WASHINGTON— During 2022, mortgage applications and originations declined markedly from the prior year, while rates, fees, discount points, and payments—up 46%--increased, according to a new annual report on residential mortgage lending activity and trends released by the Consumer Financial Protection Bureau.
In addition, the CFPB reported that overall affordability declined significantly, with borrowers spending more of their income on mortgage payments and lenders more often denying applications for insufficient income.
“Most refinances during the reported period were cash-out refinances, and, in a reversal of recent trends, the median credit score of refinance borrowers declined below the median credit score of purchase borrowers,” the CFPB said. “As in years past, independent lenders continued to dominate home mortgage lending, with the exception of home equity lines of credit.”
Key Findings
According to the CFPB. Key findings from this year’s analysis include:
- Borrowers paid much more in costs and fees: “When taking out a mortgage, borrowers often pay certain costs and fees. These costs rose 22% from 2021 to $5,954. A higher percentage of borrowers (50.2%) paid discount points in 2022 than in any other year since data collection in this area began, including than in 2021 (32.1%). The average borrower paid $2,370 for discount points in 2022.”
- Cash-out refinances comprised majority of refinance originations. “In 2021, the number of refinances was 8.3 million. Today’s report shows that number dropped to 2.2 million in 2022, a 73.2% reduction. Most of the refinances were cash-out refinance loans originated by independent lenders. Cash-out refinances can increase the risk of foreclosure as they typically have higher interest rates, higher monthly payments, and higher balances than other refinances, and can result in unsecured debt, such as credit card debt, becoming secured by the home.”
- Home-equity lines of credit rose. “Though they did not comprise the majority of refinances, home-equity lines of credit were the only form of refinancing to see a rise from 2021,” the CFPB said. “While independent lenders dominate the cash-out refinancing market, depository institutions offered the majority of the 1.27 million home-equity lines of credit in 2022. Home-equity lines of credit tend to have lower interest rates, monthly payments, and foreclosure risks than cash-out refinances.”
- Average monthly mortgage payments increased more than 46%. “Driven by the rise in mortgage interest rates, the average monthly payment for borrowers taking out a conventional conforming 30-year fixed-rate mortgage (excluding taxes and insurance) rose from $1,400 in December 2021 to $2,045 in December 2022 – a 46.1% increase. The median interest rate for a 30-year fixed-rate mortgage at the end of 2022 was 6.5%.”
- Overall, Hispanic and Black borrowers experienced worse outcomes. “Black and Hispanic borrowers were denied loans at higher rates, received smaller loans, were charged higher interest rates, and paid more in upfront fees than white and Asian borrowers. For example, in 2022, the median interest rate for Black and Hispanic borrowers was above 5%, while the median rate was below 5% for white and Asian borrowers.”
- Lenders increasingly denied applicants for insufficient income. “Lenders denied loan applications due to insufficient income at higher rates than at any point since that data was first collected and reported in 2018. More than 50% of mortgage denials for Asian applicants were due to insufficient income. The same was true for around 45% of denials for Black and Hispanic applicants, and around 40% of denials for white applicants. Denials due to insufficient income were below 40% for all four groups in 2018.”
Are You Being Gouged for Bank-Like Subscription Fees for Old News? Here’s a CU-Like Way to Fix That
The biggest, best and freshest news reporting in credit unions remains free! Each morning CUToday.info delivers its daily Fresh Today news update offering the latest headlines and breaking news right to your email, with the easy-to-read headlines format allowing you to click on the stories that interest you most in order to learn more. So stop paying those bank-fee-like subscription prices from other so-called “news”” publications!
If you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time—and it’s free!
Please note that after signing up you may need to go to your Spam/Junk folder and mark the morning headlines email as safe. CUToday.info does not provide its list of readers and emails to outside parties, and we will not be contacting you to sell you an extended warranty or sending you any links so you may cash in on an inheritance you didn’t know was coming.
And did we mention it’s free?