Minority borrowers struggled in 2020: HMDA

Closed-end originations increased by 65.2% in 2020, according to the latest CFPB report

The mortgage market had a stunning year in 2020, with closed-end originations increasing by 65.2% from the year prior, a Home Mortgage Disclosure Act (HMDA) report published by the Consumer Financial Protection Bureau this week disclosed. But some of the industry’s same problems remained in 2020.

According to the report, comprised of data provided by 4,472 financial institutions, the increase was predominantly driven by the refi wave, with originations jumping from 8.3 million in 2019 to 13.6 million in 2020.

The number of refi loans increased by an astounding 149.1% from 3.4 million to 8.4 million last year and home-purchase loans secured by one-to-four-family properties increased by 387,000, the CFPB’s report found.

But apart from lenders reaping the rewards of an ultra-low-rate environment, troubling trends also persisted, mainly, that Black and Hispanic borrowers paid higher median interest rates and total loan costs compared to non-Hispanic and Asian borrowers, the CFPB said.

CFPB Acting Director Dave Uejio noted in a statement that although the initial observations of the mortgage market in 2020 was welcome news, “Black and Hispanic borrowers continued to have fewer loans [and] be more likely to be denied than non-Hispanic White and Asian borrowers.”

Uejio remarked the nation’s economic recovery post-pandemic “won’t be robust if it remains uneven for mortgage borrowers of color.”

HMDA data revealed that Black borrowers applying for a mortgage had an elevated denial rate of 18.3% last year and Hispanic borrowers had a denial rate of 12.5%. Meanwhile, Asian applicants hovered at a 9.7% denial rate and the denial rate for white borrowers was a mere 6.9%.

Regarding demographics, the share of home purchase loans amongst Black borrowers increased from 6.8% in 2018 to 7.3% in 2020, while the share for Hispanic borrowers was 9.1% in 2020 compared to 8.9% in 2018. White borrowers continued to have a significantly larger share of home-purchase loans at 59.1% in 2020, slightly down from 62% in 2018, the CFPB noted.

In recent months, numerous ideas of how to increase minority homeownership have been floated including a first-time homebuyer assistance bill, changing the way student loan debt is calculated for borrowers applying for an FHA-insured loan (which is now in effect) and lowering the monthly mortgage insurance premium requirement for borrowers. How these initiatives could impact the demographic landscape of borrowers remains to be seen.

Other trends worth noting from the report is that the number of refi loans was notably elevated for Asian borrowers at 6.7% and white borrowers at a whooping 61%.

Additionally, the number of open-end line-of-credit originations, not including reverse mortgages, decreased by 16.6% in 2020, from 1.04 million to 869,00, CFPB’s report said.

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Retiring at age 65 is no longer feasible, older investors say

By Didier Malagies • 22 Apr, 2024

Retirement at 65 has been a longstanding norm for U.S. workers, but older investors believe that not only is such an outcome unfeasible, but they’re likely to face more challenging retirements than their parents or grandparents. This is according to recently released survey results from Nationwide , with a respondent pool that included 518 financial advisers and professionals, as well as 2,346 investors ages 18 and older with investable assets of $10,000 or more. The survey follows other ongoing research into the baby boomer generation as it approaches “ Peak 65 .” The investors included a subset of 391 “pre-retirees“ between the ages of 55 and 65 who are not retired, along with subsets of 346 single women and 726 married women, Nationwide explained of its methodology. Seven in 10 of the pre-retiree investors said that the norm of retirement at age 65 “doesn’t apply to them,” while 67% of this cohort also believe that their own retirement challenges will outweigh those of preceding generations. Stress is changing the perceptions of retired life, especially for those who are closest to retirement, the results suggest. “Four in 10 (41%) pre-retirees said they would continue working in retirement to supplement their income out of necessity, and more than a quarter (27%) plan to live frugally to fund their retirement goals,” the results explained. “What’s more, pre-retirees say their plans to retire have changed over the last 12 months, with 22% expecting to retire later than planned.” Eric Henderson, president of Nationwide Annuity , said that previous generations who observed a “smooth transition” into retired life do not appear to be translating to the current generation making the same move. “Today’s investors are having a tougher time picturing that for themselves as they grapple with inflation and concerns about running out of money in retirement,” Henderson said in a statement. The result is that more pre-retirees are changing their spending habits and aiming to live more inexpensively. Forty-two percent of the surveyed pre-retiree cohort agreed with the idea that managing day-to-day expenses has grown more challenging due to rising costs of living, while 27% attributed inflation as the key reason they are saving less for retirement today. Fifty-seven percent of respondents said that inflation “poses the most immediate challenge to their retirement portfolio over the next 12 months,” while 41% said they were avoiding unnecessary expenses like vacations and leisure shopping. Confidence in the U.S. Social Security program has also fallen, the survey found. “Lack of confidence in the viability of Social Security upon retirement (38%) is a significant factor influencing pre-retirees to rethink or redefine their retirement planning strategies,” the results explained. “Over two-fifths (43%) are not counting on Social Security benefits as much as previously expected, and more than a quarter (27%) expect to receive less in benefits than previously anticipated.” The survey was conducted by The Harris Poll on behalf of Nationwide in January 2024.

Opportunities for First Time Home Buyers

By Didier Malagies • 22 Apr, 2024

Depending on where you live there is an opportunity in certain areas that you can get $2,500 towards the closing costs. You also get a lower rate and monthly PMI. Programs open up to you where there is down payment assistance and also the 1% down program available. I am seeing more and more first-time home buyers coming out now and this is information you need to know. Yes, home prices are higher and rates as well. But if you have these programs available and the payment is affordable then the probability of refinancing down the road is in your favor and if inflation continues to go up so will home prices. Maybe it is the right time to buy a home now? Tune in and learn https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329

The mortgage rate pendulum swings yet again

By Didier Malagies • 18 Apr, 2024

Expect 2024 to be mildly better than 2023 with mortgage rates falling in the second half of the year, housing experts opined in their forecasts at the end of the year. Cuts to the Federal funds rate (and subsequently to mortgage rates) are imminent, traders enthused after December’s meeting of the Federal Open Market Committee in which committee members predicted three rate cuts in 2024. Some experts forecasted as many as six rate cuts in the year based on this news. Rate cuts are still coming, just not in March , traders and market experts reasoned more recently as the economy continued to run hot. And now on the heels of reports of stronger than expected jobs growth and stickier than anticipated inflation , the market’s shift from optimism to pessimism over rate cuts is complete. Some even expect rate hikes before rate cuts. The pessimism is visible in mortgage rates. Freddie Mac‘s weekly Primary Mortgage Market Survey is climbing back towards 7%. HousingWire’s Mortgage Rate Center , which relies on data from Polly, is already above 7.2%. Rates were as low as 6.91% for Polly and 6.64% for Freddie as recently as February. On Tuesday, they reached 7.50% on Mortgage News Daily, a high for this year. Mortgage rates hold major power in the housing industry; most importantly, high rates exacerbate the current affordability crisis by walloping the buying power of would-be buyers and discouraging some would-be sellers – those with low, fixed-rate mortgages – from listing their homes, a drain on available inventories. All this leaves housing professionals once again fighting for their share of shrinking pies – as we have observed with recently released mortgage data and RealTrends Verified’s brokerage data , as well as deeper dives on the brokerage landscapes in Jacksonville and San Diego . It is unsurprising, then, that real estate stocks have suffered since the FOMC’s March meeting and the recent job and inflation reports. That includes the nation’s top homebuilders (DR Horton and Lennar), mortgage originators (United Wholesale Mortgage and Rocket Mortgage), brokerages (Anywhere and Compass) and residential search portals (Zillow and CoStar, which owns Homes.com). There are other dynamics at play for some of these companies, however. The brokerages are also contending with the rule changes included in a proposed settlement by the National Association of Realtors; some investors also believe those rule changes advantage CoStar at the expense of Zillow . UWM, meanwhile, is contending with a scathing investigative report by a hedge-fund-affiliated news organization whose hedge fund shorted UWM and went long on Rocket; it is also dealing with pending litigation . UWM denies the allegations made in the report. High mortgage rates, fewer mortgage applications and fewer home sales are unfortunately not the only effects housing professionals could see from a more prolonged high-rate environment. There are also spillover effects from other industries, especially office real estate. Regional banks – which traditionally have been major residential mortgage originators – went big on commercial real estate loans as larger banks scaled back in this area in recent years. That increased their exposure to downtown office towers, which have seen an exodus of tenants and a bottoming out of appraised values just as a record $2.2 trillion in commercial real estate debt comes due over the next few years. That ties up capital that could otherwise flow to residential mortgages and in some cases stresses banks like New York Community Bank, parent of Flagstar Bank — the 7th-largest bank originator of residential mortgages, 5th-largest sub-servicer of mortgage loans and the 2nd-largest mortgage warehouse lender in the country. Homebuilders, too, feel the effects of prolonged high rates. Although homebuilder confidence is still up significantly since last fall, new housing starts are slowing . The dim prospects for homebuyers have turned some investors to the nascent build-to-rent sector , essentially a bet that high rates are here to stay for long enough that would-be buyers are now would-be renters.