Last week, September 22nd, 2014, the Federal Reserve released an overview of the 2013 Home Mortgage Disclosure Act of 1975, HMDA. [1] As most of us know, the 2013 mortgage activity saw a dramatic drop in refinancings, increase in home-purchase originations, and a reduction in government backing. This data reflects mortgage market activity over time and lending patterns across different demographic groups and lender types. The HMDA data are the most comprehensive source of publicly available information on the U.S. mortgage market, providing unique details on how much mortgage credit gets extended each year, who obtains such credit, and which institutions provide such credit.

According to this data, during 2013:

• economic and housing conditions continued to improve

• house prices rising significantly during the course of the year, particularly in areas where they had declined sharply during the recession

• mortgage interest rates increased about 1 percentage point during the year

• credit conditions still were tight going into 2014, some data suggest that credit standards for prime mortgages may have eased somewhat in 2013

Federal Reserve analysts found: [2]

• The number of mortgage originations in 2013 declined 11 percent, to 8.7 million from 9.8 million in 2012. The decrease resulted from the increase of interest rates, which motivated a 23% drop of refinances in the single family market as compared to the previous year. MEanwhile, single family home purchase grew by 13%. This increased is considered low by historical standards.

• Government-backed mortgages dropped by 7% to a total of 38% of home-purchases for single family, site built, owner occupied properties. This decreased was led by the decreased of FHA loans that resulted from increased mortgage insurance premiums, MPIs. Government backed purchase loans declined across all population sectors.

• Home-purchase originations for single family properties continued to grow during 2013. Growth varied substantially across demographic groups, with high income borrowers at the top of the charts showing a 50% growth and Asians showing 42% growth. Smallest growth was by low- and moderate-income households showing a 7% growth.

• Number of loans with annual percentage rates (APRs) of at least 1.5 percentage points above the prime offer rate, high-priced loans, increased by 7% from the previous year. THe increase was driven by higher priced FHA loans, which resulted from higher MPI fees.

• Credit score continued to be a good indicators of higher-price lending incidences. In depth analysis of data against indicators of race and ethnicity of borrowers showed that black and Hispanic-white borrowers are over 11% more likely to get higher-priced loans. Furthermore, analysts found that minority borrowers tend to get loans from institutions that often make higher-priced loans.

HMDAs BACKGROUND

The Home Mortgage Disclosure Act of 1975 was enacted to help members of the public determine whether financial institutions are serving the housing needs of their local communities and treating borrowers and loan applicants fairly, provide information that could facilitate the efforts of public entities to distribute funds to local communities for the purpose of attracting private investment, and help households decide where they may want to deposit their savings. These data includes:

• approval status of each application for mortgage credit

• the type, purpose, and characteristics of each home mortgage that lenders originate or purchase during the calendar year

• the census-tract designations of the properties related to those loans

• loan pricing information

• personal demographic and other information about loan applicants, including their race or ethnicity and income

• information about loan sales

History of HMDA: http://www.ffiec.gov/hmda/history2.htm

I VALUE the analysis the Federal Reserve provided with the release of these data. If like me, you grasp numbers and correlations better when with visualizations, head on over to the updated Consumer Financial Protection Bureaus HMDA Visualization tool for a look at the 2013 data: http://www.consumerfinance.gov/hmda/

1) http://www.federalreserve.gov/pubs/bulletin/

2) http://www.federalreserve.gov/pubs/bulletin/2014/pdf/2013_HMDA.pdf#page=3

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