CFPB: Overall Mortgage Lending Falls Amid Rising Interest Rates, Discount Points
Mortgage applications and originations declined markedly in 2022 from the prior year, while rates, fees, discount points and other costs increased, the Consumer Financial Protection Bureau reported.
The CFPB released its annual report on residential mortgage lending activity and trends Wednesday.
“Overall affordability declined significantly, with borrowers spending more of their income on mortgage payments and lenders more often denying applications for insufficient income,” CFPB said. “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.”
As seen in other years, independent lenders dominate home mortgage lending, with the exception of home equity lines of credit, the report said.
“The higher interest rate environment had profound effects on the mortgage market in 2022, with borrowers paying much more in monthly payments,” CFPB Director Rohit Chopra said. “These trends are likely to continue given further increases in interest rates in 2023.”
CFPB said other key findings from this year’s analysis include:
-Borrowers paid 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 median borrower paid $2,370 for discount points in 2022.
-Cash-out refinances comprised the majority of refinance originations: In 2021, there were 8.3 million refinances. Last year that number dropped to 2.2 million, a 73.2% reduction. Most of the refinances were cash-out refinance loans originated by independent lenders.
-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 increase from 2021, CFPB reported. Independent lenders dominate the cash-out refinancing market, but depository institutions offered the majority of the 1.27 million home-equity lines of credit last year.
-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, CFPB said. The median interest rate for a 30-year fixed-rate mortgage at the end of 2022 equaled 6.5%.
