CFPB reports ‘significant’ drop in mortgage applications, originations in 2023

Mortgage application and origination activity dropped by roughly one-third from 2022 to 2023 as high interest rates depressed broader industry activity. That’s according to Home Mortgage Disclosure Act (HMDA) data published by the Consumer Financial Protection Bureau (CFPB) in a report released Friday.

The decline was sharper for refinances when compared with purchase loans, according to the report. Refis for single-family homes were down nearly two-thirds from 2022, while last year also saw significant increases in the median costs for a home.

More borrowers reported “having paid discount points than any other year since tracking of the data began” in 1975, when HMDA began requiring financial institutions to collect and publicly release loan-level information on mortgage applications and originations.

“The number of applications and originations continued their downward trend in 2023, with applications decreasing by 30% and originations decreasing by 32% from 2022,” the report stated. “Refinancing of single-family homes fell by 64%. Most of the refinance originations left in the market were a small number of cash-out refinance loans.”

Rising interest rates largely drove consumers into higher monthly mortgage payments, with a conventional conforming 30-year fixed-rate mortgage increasing from $2,045 in December 2022 to $2,295 a year later. Despite rising rates that fueled this increase, debt-to-income ratios did not see a significant change in the same period.

“More than 56% of single-family loan originations paid some discount points in 2023, nearly a 13% increase from 2022,” according to the report. “The median discount points paid for home purchase loans was about $3,000 and for refinance loans was about $3,900.”

Median total loan costs for home purchases also rose faster for people of color, the report found. Black and Hispanic mortgage borrowers had sharper increases than their white and Asian counterparts.

Additionally, non-depository institutions like independent mortgage banks (IMBs) secured a higher share of application and origination activity in 2023 when compared to banks and credit unions.

“In 2023, independent mortgage companies originated nearly 62% of all closed-end home purchase loans and over 64% of refinance loans,” the report noted.