HMDA: Growing Nonbank Share, High-Cost Share Sinks

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Non-bank share of mortgage originations widened over 3 percentage points last year based on annual data reported by home lenders. At the same time, higher-cost loan activity plunged.

Last year,
6,762 U.S. financial institutions filed application, origination and denial data as required under the Home Mortgage Disclosure Act of 1975.

The total included
3,805 banks and thrifts, 1,939 credit unions, 131 mortgage firms affiliated with depositories and 887 independent mortgage companies.

Those were among a robust collection of metrics to be reported in a forthcoming article for the Federal Reserve Bulletin. The article was prepared by Neil Bhutta, Steven Laufer and Daniel R. Ringo of the Federal Reserve Board’s Division of Research and Statistics.

The number of covered institutions declined around 2 percent from 2015.

“While there were some new reporters in 2016, this number was more than offset by the number of institutions that reported in 2015 but did not do so in 2016,” a statement from the Federal Financial Institutions Examination Council said. “In most cases, this is because of mergers and acquisitions.”

Last year’s HMDA activity included information on 13.926 million loans applications, jumping from 12.094 million in 2015. The 530,000 requests for home-loan pre-approvals was about the same as the prior year.

Single-family loan originations amounted to 8.378 million transactions during 2016. Mortgage production was up by 13 percent from the preceding year.

“Mortgage lending during 2016 occurred in the context of rising house prices, the continuation of an upward trend in prices evident since 2012,” the Fed authors wrote. “Mortgage interest rates remained low for most of the year, hovering just slightly above their historical lows reached in late 2012 and early 2013. Mortgage rates jumped sharply, however, following the November elections. Mortgage credit conditions continued to slowly ease, but credit remained more difficult to obtain for individuals with lower credit scores or hard-to-document incomes.”

Loans used to finance a home purchase accounted for 4.046 million of last year’s loan closings. Purchase-money lending improved from 3.662 million in 2015.

Refinance production expanded to 3.755 million loans in 2016 from 3.228 million during 2015.

Home-improvement loan originations climbed to 577,000 from 474,000 in 2015.

Another 50 multifamily loans were reported for last year.

First liens classified as higher priced made up 5.5 percent of all first liens, down from 6 percent the prior year.

There were just 1,903 mortgages made during 2016 that were subject to the Home Ownership and Equity Protection Act. Despite HOEPA being extended to home-purchase loans, last year’s HOEPA lending plunged from nearly 36,000 in 2015.

Non-bank share of first-lien purchase originations widened to 53 percent in 2016 from 50 percent a year earlier.
Non-bank share on refinances jumped to 52 percent from 48 percent in 2015.

Jumbo mortgages made up 5.2 percent of all first-lien, owner-occupied, home-purchase mortgages last year, about the same share as in 2015.

For purchase-money mortgages, 6.0 percent went to black borrowers, increasing from 5.5 percent a year earlier.
The Hispanic white share of purchase financing also rose, to 8.8 percent from 8.3 percent in 2015.

Government loan programs were utilized on purchase financing by 69 percent of black borrowers and 60 percent of Hispanic white borrowers. Government share was just 35 percent among non-Hispanic whites and only 16 percent for Asians.

Denial rates on conventional purchase loans for black applicants was 22 percent. The rate was 15 percent for Hispanic white consumers, 11 percent for Asian applicants, 17 percent for other minorities and 8 percent non-Hispanic white borrowers.

“Previous research and experience gained in the fair lending enforcement process show that differences in denial rates and in the incidence of higher-priced lending … among racial or ethnic groups stem, at least in part, from factors related to credit risk that are not available in the HMDA data, such as credit history (including credit scores), ratio of total debt service payments to income (DTI), and LTV ratios,” the Fed said. “Differential costs of loan origination and the local competitive environment, as well as illegal discrimination, may also bear on the differences in pricing.”


Mortgage Daily Staff


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