CFPB Reports Significant Drop in Mortgage Applications, Originations in 2023

(Chart courtesy of Consumer Financial Protection Bureau. Inset photo: RDNE Stock project/pexels.com)

The Consumer Financial Protection Bureau, Washington, D.C., found a significant decline in mortgage lending activities during 2023. Loan applications and originations dropped by nearly one-third from 2022.

In its annual report on residential mortgage lending market tends, Mortgage Market Activity and Trends, the CFPB noted the decline was more prominent in refinancing than in home purchases, with single-family refinance originations down nearly two-thirds from 2022.

“Median total loan costs also jumped significantly in 2023, with a higher percentage of borrowers reported having paid discount points than any other year since tracking of the data began,” the report said.

The Home Mortgage Disclosure Act requires financial institutions to collect and make public certain loan-level information on mortgage applications and originations. Responsibility for administering HMDA was transferred to the CFPB in 2011.

Key findings from the CFPB’s analysis include:

Loan applications and originations for both home purchase and refinancing activity dropped significantly in 2023 compared to 2022.

Rising interest rates drove higher monthly mortgage payments. The average monthly payment excluding taxes and insurance for borrowers taking out a conventional conforming 30-year fixed-rate mortgage rose from $2,045 in December 2022 to $2,295 in December 2023. “The increase in monthly payment was driven almost entirely by the rise in mortgage interest rates,” the CFPB said. “Despite this, the average debt-to-income ratio of home purchase applications did not significantly change year-over-year. This likely reflects lenders shifting toward higher-income and away from lower-income borrowers.”

CFPB reported well over half of all borrowers paid discount points. In 2023, more than 56% of single-family loan originations paid some discount points up nearly 13% from 2022. The median discount points paid for home purchase loans was about $3,000 and for refinance loans was about $3,900.

Non-depository institutions once again increased their share of originations in 2023. “Non-depository institutions such as independent mortgage companies originated significantly more loans than banks and credit unions,” CFPB said. “In 2023, independent mortgage companies originated nearly 62% of all closed-end home purchase loans and over 64% of refinance loans.”