Earlier this week, the Federal Reserve Board released findings from their analysis of the 2013 HMDA data. This analysis provides key insights. We've compiled some of those key insights into a quick, easy-to-read "By The Numbers" summary. Check it out:
The Federal Reserve Board recently released their analysis of the 2013 Home Mortgage Disclosure Act Data, contextualized with data gathered since 2004. Some of the official reasons for the public release of HMDA data are that it helps the public determine whether financial institutions are adequately serving the housing needs of their communities, identify potential discriminatory lending patterns, and enforce anti-discrimination legislations.
The FRB's analysis of the public HMDA data provides insight into the data and trends, highlighting both what the regulators are seeing in the data and how they're seeing it.
We've gathered 9 of these key observations from the Federal Reserve report into a "By the Numbers" summary to make the statistics easy to read and understand. Let's jump in.
Roughly 8.7 million applications resulted in originations, while 1.9 million were closed by the lender or withdrawn by the applicant before a decision was made.
Additionally, more than 2,615 of the 7,190 reporting institutions originated fewer than 100 mortgages in 2013. With the proposal for HMDA Plus, and the changing reporting thresholds, these numbers may decrease even more.
The Federal Reserve bulletin attributes this decrease to a 23 percent drop in refinance mortgages for one-to-four-family properties in 2013.
That sharp decrease was offset by a 13 percent increase in one-to-four-family home-purchase originations in 2013. The bulletin does note that purchase originations were historically low in 2013, lower than all levels since 1993.
Roughly 70 percent of conventional (i.e. not government-backed) home-purchase loans were taken out by white non-Hispanic borrowers. Hispanic borrowers took out 7.3 percent of the home purchase loans in 2013, while Asian borrowers took out 5.7 percent and black borrowers took out 4.8 percent.
This decline in the share of nonconventional, or government-backed, first-lien home-purchase loans is due to a decrease in the FHA share of loans, according to the bulletin. This is attributed in part to increases in mortgage insurance premiums (MIPs) that the FHA charges borrowers, it added. Home-purchase loan rates varied widely across states.
Blacks and Hispanics are much more likely to use nonconventional, or government-backed, loans than conventional loans when compared to other groups, the bulletin states. About 35 percent of non-Hispanic white borrowers, and only 16 percent of Asian borrowers, took out a nonconventional home-purchase loans.
Simultaneously, white non-Hispanic borrowers' share of home-purchase loans roase to 70.2 percent, up from 61.2 percent in 2006. The total number of home-purchase loans increased approximately 30 percent from 2011 to 2013.
Despite an increase in the total number of home-purchase loans, the number of loans to LMI borrowers declined slightly from 2012, the report added.
These rates have varied significantly since 2006, the report states. These swings may be a result of changes in credit standards, demand for credit, and the demographics of mortgage applicants.
In 2013, black applicants were more than twice as likely to be denied as white applicants, with a 25.5 percent and a 12.2 percent denial rate, respectively. Historically, this difference is pretty consistent.
The report noted that these differences in denial rates are related to credit risk-related factors, including credit scores. Credit history was listed as a denial reason in almost a third of black applicants, and almost a quarter of Hispanic applicants, it said.
Ncontracts Viewpoint: This public release of HMDA data provides the potential for great insight. At Ncontracts, we work with our clients to analyze their data and understand what it says about their institutions. We find that awareness of overall market trends and statistics helps our clients contextualize and enhance understanding of data.