by 64%, with most of the refinance originations still taking place limited to a small number of cash-outs. The count of purchase loans, on the other hand, retreated by 21%.

With 2023’s rising mortgage rate environment, affordability challenges were a key reason driving the plunge in activity. The average monthly payment, excluding taxes and insurance, for a conventional conforming 30-year fixed-rate mortgage was $2,045 in December 2022. By December 2023, that figure had risen to $2,295. Despite the bump in monthly payments, the average debt-to-income ratio did not see a meaningful change, likely reflecting lenders shifting toward higher-income buyers and away from lower-income applicants.

Notably, cost-conscious borrowers got creative in their hunt for affordability in 2023, with more than half of all borrowers paying discount points. Fifty-six percent of borrowers did so, a pickup of nearly 13% from one year prior. The median discount points paid was about $3,000 for purchases and $3,900 for refinances.

Median total loan costs, including origination fees and discount points, rose to $6,684 in 2023, a 12% increase from 2022. Loan costs for refis ballooned, with the median total loan cost for a refinance at $7,329 in 2023 — up more than 47% from the previous year.

HMDA data also revealed that non-depository institutions, such as independent mortgage lenders, continued to increase their market share at the expense of banks and credit unions. Nonbank lenders originated nearly 62% of all purchases (about 1.7 million loans) and 64% of refinances (about 355,000 loans) in 2023.

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