Latest HMDA Data Suggests 3 New Trends in the Mortgage Industry
The annual release of Home Mortgage Disclosure Act (HMDA) data marks an important moment for the mortgage industry. According to the FFIEC, this data is collected from financial institutions, such as banks and credit unions, to detect patterns of discriminatory lending and identify financial institutions’ responses to local housing needs. HMDA data outlines clear trends in the industry, which lenders can use to their advantage. Recently released 2013 HMDA data suggests that three new trends are emerging in the industry.
Trend 1: More loans are going to wealthier households
The income disparity for mortgage loans is growing, with more loans going to wealthier households and fewer to middle-class and low-income households. Home loan borrowers with income less than 80 percent of the median fell to 28.4 percent, down from 33.4 percent in 2012. At the same time, total loans to high income borrowers grew by 50 percent.
This trend can be attributed to new lending standards that have made it more difficult for an applicant to qualify for a loan. Wealthier borrowers have an easier time meeting these requirements and, consequently, are more likely to qualify. In addition, costs have gone up in the FHA program — a government initiative designed to help borrowers qualify for loans. This could price low-income households out of the market.
Trend 2: More minorities are qualifying for mortgage loans
Minority groups are having a slightly easier time qualifying for mortgages. The denial rate for all minority groups has either improved or remained unchanged, compared to 2012. However, there is still a significant gap in acceptance rates. The denial rates for black and Hispanic borrowers were 29 percent and 22 percent, respectively, in 2013, compared to 11 percent for white borrowers. However, that gap is shrinking.
A possible reason for the smaller gap is because minority borrowers are taking advantage of government lending programs like the FHA or loans from the Department of Veterans. Seventy percent of African-American borrowers and 63 percent of Hispanic borrowers used one of these programs. By comparison, only 35 percent of white borrowers used a government lending program.
Trend 3: The number of lenders is shrinking
The number of lenders in the mortgage industry decreased in 2013, with the number of banks reporting to the HMDA falling by 3 percent and the number of mortgage companies falling by 4.2 percent. The number of credit unions offering mortgages showed an increase of 1 percent, but overall the total number of lenders in the mortgage industry fell by 2 percent.
This could be a concern for the government, which has expressed interest in seeing more lenders in the mortgage industry. Current lenders could use this data as a possible marketing opportunity by expressing enthusiasm towards expanding the market and offering more options to a wider array of consumers.
In today’s constantly changing markets, lenders need to continuously keep on top of new mortgage trends. Staying up-to-date with new information, like this year’s HMDA data, can prepare you and your company for the future.
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