On December 13, 2024, the CFPB released its annual report on residential mortgage lending activity and trends. The report provides an overview of residential mortgage lending in 2023 based on the data collected under the Home Mortgage Disclosure Act (HMDA).
According to the report, mortgage applications and originations declined, while rates, fees, discount points, and other costs increased in 2023. In addition, overall affordability declined significantly, potentially shifting the composition of home purchase borrowers to higher-income borrowers.
Key findings from the 2023 data analysis include the following:
The total number of applications and originations dropped significantly in 2023. In 2023, applications fell by 4.3 million (30.3%) and originations dropped by 2.7 million (32.2%) compared to 2022. Origination volume was about 37.9% of its peak in 2021.
Refinance originations dropped by more than half since 2022, and home purchase originations dropped by less than one-third. Lenders reported about 3.2 million closed-end site-built single-family home purchase originations, down 21.3% from 4.1 million in 2022. Refinance originations plummeted from 2.2 million in 2022 to 796,000 in 2023, a 64.2% decline, with most remaining being cash-out refinance loans.
More than half of all borrowers paid discount points, a 12.7 percent increase from 2022. In 2023, 56.6% of first-lien closed-end home purchase loans secured by single-family residences paid discount points, a 12.7% increase from 2022. The median discount points for home purchase loans were $3,000 and for refinance loans were $3,902, up 26.6% and 35.6% respectively from the previous year. The report does not assess the impact of discount points on interest rates or total loan costs.
Total loan costs, which include origination fees and discount points, also increased between 2022 and 2023, with faster increases for Hispanic white and Black borrowers. . In 2023, the median total loan costs for home purchase loans rose to $6,684, up 12.2% from $5,954 in 2022. For refinance loans, costs increased to $7,329, a 47.2% rise from $4,979. Hispanic white and Black borrowers experienced larger increases in home purchase loan costs compared to Asian and non-Hispanic white borrowers.
Rising interest rates throughout 2023 drove higher monthly mortgage payments. The average monthly payment for a conventional conforming 30-year fixed-rate mortgage rose from $2,045 in December 2022 to $2,295 in December 2023, a 12.2 percent increase. This hike was primarily driven by rising mortgage interest rates.
Despite the increase in the average monthly mortgage payment amount, the average debt-to-income ratio (DTI) and the share of home purchase applications denied due to high DTI have not significantly changed year over-year. The average DTI of home purchase borrowers and the share of home purchase borrowers denied due to high DTI remained elevated in 2023 but the upward trend that was observed in 2022 appears to have stabilized. This likely reflects the compositional shift of home purchase borrowers towards higher-income and away from lower-income borrowers.
Non-depository institutions continued to increase their share of closed-end originations. In 2023, independent mortgage companies originated more loans than those affiliated with depository institutions, making up 61.9 percent (about 1.7 million) of closed-end home purchase loans and 64.3 percent (around 355,000) of closed-end refinance loans.
The full report can be found here.